07.01.10 by Andrew Montlake
Bank Base Held At 0.5%, But For How Long?
The first decision by the Bank of England’s’ Monetary Policy Committee of the new decade has heralded no change at all, but the question on everyone’s lips is how long this status quo can now be maintained?
Over the last few months there has been a recovery in house prices as well as a growing expectation that inflation could rise sharply over the coming months. This could mean an earlier than expected move by the Bank of England to increase rates, with some commentators suggesting this could happen as early as March this year.
Other Economists are more cautious and do not see any increase until the 3rd or 4th quarters of 2010, but either way, the consensus is of a rise this year.
Whilst a recent report by Zoopla.co.uk has suggested that 81% of people expect house prices to rise further in the next 6 months and that confidence in the housing market is “back to pre-crunch levels”, as more people put their properties on the market, however, we could see an easing off of rises in the second half of the year.
This is all good news on the face of it; however it leaves many with an important decision to make over the next few months.
For purchasers finding the right property sooner rather than later is still preferable, especially with traditional high demand areas, such as parts of London, continuing to grow.
For those who have held off remortgaging to take advantage of low variable rates the decision is perhaps even more difficult.
It may have been all very well to sit on a nice variable rate last year with no prospect of a change in rates and a perception that it was too hard to remortgage anyway, due to the fact that property values had fallen and lenders criteria had hardened.
However, the surprise price rises of last year and the return of more mortgage products to the market mean that the first quarter of 2010 could well be the best time to remortgage. Several mortgage lenders have already increased their variable rates and you can be sure that as soon as Base Rate changes the rest will follow without hesitation, perhaps rising by more than the Base Rate change as the costs of funding continue to increase.
Product pricing has now come down to the extent that many who were prepared to sit on variable rates of at least 3.5% do not want to take the risk any more of missing out.
After all, why sit on a variable rate at 3.5%, which is very unlikely to reduce further, when you can fix for 2 years at 3.59%, (4.2% APR), or even reduce your payments further to 2.59%, (4.7% APR)?
What is more, you can now obtain a 5 year fixed rate at 4.89%, (5.70% APR). A 5 year fixed rate below 5% has always been a highly prized product in any market, and with rates undoubtedly set to increase over the next 5 years this really does look like terrific value.
As we get even closer to the time that the markets perceive rates will rise we could well see the current product offerings increase accordingly.
With many lenders still offering remortgage incentives such as a free valuation and legal fees, now really does seem as good a time as any to move your mortgage.
Monty’s Mortgage Blog
19.08.10
Mortgage Lending Up...A Bit
Today saw the release of the latest set of data from the Council Of Mortgage Lenders, (CML) stating that Gross Mortgage Lending rose by 5% in July compared to June, although this is still 3% down from July 2009.
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