November 2011 Mortgage Update

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I have just returned from Mortgage Vision 2011. A conference involving the main players in the UK mortgage market. During the day I was involved in many discussions regarding the future direction of the mortgage market. I will now take the opportunity to briefly update you on developments over the last month and where we feel the future is headed.

In our October update we said that we thought that the fixed rates and tracker rates that were in the market were not going to get any better. Although the chances of a base rate rise anytime soon are rapidly diminishing the actual costs of banks getting funds to lend is more expensive and hence October has witnessed a slight increase in mortgage rates. We still believe that if you can now is a great time to look at fixing your mortgage for 4 or 5 years or moving from uncompetitive standard variable rates to a 2 year low cost tracker. I warn you again that money will NOT be this cheap for much longer, regardless of what happens with the Bank of England base rate.

All the speakers at the conference were fairly hopeful that we have reached the bottom of the curve and that things may soon be improving. An example of some cautiously bullish words were “hopefully we are potentially at the cusp of recovery”. Hardly a ringing endorsement that the good times are back.

2012 is looking like being a nothing of a year, the experts opinions are that property prices will remain static and that interest rates will not rise. If we are to dig down a little more into property prices they are predicting a slight rise in London and the home counties and a slight drop in Northern Ireland, Wales and Scotland.

In 2007 there were 34,000 mortgage brokers, there are now less than 10,000, we are an endangered species so make sure you look after us. Seriously though, despite the huge drop in mortgage broker numbers we still account for 50% of the lending market. So those who have survived are busy. I believe the cream of the crop have survived and are now excellently placed to serve the needs of their clients in a market where independent advice is more important than ever.

In 2008 mortgage lending was over £300 billion pounds, in 2011 it will be a miserly £130 billion and this is expected to be the same in 2012 before increasing to £180 billion in 2014.

Despite the doom and gloom there is some good news. The average mortgage has not been so affordable for many, many years, it is now accounting for only 27% of disposable income! Also in all regions of the UK it is now cheaper to buy than it is to rent. This is comparing the monthly costs of renting and having a repayment mortgage. It does not take into consideration the massive long term benefits of actually owning your own house and hence not having to pay rent in retirement! Clearly there are still good reasons why many people rent, being unable to get a mortgage or not having a deposit are amongst the most cited reasons, however, some lenders have now come out with mortgages that mean you only need a small deposit and hence don’t decide you are now eligible for a mortgage until you have consulted an independent professional.

So in summary, whatever your position is you must get independent advice to help you make the right decision. Money is not going to be this cheap for long and hence there is no better time than NOW to start taking action to secure your financial future. Property prices and interest rates remain stagnant and should continue to do so in 2012.

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