News

Mortgage market expected to polarise further following latest FSA proposals

The FSA has signaled its intention to exempt ‘high net-worth clients’ and ‘mortgage professionals’ from standard lending rules in its latest Mortgage Market Review (MMR) paper, catering further for their particular needs by relaxing its guidance on interest only, lending into retirement and multiple sources of income, including bonuses.

Whilst there is bound to be some debate about who exactly fits into these categories, what is certain is that the mortgage market will polarise further into ‘mainstream’ and ‘niche’ sectors.

Lenders will look for a more cost effective way of distributing mainstream products through the internet and high street branches, with less involvement for mortgage brokers. But where there is an element of discretion in a niche sector, there will be a lighter regulation of products, more care required and more choices to be made.  It is here that an experienced independent broker’s advice will be valued by clients.

We will discuss the consequences of the FSA’s latest thinking in a more detailed review soon. In the meantime, if you want to know more about what the changes mean to you, please call us on 0800 980 8777. 

CML predicts stable mortgage market in 2012

According to the Council of Mortgage Lenders (CML), UK mortgage lending in November 2011 was an estimated £13.0 billion, the fourth month in a row that there has been a year-on-year rise. This is 5% higher than in October 2011, and 13% higher than in November 2010.

The CML published its latest housing and mortgage market forecast update on 15^th December, confirming that it now expects gross mortgage lending in 2011 to total £138 billion. For 2012, the CML's new central forecast is for £133 billion, slightly down on 2011, reflecting the weaker economic environment that now seems likely. However, with so much uncertainty at present, especially about the Eurozone, this is subject to considerable variation in either direction.

The CML expects a continuing low level of housing transactions in 2012. While an estimated 852,000 transactions are likely to have taken place in 2011, slightly fewer transactions are expected next year with a central forecast of 825,000. Whilst this ‘new normal’ is considerably lower than the peak activity reached in 2007-2008, the stability of the housing market is in everyone’s interests and such stability should give those contemplating a move in 2012 the confidence to continue with their plans. Recent government housing initiatives should help to boost the number of house purchases made by first-time buyers, but the overall market impact depends upon mortgage credit availability.

For good advice on mortgages and finance, contact Private Finance on 0800 980 8777.

Mortgage rates may increase in 2012 according to the Bank of England

The Bank of England has warned that mortgage rates may increase in 2012 as banks pass on higher funding costs to their customers. In its Financial Stability Report released on 1 December the Bank says that the increase in wholesale funding costs will ultimately lead to higher mortgage rates.

The report says: “At the beginning of the financial crisis, when funding costs rose sharply, banks were relatively slow in updating the price of new mortgages and the residual remained negative for around a year. This suggests it may be during 2012 that any significant increase in banks’ lending rates occurs.”

It adds: “While credit availability was reported to have increased slightly in 2011 Q3, particularly for high LTV mortgages, subsequent market intelligence suggests that, as with corporate lending, some banks may be starting to pass on higher funding costs to mortgage customers through higher prices.”

Against the backdrop of serious worries about the future of the eurozone, short term rates are increasing to reflect the perceived increased risk of lending between institutions. (3 month LIBOR is just under 1.04% as at 1 December 2011) whilst longer term rates are still relatively low: 5 year swaps are just 1.77% as at 1 December 2011.

The time for switching from a variable to a fixed rate may be fast approaching. Call Private Finance for good, independent advice on mortgages and finance.