Five-year mortgages fall below 3% for first time in three months - http://t.co/jTj1sNBRdJ
23rd April 2012
Last week saw an interesting report from Rightmove which claimed that asking prices for properties are now at an all time high, above even the peak of the last boom.
According to the report, “Average asking prices rose 2.9 per cent between March and April … £1,327 more than the last peak in May 2008 when the average was £242,410.” It went on to say that “the average is being skewed by London’s irrepressible housing market.”
Meanwhile, London apart, the usual House Price Indices, (whatever they are worth), suggest prices may actually be falling, albeit slightly. Therefore the gap between realistic actual prices and what a vendor wants for their property seems to be growing once more!
Demand in London, however, remains high for decent property as evidenced by the amount of sealed bids we are seeing.
As supply and demand is one of the only economic theories left with any credence it therefore seems that despite withering economic conditions house prices in the high demand areas will hold their value at least. We stand by our 3% growth prediction at present!
The difficulty all this brings is that this is happening at a time when some of the major mortgage lenders seem to be admitting privately, that they could be lending out less than last year, with the cost of funding increasing and the availability of cash to lend out being constrained.
We have recently seen another rash of interest rate rises from many of the major lenders, with fixed rates especially edging up again.
This looks set to continue even though Bank Base Rate is staying static. A recent report stated that the average two year fixed rate has risen to 4.15% up from 3.82% in October 2011, whilst five year fixed rates hit a low in January with an average rate of 4.57% but this has crept up to 4.72%.
The average rate for two-year trackers now stands at 3.63% up from its lowest level in August 2011 at 3.37%.
In terms of reasons for this rise, lenders point to the cost of funds, the cost of getting savers in, the cost of borrowing to lend, capital adequacy and levels of competition. Also important however, are service levels and plain old profit, which all play a part when there is a limited supply to lend.
The phrases “Mortgage Prisoners” and “Mortgage Time Bomb” have appeared on the front pages, which all seems very dramatic and may have you wondering whether this means that no-one can get a loan these days.
As ever, this is far too simplistic. Whilst it is true that lenders have tightened up their criteria in respect of interest only loans, affordability etc, there are fundamental differences to the dark days of 2008.
Much of the tightening up on the high street has been countered by the growing number of smaller, niche lenders, mainly building societies, who are able to look at applicants in the old fashioned way – blank sheet of paper and a human underwriter. Together with a more forward thinking Private Bank sector, these lenders are actively helping borrowers such as the self-employed and high net worth individuals.
When all this is taken together, these issues mean that it is more important than ever for buyers to take advice and have their finances in place at the earliest possible opportunity, not just to prove to the vendors that they are serious and can move quickly, but also to ensure they are not caught out by sudden rate rises or criteria changes by the lender.
Andrew Montlake, Director and Spokesperson for Coreco, gives his honest and forthright views on the mortgage market, economy and all things property related. Monty was voted "Mortgage Personality of the year 2008" and is the current holder of the British Mortgage Awards "Best Press Spokesperson" title. Expect expert analysis, delivered in a down to earth style with a side helping of exuberance.