Market Comment

September 2011.

Mortgage Market Update.

After what has been a wet and sometimes chilly like Summer, are we going to see some warmth in the property market during Q4 of 2011 or is that market going to freeze up?

The Bank of England Monetary Committee has maintained Base Rate at 0.5% for the 30th month in a row. Following comments from the Bank about base Rate rises not being the correct tool to tackle the current inflation problems, it seems likely that rates will remain at current levels for some time. The Monetary Policy Committee voted 9-0 to keep rates at this level in August. Despite a flurry of news stories in late August and early September suggesting we might see the Base rate fall from 0.5% to 0.25%

Although this remains good news for borrowers, the underlying factors behind this vote are less appetising. Members of the MPC admitted that the economic outlook had darkened, particularly as a result of the ongoing Eurozone debt crisis which seems to worsen every day. The bank has now downgraded its growth forecasts for the second time this year and warned the UK faces serious threats from Europe's debt storms. Inflation is expected to peak at 5 per cent this year however MPC members thought slower growth prospects would reduce pressure on prices.

Samuel Tombs, UK economist at research firm Capital Economics, said: 'August's MPC minutes and the latest labour market data strongly support the markets' assumption that interest rates will remain on hold for at least the next couple of years.'

Alarm bells are ringing over the health of the housing market after Hometrack, the property data company, forecast steeper falls in prices this autumn – with the latest figures showing a 3.6% annual fall in August.

Hometrack's prediction will fuel the view of bearish commentators that UK house prices are still some way from the trough, despite falls of about 10% since their peak. Prices fell 0.1% in August for a fourth consecutive month, suggesting that the housing market has been in a temporary state of equilibrium with sellers and buyers having similar expectations over pricing levels.

Richard Donnell, Hometrack's director of research, said that price inflation in parts of London had put a gloss on the figures for the first half of the year, and that once the "London effect" was eliminated, there was less scope for optimism.

This month, figures from the Land Registry put the annual fall in house prices at 2.15%, taking the average price of a property in England and Wales to £163,049. The south-west experienced the greatest monthly rise in prices, with an increase of 2.2%, while the greatest annual price fall was in the north-east, with a decrease of 8.8%.

So, what advice for borrowers? Although it is very easy to remain on a lender's standard variable rate, of which many are in the region of 4.5%, there are far more competitive interest rates available at present with some lenders offering both 5 and 10 years fixed rates at below 4%. Not only are these schemes more competitive than many standard variable rates, they will also offer protection at the point that Bank of England Base Rate finally rises. For those who wish to benefit from a slightly lower base Rate tracker then we have access to lenders who will offer a competitive tracker rate which offers the option of switching into the lenders fixed rates, thus offering the best of both worlds.

One thing that is certain is that procuring a mortgage will remain extremely difficult with lenders declining applications for what seem like minor divergences from their credit policy. Now, more than ever, the expertise of a Mortgage Broker is required. If you recognise this issue then please consider contacting us.

To discuss your mortgage and the different options available to you please call one of the Tyler Mortgage Management Account Managers.

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, 16th September 2011.

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