The Funding for Lending scheme (FLS) is resulting in cheaper mortgage rates, according to the Bank of England, which is expected to boost the amount of lending done throughout the rest of the year.
Mortgage rates have fallen between 0.5 and one percentage points in the past year since the scheme was introduced. Subsequently, borrowers are enjoying some of the cheapest mortgage rates ever seen, with pricing falling across the loan-to-value curve. This means that even those with more modest deposits, particularly first-time buyers, are also benefiting from cheaper mortgage rates. Indeed, the Council of Mortgage Lenders reported last week that the number of first-time buyers is at its highest level since 2005 as they return to the market in their droves.
Fears of a house-price bubble show no signs of abating as increased confidence in the economy and rising employment contribute to a steady ascent in property values. So far, this is not deterring buyers as low mortgage rates mean affordability is not yet an issue. However, if prices continue to rise this situation could change.
Government schemes such as FLS and Help to Buy will continue to support the growing availability of cheaper mortgage rates in coming months. While interest rates are expected to stay at 0.5 per cent at least until late 2016, following the forward guidance issued by Bank of England Governor Mark Carney, it is important that borrowers take nothing for granted and don’t overstretch themselves. Rates will rise at some point so it’s important to bear this in mind; Anderson Harris can advise as to the best course of action for clients faced with an increasing array of funding choices.
The private banks continue to remain extremely competitive for borrowers requiring large loans, with low rates and flexible conditions often better than those found on the high street. Our excellent contacts with the private banks mean we can also place more complex cases for wealthier borrowers.
For funding solutions for you or your clients, please get in touch.