The only thing we can do therefore is to put the Euro issues to one side and assume that things will remain much the way they are. In fact, if anything things are a little clearer now, especially as we have finally seen the much anticipated Mortgage Market Review and know that there is nothing really to fear there.

So whilst I agree that lending will be pretty similar to 2011 I think there are reasons to be optimistic, rather than continue to get weighed down by a dark cloud of disillusion. Whilst the doom mongers are still predicting the end of the world, especially where house prices and lending is concerned I disagree.

Mortgage costs will continue to rise slightly, whether or not the Euro issues are sorted, but for different reasons and whilst we may well slip back into a technical recession things do actually feel different to the first credit crunch. For one, lenders are still talking about lending, they still have plans to bring more products to the market and there is every sign that competition will increase, however slight it is.

Remortgage business will begin to return as borrowers get ever closer to increasing mortgage rates and a there is a massive amount of people coming off products and moving onto higher variable rates. Now that broker levels have dropped by a third, that is an awful lot of orphan clients to target. Buy To Let will continue to grow in strength.

Some lenders of course will try and fail yet again to up the amounts of business through their branch networks, especially now the FSA has rightly recognised that advice should be a cornerstone of any mortgage proposal.

In fact, Euro aside again, what is really worrying some in the City is actually the potential speed of an upturn. If the Euro does not go Kaput , if there is a feel good factor, if job losses are not as severe as thought and if the costs of QE do lead to higher inflation for longer and the global slowdown begins to turn toward the end of the year, what then?

I know that is a lot of ifs, but someone needs to think about these things. For those hard working brokers who have survived this long, the exceptionally dim light at the end of an extraordinarily long tunnel, could prove to be the brightest light for many a year.

The Euro turmoil is starting to affect the biggest countries in the EU now, and for the first time in around a decade the UK is now able to borrow on cheaper terms than Germany. German 10 year government debt rates increased to 2.21% whilst the UK, relishing it’s new found “safe-haven” status, sits at a mere 2.16%.

This is hugely significant, and will up the pressure on Merkel et al to sort it all out once and for all. With the markets becoming more and more convinced of an EU zone break up of some description, the politicians seem to be stuck in a holding pattern of indecision.

Back on our fair Isle, however, although there is a growing movement against austerity cuts, there is a general acceptance that, hard as it is, these things need to be done to chart a safe passage through stormy times.

Today UK growth was confirmed at 0.5% in the 3rd quarter of this year and earlier this week the Government launched its much anticipated Housing Strategy, pulling together a range of announcements with a couple of new ones to try to stimulate growth and return some confidence back to the house building industry.

Whether you agree with the content of this or not, the point is that at last the Government is trying to do something to help stop a housing issue become a full blown crises. Having been fortunate enough to discuss the report over lunch with the Rt. Hon Grant Shapps MP yesterday at the House of Commons, it was refreshing to see the passion behind the policies.

In the meantime more lenders have increased their rates further, with at least one other lender also increasing their variable rate. We are beginning to see the expected increase in remortgage business as a result.

With rates available from just 2.29% on a tracker basis (The overall cost for comparison is 3.80% APR), or 2.58% fixed until 31/01/2014 (The overall cost for comparison is 4.70% APR), 2.94% fixed until 28/02/2015 (The overall cost for comparison is 3.50% APR) and 3.39% fixed until 31/01/2017 (The overall cost for comparison is 4.00% APR), all with free legals and free valuations, it is an excellent time to reserve some outstanding products.

This rise in rates I am alluding to is due to two things; firstly, as the storm in the Eurozone does its best to turn itself into a full scale hurricane of a banking crisis, because quite simply the cost of funds looks set to rise and secondly, liquidity issues are once more emerging from the shadows.

Given that almost every report seems to suggest we are heading, if not towards another full-scale recession, but a period of stagnation that feels like a recession anyway, it will come as no surprise that the MPC has decided to print more money, entering into another period of Quantitative Easing, (QE) a month earlier than initially expected. Another £75 billion, slightly more than thought, will be pumped into the system.

On the back of the US’s “Operation Twist”, which in essence involves the Fed selling short-term bonds and, here’s the twist, replacing them with longer term ones, (the result being that as more long-term bonds are purchased interest rates should fall), there was pressure on the Bank of England to do their bit.

