At last, some good news: UK mortgage market is on the up again

The mortgage market's moving again, rates are at an all-time low, lenders are flush with government cash, and – at last – they're keen to hand it over

Whisper it quietly, but there is just a touch of boom-times about the UK mortgage market. Cash-rich lenders, flushed with £80bn of readies from the Bank of England's Funding for Lending scheme, are once again competing for borrowers' attention with eye-catching deals. It's not quite 2006 and 2007 all over again, but for a fair few credit-worthy borrowers it sort of feels that way.

Take Tesco's new deal, launched last week. A newcomer to the mortgage market, the supermarket giant offers a two-year, fixed-rate deal at 1.75 per cent. It comes with a hefty £1,300 arrangement fee, but, nevertheless, the rate is below inflation. Elsewhere, Norwich and Peterborough Building Society offers two- and five-year fixed-rate mortgage deals with ultra-low fees at just 2.24 per cent and 2.74 per cent respectively. "Banks are taking advantage of cheap money courtesy of the Government's Funding for Lending Scheme," said Ashley Brown, director of the independent mortgage broker Moneysprite. "That's why we're seeing record low rates."

Sylvia Waycot, of the financial information firm Moneyfacts, subscribes to the idea that some mortgage borrowers have never had it so good: "The Funding scheme has kick-started the mortgage market in a way previous quantitative easing has not. Today's market is all about enticing the less-risky borrower [who has] a large deposit. There's less chance of things going sour."

Less-risky borrowers are those who have been a salaried employee for, say, three years or more, have kept up all their loan and credit repayments during the past few years, have a hefty deposit – 25 per cent and above – or have a large amount of equity in their current home. These winners from the global financial crisis and recession are the ones best placed to scoop all-time low mortgage rates. And rates may go lower still. Mark Harris, chief executive of the mortgage broker SPF Private Clients, said: "Rates are likely to fall further still, but we also expect lenders to loosen criteria as they get fed up with competing with each other over pricing. Some of the smaller lenders may not have the capacity for big battles on the rate front and are likely to tweak criteria instead, which will be welcome." This could mean that lower rates for first-time buyers, who generally have smaller deposits, are on the way.

But does all this mean the UK is on the cusp of another house-price boom, fuelled by the lenders again? Probably not. First, there is still a huge debt hangover from the last boom, nearly £1.2 trillion of mortgage debt remains to be paid off and several hundred billion of loans and credit cards. All that has happened since the global financial crisis of 2007 and 2008 is that consumers have slowed their rate of new debt accumulation, rather than paying off substantial amounts. Any major rise in interest rates, for instance, would still have a potentially catastrophic impact on family finances in millions of British homes.

What's more, property transaction levels are still historically low. During the boom years new mortgages would top 100,000 a month. In figures for April, released on Friday, the Bank of England says that there were 53,710 new mortgages granted for house purchase. By far the fastest-growing sector is existing homeowners staying put and moving to one of the new ultra-low rate deals, with 30,313 remortgages taken out in April compared with 25,766 in January.

More generally, house prices are rising in London and the South-east owing to the better economy, greater mortgage availability and the torrent of property investment cash ploughed in from wealthy foreigners. Outside the capital, commuter towns and second-home destinations such as the South-west, the market is still in a state of torpor. Prices are edging lower in much of the North and West, with the backdrop of a struggling economy and rising unemployment.

The mortgage boom doesn't quite equal higher house prices – yet.

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Financial Adviser

    £20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

    SThree: Graduate Recruitment Resourcer

    £20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

    Guru Careers: Application Support Analyst / 1st Line Support

    £25 - 30k: Guru Careers: We are seeking an Application Support Analyst / 1st L...

    Guru Careers: .NET Developer / Web Developer

    £45K - £55K (DOE) + Benefits: Guru Careers: We are seeking a full stack .NET D...

    Day In a Page

    Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

    Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

    How a costume drama became a Sunday night staple
    Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

    Miliband promises no stamp duty for first-time buyers

    Labour leader pushes Tories on housing
    Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

    Aviation history is littered with grand failures

    But what went wrong with the SuperJumbo?
    Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

    Fortress Europe?

    Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
    Never mind what you're wearing, it's what you're reclining on

    Never mind what you're wearing

    It's what you're reclining on that matters
    General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

    Chuka Umunna: A virus of racism runs through Ukip

    The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
    Yemen crisis: This exotic war will soon become Europe's problem

    Yemen's exotic war will soon affect Europe

    Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
    Marginal Streets project aims to document voters in the run-up to the General Election

    Marginal Streets project documents voters

    Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
    Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

    The real-life kingdom of Westeros

    Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
    How to survive a social-media mauling, by the tough women of Twitter

    How to survive a Twitter mauling

    Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
    Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

    At dawn, the young remember the young

    A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

    Follow the money as never before

    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
    Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

    Samuel West interview

    The actor and director on austerity, unionisation, and not mentioning his famous parents
    General Election 2015: Imagine if the leading political parties were fashion labels

    Imagine if the leading political parties were fashion labels

    Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence