At the end of each year I ask the Consultants to write a summary of the mortgage market over the past 12 months and predictions for the coming year. This helps to focus the mind on the various debates / discussions they will be having with clients, who always want to know our opinions on rates and on what they are based.
Usually I get 15 very different reviews, particularly about what the future holds, varying from the over optimistic, to the ever pessimistic. This year however, they were like carbon copies.
It was clear from the off in 2013 that the Government wanted to restart the housing market. Assistance came in the form of “Help to Buy 1” (a scheme designed to stimulate the new build market), “Funding for Lending” (a scheme to enable lenders to borrow money for mortgages from the Bank of England at incredibly low rates) and finally “Help to Buy 2” (a scheme to enable applicants to borrow 95% mortgages again).
Lenders responded by reducing their mortgage rates early on, and they started to relax the harsh lending criteria which had been in force since the credit crunch. Although the best rates are still reserved for those with the biggest deposits, anyone with a smaller deposit now stands more of a chance of being accepted for a mortgage.
As the recovery started to gather pace, mortgage lending exceeded all predictions and house prices increased by an estimated 7% year on year. (Reports show an increase of 10% for this area)
I know that sounds like good news, but to avoid any sort of housing boom (and potential bust), “Funding for Lending” has been withdrawn and “Help to Buy” is under constant review.
The Bank of England seems determined to leave the base rate at 0.5% throughout 2014, the Governor Mark Carney has stressed that he will leave interest rates on hold at least until the unemployment rate falls below 7%, something the Bank doesn't expect to happen until at least 2015.
The “Buy to Let” sector grew the most in 2013, with investors taking advantage of strong demand and rising rents. Buy to Let lenders reduced their rates mid-year triggering some long awaited competition in this sector of the market. Some economic forecasters see the future with 25% of property owned by private landlords.
My guess is that unless lenders have left over stocks of “Funding for Lending” money, longer term fixed rates may start to edge up shortly – but it seems likely that rates will stay low for a sustained period. Borrowers have no need to panic, 2014 looks bright!
To speak to a mortgage consultant contact us on 01628 507477.
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