As for the Euro issues turning into a banking crisis, we have already seen the first casualty in the shape of the Belgian / French bank Dexia which is about to enter into a Northern Rock style arrangement. Although the Europeans have talked positively about supporting their banks and of course Greece, it seems the markets do not quite believe them and need to see a concrete plan of action.

All this means there is a very high probability that, whilst the UK banks are undoubtedly in a much better position that our Euro counterparts, lending levels will be affected in the coming months. Almost every lender I have spoken to has said the same; unless things change they expect funding costs to rise and therefore mortgage rates on offer will rise accordingly.

With all of this mind and whilst we are experiencing some of the lowest rates for a generation, it does seem that the time to act is now. For those looking to remortgage there are now many products that are available at less than even the lowest Standard Variable Rate and some highly competitive fixed rates.

Tracker products start at 1.98% for 2 years, (the overall cost for comparison is 4.60% APR) and fixes now start at just 1.99%, (the overall cost for comparison is 5.30% APR), which is the lowest 2 years fix anyone can remember, a fantastic 2.69% (the overall cost for comparison is 3.40% APR) for 3 years and 5 year fixes available at an astonishing 3.29% (the overall cost for comparison is 4.90% APR).

Remember most offers are valid for 3 to 6 months, so if Chancellor Merkel et al do get their act together and rates improve again there will still be options.

In truth the average consumer still feels like nothing has really changed, the technicalities of a recession are unimportant, it is how they feel and for most, things still feel tight.

However for all this talk I do get the feeling that most are taking a glass half full approach and despite the gloom the good old British spirit has kicked in. A cursory walk around the City outside our office and you can see the change. Offices are filling up, new tower buildings are being erected and bars are full in the evenings. There is an acceptance that we are where we are and we need to make the most of it.

The Mortgage market is no exception and we have been pleasantly surprised how the level of enquiries has held up over the traditional Summer lull, which quite frankly never really happened. In fact, seasonality seems to have all but disappeared, leaving a steady, though relatively flat, stream of business.

Undoubtedly this is a result of several major factors. Rates are incredibly low and all hyperbole aside, when you see fixed rates for 3 years below 3% and 5 years a smidgeon over it is hard not to react if you can. New tracker products are now lower than even the most competitive lenders’ variable rates so remortgaging is back in vogue.

The most pleasing aspect for us brokers is not just the fact that lenders are now tapping us on the shoulders and asking for more business but the return of the smaller building societies who, not able to just compete on price, are looking for new ways to lend again.

These lenders are able to eschew the frustrating tick box mentality of those banks who claim to offer the very best rates, (the reality being that clients are victims of the long, drawn out, “Yes, Yes, er No” approach), and instead offer the ability to discuss trickier cases with a real decision maker on day one.

If the property market is to kick forward once more, then this lending is essential in the new world where credit and risk rules the roost.

Of course there are still potential dangers ahead; although the reality is that in the short-term at least, inflation and potential interest rate rises are low down the list. With the US making clear that they do not expect to raise their rates until 2013 there is every likelihood, especially with weakening growth figures, that the UK will not see a rate rise until mid 2012.

So, whilst everyone knows that the next change in interest rates will be upwards, we could be seeing a further round of Quantitative Easing before we see a rate rise.

The threat is actually a second retreat by lenders triggered by, for example, a further disintegration in Europe or the mighty Bank of America seriously faltering and pushing up the cost of funds and stifling lending appetites.

I make no apologies therefore for suggesting that the next few months could well represent one of the best opportunities to purchase or remortgage. The remortgage benefits are obvious as rates are so low.

On the purchase side the lack of stock is obviously an issue, but whilst this is keeping values steady the gap between vendor aspirations and actual purchase prices seems to be easing. There are also more affordable rates at higher Loan to Values that will help first time buyers.

It will be interesting to see what the rest of this year holds, but I for one will continue to top up my half-full glass.

Not that inflation is worrying the Bank of England as all 9 members of their committee that sets interest rates decided unanimously to keep rates on hold last month. This represents a small sea-change as at one stage at least 3 of the members were voting for an immediate rise, (although the main protagonist calling for rises has now left the committee of course).

The evidence of slowing growth and the issues in the financial markets, coupled with reports that suggest home finances fell for 40% of households in August, have been enough to put back rate rises to next year, if not beyond.

The biggest discussion point now is whether Quantitative Easing, the much heralded QE3, will be seen at some stage soon, with even some speculating that Bank Base Rate will be cut even further.

