Is it all change in the mortgage market in 2011?
The first meeting of the Bank of England’s Monetary Policy Committee (MPC) in 2011 resulted in the bank base rate being maintained at half of one percent, or 0.5%, for the 22nd consecutive month…..
Increases in VAT and fuel duty are now impacting on disposable incomes and both will have a knock on effect on the headline Consumer Price Indices (CPI) rate. CPI is already at 3.7% and is likely to rise further in the near term, causing influential and respected bodies to forecast that base rates could rise as early as the second quarter of 2011.
In recent weeks we have seen a rise in factors that influence the pricing of fixed rate mortgages and there has been a slight month on month rise in average fixed rate deals. Those borrowers looking to re-mortgage, and obtain the peace of mind that a fixed rate brings, can still obtain some very competitive products relative to historic levels. We may, however be approaching the point where rates are finally on an upward curve.
With house prices being largely flat or moving slightly down regionally, remortgage borrowers also need to be aware that if they have little equity, a small reduction in value can have a considerable impact in terms of the rate of interest they can borrow at. Mortgage product pricing is very much loan to value driven and significant variation exists between borrowing at below 60% of a property’s value compared to borrowing at 85% or 90%.
Once again, fixed rates have remained the product of choice for both house buyers and re-mortgage customers during December with almost two thirds of borrowers electing to fix their mortgage repayments.
Lenders continue to provide a healthy number and range of mortgage products to the market with almost 5,000 products typically available through a mortgage intermediary, an increase of more than 55% on the corresponding period in 2010.
Although no-one realistically expected a change this month it has been suggested that base rate rises are now more of a possibility in the shorter term than just a few months ago.
Courtesy of the Mortgage Advice Bureau (MAB 3886) – Mortgage Advice Bureau Website
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