Blog Archives

Fall in inflation takes pressure off rate rise but borrowers must prepare


Interest rates will rise ‘sooner than markets currently expect’, according to Bank of England governor Mark Carney in his Mansion House speech. Given that interest rates have not shifted from 0.5 per cent in more than five years, his pronouncement came as a shock, with money market rates rising significantly. However, not long after Carney made his remarks, the Office for National Statistics announced that inflation fell from 1.8 per cent to 1.5 per cent in June. This is well below the Bank of England’s 2 per cent target, taking the pressure off the Bank to raise interest rates.

But while an interest rate rise may not be imminent, it will happen. There is no need for borrowers to panic, particularly as long-term fixed-rate mortgages are historically still cheap. Yet it is worth looking at your options. If you are on your lender’s standard variable rate, or you will need to remortgage or take out a new deal in the next six months, it is not too soon to start looking. Seek independent advice and consider whether a fixed rate might be the best option for you.

Many of our clients are opting for five-year fixes because they are so competitively priced. Only a few years ago we didn’t expect five-year fixed rates below 4 per cent but it is possible to fix for that length of time from 3.09 per cent, depending on your deposit or level of equity in your home. 

Those considering a new mortgage should be aware that the mortgage market review (MMR) means the application process has changed. Lenders are assessing borrowers’ affordability in greater detail; whereas before they would check three months of bank statements, now they are checking six to 12 months of statements. They are also going into great detail when checking the source of deposits.

We advise clients to prepare before making their application, cutting back on unnecessary spending at least six months beforehand, and paying off any debt. Contact us for more information.

Adrian Anderson
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Adrian Anderson

Borrowers take a breath as Bank of England reports lull in lending volumes


It is not exactly a fall in lending volumes but the Bank of England has reported a softening. With an increasing number of people worried about the double whammy of overpriced property and the impact of an interest rate rise, the housing market frenzy seems to be moderating.

The Bank of England said lending volumes rose to the highest amount in the first quarter of the year since Q1 2008 but this was still 8.5 per cent less than Q4 2013.

Borrowers are protecting themselves where they can with more than 80 per cent of new mortgages taken on a fixed basis, giving the borrower the security of a lower rate for a longer period. Even though the average fixed rate edged 2 basis points higher, while variable rates fell on average by 6 basis points, the growing threat of an interest rate rise means the allure of the fixed rate is strong.

The proportion of lending to first-time buyers declined by 0.5 percent from the previous quarter which is perhaps surprising given that the second phase of Help to Buy is well under way. This does reflect the general easing across the market to which first-time buyers are not immune. With £9.4bn of lending done to first-time buyers, compared with £3.2bn in the first quarter of last year, government assistance and the general availability of more deals at higher loan-to-values have made it easier for them to get on the ladder.

The buy-to-let market is going from strength to strength as investors shun poor rates on savings accounts and turn to property. Lenders are offering cheaper mortgages with looser criteria, further fuelling the sector’s expansion.

We are expecting to see a further falling off of lending volumes when the second quarter’s statistics are published as they will cover the period when the mortgage market review was introduced.

Jonathan Harris
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Jonathan Harris