Talk of “a lost decade” and a “Japanese era” are being whispered with growing concern as has the much dreaded term “Stagflation”. The Wikipedia definition is that this “is a situation in which the inflation rate is high and the economic growth rate is low. It raises a dilemma for economic policy since actions designed to lower inflation may worsen economic growth and vice versa.”

The issues that such a period can cause are often seen as more difficult than dealing with straightforward inflation. However, whether or not we do indeed fall into a new recession, or whether this is just actually a continuation of the first one, it is what it is.

All this means that at present mortgage rates continue to be ridiculously low and the financial cost of purchasing a property, especially compared to renting, remains more affordable than it has been for a long time, (as long as you can raise that much needed deposit of course).

On the back of these low rates, especially the longer-term ones, we are seeing a steady increase in remortgaging, after all, when you can fix for 4 years at 2.99% or for 5 years at 3.39% for example, the benefits in years 3, 4 and 5 could potentially be massive.

Whilst the debate rages on, recent research conducted by the BBC reflected the differences within the MPC. Of 22 economists who were asked “In which month do you think the MPC will raise interest rates?”, 14 said August, 4 plumped for May and 1 each reckoned on June, July, November and February.

The follow up question, “What level do you think interest rates will be at by the end of the year?” prompted 12 to say 1%, 6 were at 1.25%, and 1 believed they would be up at 1.3%.

Many in the City have reportedly now tempered their interest rate expectations, reflecting the view that a summer rate rise is potentially now the only one expected this year. Any further moves will depend hugely on future inflation and growth reports, with the August inflation report predicted to be a key driver.

The issues for the average householder have not changed and with many feeling the squeeze on their real incomes, whilst an initial rate rise of say 0.25% as a shot across the bows may not cause a major issue, any subsequent rise will start to hurt a good many very quickly.

The good news, as far as mortgage borrowing is concerned, is that there is a light at the end of a very long tunnel for those with property owning aspirations.

Mortgage lenders are beginning to relax slightly and there is now a smattering of products available at 90% Loan-To-Value, with at least one lender offering 95%. Whilst the cost of these deals may seem expensive compared to the historically low Bank Base Rate, historically speaking these are pretty well priced.

Quite a  few lenders have reduced their rates further and whilst tracker products continue to look attractive, there are still a good many borrowers who should be looking at competitive fixed rate options rather than trying to “beat” the market. The price of security should not be underestimated.

For those with a 40% deposit or equity, you can obtain a discounted variable rate as low as 1.99%, (2.9% APR), whilst tracker products with no penalties are available at just 2.35%, (2.40% APR).

Fixes start at 2.79%, (4.20% APR) for 2 years, 3.59% (4.80% APR) for 3 years and 4.39% (4.30% APR) for 5 years.

First-Time buyers have been in the news as ever with further reports of the difficulties faced with getting onto the property ladder. In fact, as our own research suggests, the average deposit now stands at £54,923 and a whopping £138,624 in London, property ownership  may seem to be becoming the preserve of the “haves” rather than the “have nots”.

In fact, an article I wrote for MoneySavingExpert.com about this subject provoked some lively comments : Glimmer-of-hope-for-first-time-buyers

However, the good news is that there is a light at the end of a very long tunnel for those with property owning aspirations. Mortgage lenders are beginning to relax slightly and there is now a smattering of products available at 90% Loan-To-Value, with at least one lender offering 95%. Whilst the cost of these deals may seem expensive compared to the historically low Bank Base Rate, historically speaking these are pretty well priced.

Quite a few lenders have reduced their rates further and with the latest UK growth figures showing only a small rise, basically balancing out the previous quarter’s loss, most economists agree that any rate rises will not come until August at the earliest.

Among the many voices trying to shout out different things at once, recent reports that the UK economy has been “running out of steam” seem to have done enough in the short term at least, to convince the MPC to hold their nerve.

The National Institute of Economic and Social Research (NIESR), for example, suggested that the recovery is faltering despite the economy growing by an estimated 0.7% in the first quarter of this year.

Meanwhile, figures from the Office for National Statistics showed a 1.2% drop in British industrial output in February, while manufacturing output was flat month-on-month, disappointing City analysts who expected growth of around 0.6%.

Taken together with reports that consumer confidence remains weak and consumer spending tight, you can understand this latest decision.

However, as ever, this is only part of the story. The European Central Bank faces a monumental decision this afternoon as to whether they will raise rates, with the majority expecting they will, which if followed through will heap more pressure on the Bank of England to follow suit.

