Mortgage news
Latest Base rate decision
The Bank of England's Monetary Policy Committee has once again surprised no-one with their decision to maintain the Bank Base rate at 0.5%. This decision means that the rate has now been static for six months following the unprecedented cutting in the fourth quarter of 2008 and the first quarter 2009.
During last months (August) MPC meeting the committee announced an extension to the quantitative easing programme (effectively a further increase in the money supply) by injecting a further £50bn over and above the £125bn already undertaken into the economy. Once again the MPC retained the Bank Base Rate at 0.5% and some forecasters are suggesting that this could be the rate well into next year.
The governor of the Bank of England was recently quoted as saying that he felt the effects of quantitative easing would not be known for at least six months. It is now six months since the start of the programme and this increase in asset purchase suggests that the initial action to spend £75bn followed by an expansion of the programme to £125bn in May was not now considered sufficient to provide the necessary intervention to get the economy moving at the right pace and direction.
Mortgage availability has been fairly steady with intermediaries continuing to typically have access to around 2,000 products at any one time and this number has been largely stable for several months having witnessed a reduction from the beginning of this year when nearer 3,000 deals could typically be accessed. The overall reduction in the number of lenders competing in the market is one reason for the reduction in products while another is the amount of capital that lenders have available to lend. Furthermore the regulators have increased their requirements of lenders to put aside more capital for future write downs and bad debts particularly where a lender is advancing a greater proportion of a properties purchase price or value. As a consequence the more lending that is conducted in the higher loan to value category the more it restricts what they can offer in the less capital intensive sectors.
The last month or so has not witnessed significant changes in the pricing of mortgage products but we have seen some reduction in the appetite of borrowers for fixed rate products. From a peak of almost nine out ten borrowers electing for fixed rates in May the proportion has moved back to 7 out of ten opting for this method of repayment in August and this is largely due to some increase in the cost of fixed deals versus tracker rates.
With the expectation that interest rates will be maintained at their current low levels for the near future we expect to see a continued improvement in terms of the number of new customers re-engaging the house purchase arena due to a combination of lower property prices and interest rates at historically low levels.
More news