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
Sunday 02 June 2013
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.
Independent Partners: Get fee-free expert mortgage advice and find the right mortgage deal for you.
- 1 'Women should not laugh in public,' says Turkey's Deputy Prime Minister in morality speech
- 2 The secret report that helps Israel hide facts
- 3 Is Ebola coming to Britain? UK health officials issue warning to doctors as outbreak fears grow
- 4 Richard Dawkins says 'date rape is bad, stranger rape is worse' on Twitter
- 5 Danish TV reporter is all business up top, all party down below
The secret report that helps Israel hide facts
A day in the life of Vladimir Putin: The dictator in his labyrinth
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Boozy, ignorant, intolerant, but very polite – Britain as others see us
Were 'Poor Doors' added to mixed developments so wealthy residents don't have to go in alongside social housing tenants?
- < Previous
- Next >
iJobs Money & Business
£350 - £400 per annum + competitive: Orgtel: Project Manager (specializing in ...
£25000 per annum + OTE £40,000: SThree: Orgtel are seeking Graduate Trainee Re...
£45000 per annum + Benefits: Ashdown Group: ** HR Business Partner - Senior H...
£28000 - £32000 per annum + Benefits: Ashdown Group: PA / Team Secretary - Mat...
Day In a Page
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000