Market Comment

July 2011.

Mortgage Market Update.

Our seasons continue to prove difficult to regiment this year.  After having unbroken Summer in April and May in the South East in particular and practically no rain there was a re-balancing in June just as Wimbledon began and the heavens truly opened to produce one of the wettest Junes we can recall.  Clearly having a roof on Centre Court paid off this year – a good example of an insurance policy in use, the roof had significant cost but was barely used for the first 2 years and then in 2011 all that cost seems worthwhile as the roof “policy” paid off.

A policy that seems to have not paid off in the long run has been the intrusive electronic surveillance by some at the The News of The World, the extraordinary response of closing the paper will surely be the surprise news story of the year.  Perhaps as extraordinary is the outpouring of scorn and indignation from other papers and media sources, it seems highly improbable that the methods of one investigative news organisation is not reflected my many more across the media – demanding a public enquiry in to this may spectacularly backfire for other media owners. Over the last 30 years, the team at TMM have had the pleasure of advising many “Fleet Street” journalists and senior staff at other large media groups and it, at this point seems very unfair that many fine newspaper staff will pay for this reaction from their colleagues at other news organisations with their jobs and perhaps careers.

The Base Rate not moving again this month hardly made the news bulletins given the frenzy of coverage regarding TNOTW, none the less a 28th consecutive month of stable Bank of England Base Rate at a record low of 0.5% still remains remarkable, no commentator would have predicted this as the likely future of interest rates if you had taken their views in July 2008 just 3 years ago. Today with the weakness of the UK economy and the turmoil in the Eurozone some economists talk of the base rate remaining at this level for perhaps a further 2  years.

So, how is this effecting the property market?

Signs of increased activity are apparent in the South East but it seems that these are matched by a slowing down of transactions elsewhere in the country. The predictions for mortgage lending in 2011 are no greater than the total for 2010 so overall it seems that lenders are becoming more competitive to increase market share and not to increase the market as a whole as the property market is not moving forward with any great speed.

As Government spending cuts are implemented, inflation continues to remain higher than expected and pay freezes are the order of the day for many. The result is that many homeowners are having to survive on less income. In real terms, the FSA has announced that “the number of new repossessions in Q1 2011 increased for the first time in a year and was close to a fifth higher than the number recorded in the final three months of 2010.” If a larger number of repossessed properties are marketed this will have a detrimental effect on some property prices which is not good news for confidence but  it might offer the hope of obtaining a bargain for current active purchasers.

Whilst the majority of property owners had a reason to be glum, London property owners received good news from The Land registry. “Average residential property prices in England and Wales fell 0.4% in May with London the only place where values have risen in the last 12 months.”  As we mentioned earlier any recovery of activity is very South East biased the Land Registry  index reveals that the average house price in England and Wales is now £161,823, and that represents an annual price decrease of 2.2%. The only region in England and Wales to experience an increase in its average property value over the last 12 months is London with a movement of 2.9%

Inflation fears still depress the economy as the June survey on inflation expectations by YouGov and Citi found that the general public expects prices to rise over the coming year at their fastest rate since September 2008. With an expectation of a rise of 3.9pc, the reading is a sharp increase from 3.4pc in May and 2.9pc in April.

The YouGov report came as a bleak survey by GfK NOP showed that over the past month the public has become more miserable about their personal finances and the economy.

So, how can you cheer up your view of your financial future?

Help is at hand – despite the low volumes in the market 2 of the larger lenders in the UK are involved in a scuffle to build market share and  to attract borrowers. They have been offering extremely attractive mortgage plans for short periods of time, causing small waves of consumer interest.  The recent  offerings being a 2 years fixed rate at below 2.9% and a two years tracker at below BBR plus 1.5%.

These offers were made exclusively through intermediaries and were only released for 7 days before the plans were withdrawn. If you currently benefit from either a fixed rate of interest or a base Rate tracker then these offerings will be of little interest, however if you are currently paying your lenders standard variable rate then these plans will offer monthly savings, in the majority of cases. The two years fixed rate would also offer interest rate security.

These mortgage plans are being released on a very limited time basis via a few intermediaries. Now would be a good time to call your Tyler Mortgage Management advisor to discuss current attractive offers.

Our advisors with an average of 20 years or more in the Mortgage Market can help guide you to the most appropriate solutions for your next mortgage and their wealth of experience should help ease the way for you to find the package that is most suitable for you.

For more personalised comment and for advice about your own mortgage requirements do please pick up the phone and call one of our team on 020 7930 7242 or email one of us having read our profiles on the "about TMM" pages on this site.

Your home may be repossessed if you do not keep up repayments on your mortgage.

A typical fee for arranging your mortgage is 1.5% of the loan amount.

Simon Tyler, 10th July 2011.