While some argue inflation is being used to happily munch away at our public debt, others suggest that this makes matters worse as it is hampering our recovery and that the Bank must be seen to act to tackle the problem.

Charles Goodhart of the London School of Economics stated that high inflation was “raising the deficit and cutting consumption by reducing real incomes.” He was backed by, amongst others, Sir John Gieve, a former Deputy Governor of the Bank of England who said that the recovery, whether smooth or not, was still under way and therefore “the Bank can now afford to show it still cares about inflation”.

Meanwhile the interest rates being paid on short term Fixed Rate Bonds have been steadily rising, signalling an expectation of a Bank Base rate rise in the next few months.

As far as the mortgage market is concerned, there has been some concern that the cost of funding is about to get more expensive again. In the meantime there has been a return of some semblance of competition to the market, with reports stating that there are now more than 10,000 mortgage products available once more.

Fixes at 2.79%, (4.20% APR) for 2 years, 3.59% (4.80% APR) for 3 years and 4.39% (4.30% APR) for 5 years are still available for the time being, whilst tracker products with no penalties are available at just 2.35%, (2.40% APR).

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UPDATE 13:08 on April 7th 2011

Interesting to see that the European Central Bank, (ECB) have indeed INCREASED their Base Rate by 0.25% to now stand at 1.25% for the first time in 3 years as they react to higher inflation.

With the very public issues in Portugal some believed that the expected rise would be delayed, but even though this is likely to hurt countries such as Portugal worse as borrowing costs rise, this shows the ECB’s determination to take action before inflation begins to filter through into wage rises.

As mentioned above, this is likely to add further pressure  on the Bank of England to also take action sooner rather than later.

After the almost unprecedented 4 way split revealed in last month’s meeting minutes, it really looks like the Governor Mervyn King has a fight on his hands to keep any sense of unity and these public splits do the Bank no particular favours.

At polar opposites you have Andrew Sentance, a long time proponent of an early rise and Andrew Posen, who still wants to print more money. Of the other two members voting for a rise we now have none other than the Bank’s Chief Economist, Spencer Dale, the person who actually puts the inflation report together.

Although Mr King has recently come out fighting with some strong speeches he is clearly a man under pressure and all bets are pretty much now off for a rate rise in May at the latest.

There has also been some strong political talk about supporting business and enterprise perhaps designed to take some pressure off the calls for an immediate rate rise.

Whether or not the MPC finally elects to increase rates lenders have already priced in an expected change. In fact maybe they have overpriced slightly, as a few lenders have actually reduced their rates again, albeit by a much smaller margin than they initially increased.

The good news is that lending criteria has started to ease slightly, as lenders become more comfortable to take slightly more risk. Whilst this will not change overnight, the consequence of this should be that mortgage finance starts to become slightly easier again in the coming months.

Lenders still seem to playing a week-to-week game, with rates coming and going at almost alarming speed, and with Legal & General reporting that 90% of mortgage holders are on some form of variable rate, which is an astonishing statistic, there are many who no doubt should be looking for the sanctuary of a fixed right now.

Fixes at 2.79%, (4.20% APR) for 2 years, 3.95% (4.10% APR) for 3 years and 4.49% (4.70% APR) will no doubt not be around for long. It really is now a matter of time.

Basically, Merv warned that failure to reform the banking system and remove the “too big to fail” assumption could easily lead to another financial crises. Cuttingly, he stated that over the past two decades, too many people in financial services had thought “if it’s possible to make money out of gullible or unsuspecting customers, that’s perfectly acceptable”.

With Banks promising to lend more under their “Project Merlin” agreement with the Government and coming from the man taking over the regulation of the banks, this carries some weight.

Whether or not the MPC finally elects to increase rates, (they will probably hold on for another month or so), lenders have already priced in an expected change. In fact maybe they have overpriced slightly, as a few lenders have actually reduced their rates again, albeit by a much smaller margin than they initially increased.

The good news is that lending criteria has started to ease slightly, as lenders become more comfortable to take slightly more risk. Whilst this will not change overnight, the consequence of this should be that mortgage finance starts to become slightly easier again in the coming months.

On a completely separate note, Coreco are delighted to have been given the task by BBC News Online in answering viewers’ questions as the resident “mortgage expert”. So if you or any of your applicants have any specific questions please feel free to follow the link below and ask away.

http://www.bbc.co.uk/news/uk-12644862

A selection of responses will be published on the BBC News website on Monday 14 March.