Market Comment

March 2010.

Mortgage Market Update.

After weeks of rain and snow finally this week the sun started to shine through the office windows and some flowers which in previous years have been out and flowering in December or January began to appear in the Gardens. So is a much delayed arrival of Spring after the coldest Winter for many years a worthwhile analogy for our chosen topic of mortgages? Today, with the sun shining brightly, and the sky a healthy blue, I think my response must be a positive yes (and whilst shouting “yes!” keeping our fingers firmly crossed).

Hoorah then, it’s all over – no more mortgage famine, no more credit squeeze, no more painful underwriting, a massive plethora of new mortgage products from dozens of new lenders are all here and transaction levels will return to 2007 levels by the Summer... Well no but things are not as bad as they were.

From the point of view of stability the Bank of England Base Rate has now remained unchanged for a year following the decision on 4th March to keep the Base Rate at 0.5% means we will reach the 8th April before any further change might be made (and 5 weeks before the inevitable General Election that seems unlikely) so we will have had the longest period without a change in base rate (based on Bank of England stats) since 1965/6 (rates remained at 6% from 3rd June 1965 until 14th July 1966 - maybe a positive omen for England World Cup followers?).

So we are now in the most “stable” period for interest rates for 45 years. The general feeling in the market is that the rate will not move significantly for some months yet, which does offer the housing market a chance to solidify its position and for homebuyers to consider making positive decisions.

For those who are interested the next base rate stability record is 18 months –so if Base Rate does not change in the 9th September meeting of the Monetary Policy Committee the rate will have been stable longer than the period from 11th March 1952 until 17th September 1953 - and there the records will end as the previous period of stability lasted from October 1939 until November 1951 – 12 years 2 months (2% if you are interested in knowing the Wartime and Post War Austerity interest rates).

This week I went to a conference regarding the current market and the general belief is that 2010 will see an increase in transactions of between 10% and 15 % compared to 2009. The good news for brokers like us is that most of that will come through brokers as “direct” channels for lenders are already working to capacity so this could represent up to a 30% increase in activity over 2009. This positive view is enhanced by the fact far more products are available in the mortgage market now than there were a year ago, lenders are now considering more higher Loan to Value (LTV) advances than we have seen for 18 months (albeit at higher rates to reflect the risk). There is a definite increase in interest from some lenders in the Buy To Let market. Finally we have some new Lenders entering the market and some established ones remodelling themselves for the 2010 market.

Having seen Bank of China make an appearance during the latter part of 2009 we are soon to be dealing with Aldemore – a new name in the banking world, and Kensington who were the first Sub Prime lender to launch, are starting to lend new products in the “prime” market. Other new, and some previously active, lenders will be lending by the Summer and this small increase in choice and volumes can only be good for borrowers as it will mean a return of some competition to the market.

Despite all this potential better news the media took great delight in the latter part of February reporting a that in January Mortgage lending dropped 32% to the lowest total since February 2000 which was no great surprise as January is never a busy month and the removal of the increased Stamp Duty Threshold in December probably skewed the figures. Yet sellers of homes are feeling more aggressive as Rightmove reported that asking prices had risen over 3% over the latter part of January and early part of February. So are we on the cusp of a housing and lending boom? No we are not, our economy is too fragile to sustain a boom in both these areas and with “Double Dip” becoming the journalists latest buzz word we need to tread carefully.

None the less there is a growing pent up desire from many people to move home due to changes in their circumstances – Job change, marriage, arrival of children, departure of children, divorce to name but a few – and the housing market is waking up and estate agents are a great deal more cheery than they were a year ago, which (possibly reluctantly) you should be pleased about. With an election looking almost certain in May, we have found in previous elections that this offers home buyers a good excuse to prevaricate so perhaps the uplift in housing sales will not materialise until the autumn – however the uplift is coming.

Meanwhile if you are out of a fixed or discounted period and on your lender’s standard variable rate (SVR) it is worth checking with us if this the wisest choice as the difference between the lowest SVR and the highest SVR from some of the largest lenders are as much as 2%. Contact us to see if a switch of lender might offer you some significant savings even in this period of very low interest rates.

To see just how we can help you achieve your mortgage-linked aims simply email or call one of the team who you can select from the appropriate page on this site or call us on 0207 930 7242 – we look forward from hearing from you.

Simon Tyler, 11th March 2010.

Next update Due 12th April.