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Up-Market ?


Stats this week from the Council of Mortgage Lenders show a trend that should warm the cockles of any mortgage broker’s heart, and indeed any in the property market, in that loans for house purchases have gone up 29% on last month.

Whilst it is true this is against a low figure, the scale of the increase is more than expected. Why, even remortgage business has increased by 8%.

The increase in transactions can be put down to more than just a “spring bounce”, and shows that many more people believe that now is the time to take advantage of low property prices and historically low interest rates. The First Time Buyer figures are particularly interesting and show that many purchasers are beginning to find slightly larger deposits, helped no doubt, by the “bank of Mum and Dad”.

As far as remortgages are concerned, although the sector remains muted, the increase can probably be attributed to the fact that more people believe now is the time to remortgage rather than revert, with fixed rates and the fear of increasing rates being the overwhelming reason.

The underlying message is that while rates are so low, and after we’ve seen so many shocks to the financial system during which time virtually every “expert” has been badly wrong at some point, why wouldn’t you fix to hedge your bets?

Although it does seem likely that Bank Base will stay low for another year, (though Mr King has been wrong before), fixed rates are unlikely to get dramatically lower, especially at higher loan-to-values where lenders profitability remains a key driver, especially given the capital adequacy demands on them.

The CML have also pointed out that their predictions for repossessions were pessimistic, and many who may have got into trouble are being assisted by the historically low rates. I still feel this is an issue that may be delayed rather than avoided and the real test will come in 12 to 18 months time when rates do increase if the economy is not on its way out of the recession. Another reason for those who feel things could get tight to fix into an affordable rate now.

It does seem that lenders are now slowly moving the battleground from the 60% LTV levels towards the 75% levels which will be welcome to many, but there is a long way to go. The next few months are crucial and as we all know, anything can happen.

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