As speculation of a house-price bubble continues to grow in some quarters, the Bank of England is putting the brakes on Funding for Lending (FLS) – at least as far as mortgages for households is concerned. Mark Carney, the Governor of the Bank of England, has announced that from 2014 the focus of FLS monies will be on small businesses, rather than individuals.
Was this decision made because the Bank panicked about rising property prices and activity? Data released last week from the Land Registry and Nationwide both underline the rise in activity in the housing market. The Land Registry said London house prices have risen by 9 per cent in the past year, but it’s not just London: other parts of the UK are also seeing rises, albeit at a slower pace.
Nationwide reported a 0.6 per cent growth in prices in November compared with 1 per cent in October but this is in line with a seasonal slowdown as sellers approach Christmas and delay putting their properties on the market until January.
The repositioning of the FLS is no surprise as it was only meant to stimulate the market in the short term. This has resulted in cheaper mortgage rates with borrowers never having it so good.
Borrowers don’t need to panic but lenders may look to re-price fixed rates higher so if you need one of these, it may be worth securing a deal sooner rather than later. However, it is unlikely that mortgage rates will shoot up overnight: lenders have targets to meet for the end of this year and into the Spring, before the Mortgage Market Review is implemented in April, so we still expect some competitive pricing.
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