Market Comment

June 2010.

Mortgage Market Update.

A month into the new Government’s tenure and apart from the David Laws expenses banana skin the new administration seems pretty sure footed and majoring on their style of “open” Government. Let’s hope it lasts and does not wither under the scrutiny of the journalists who are so keen to highlight the differences between the members of the coalition, rather than the common aims that hopefully will bind them together.

The Bank of England, on 10th June, once again decided that no change in interest rates was the best way forward and for a further month, at least, we are to be blessed with a 0.5% Bank of England Base Rate, the 16th month in a row.

Over the last couple of months there have been stirrings in the mortgage market and although the attitude of lenders to borrowers has not significantly changed (more of this later) there is a tiny bit of competition entering the market which represents good news for borrowers in the long run. New lenders Aldermore and Precise Mortgages have launched in the last month, lending in the investment mortgage market (Buy To Let) and in recent days a major intermediary lender The Mortgage Works (part of the Nationwide Building Society) has launched into the prime mortgage market. It is also heavily reported that specialist Buy to Let Lender Paragon could begin lending once again before the summer is over (if we get one!).

These are all good signs, as it is clear that there remains a higher demand for mortgages than there is supply after the market plummeted from its high levels of 2007 down to the current levels of 2010. More lenders means more choice and ultimately such competition is likely to cause margins to narrow slightly from their current levels as, and when, interest rates start to rise again.

We are all now waiting to see the strength of the medicine that we are instructed to take in the emergency budget during the next two weeks. As far as the mortgage/housing market is concerned there has been much talk of the effect a possible raising of Capital Gains Tax will have on the investment property market. There has been no suggestion of higher Stamp Duty as yet but the major concern will be the what effect of potentially higher taxes (so less disposable income) and increasing unemployment will have on the fragile property market.

The property market is difficult to understand especially when the largest lender and the largest Building Society produce differing figures for house prices in their own surveys as Halifax and Nationwide did last month. Nationwide report a 0.5% increase in May and Halifax a 0.4% decrease which seems quite odd but both agree house prices average in the late £160,000’s still about 10% down on the 2007 peak. It would seem that the market remains very flat and slow and the absence of property on the market continues to underpin the “recovery” we have seen over the last 12-15 months so we are certainly not out of the woods yet and the Budget could yet send us further into the forest.

Lenders continue to be very hesitant to lend to all but the very cleanest of borrowers. With high demand for mortgages they can afford to be choosy but the reliance on computer based lending decisions and scoring techniques means that some of the larger lenders can shoot themselves in the foot. We can get superb solutions from smaller lenders who rely more on manual underwriting and old fashion common sense rather than the very popular “Computer Says No” culture that some lenders adhere to.

Recently we helped a solicitor who runs a leading conveyancing practice and has done for 30 years he was exposed to the “computer says no” environment and as a result of our help all was resolved, after the offer was issued, he kindly wrote a note to one of the Mortgage Magazines...

“I know I don’t have to tell your readers that the last 3 years have been hard for mortgage intermediaries, but even I wasn’t aware of just how hard it has been for them until I experienced for myself the frustration of trying to place a mortgage...

This exercise made me realize that intermediaries do a wonderful job in the face of almost impenetrable barriers thrown up by lenders who say they have products but don’t appear to want to lend on them. I have no doubt that anyone thinking of getting a mortgage needs the advice and guidance of a mortgage intermediary more than ever before.

So well done mortgage brokers - you get my vote of confidence.”

We could not have summed it up better ourselves - so 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.

You may have to pay an early repayment charge to your existing lender if you remortgage.

The overall cost for comparison is 4.8% APR. The actual rate available will depend upon your circumstances. Ask for a personalised illustration.

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

Simon Tyler, 11th June 2010.

Next update due 12th July.