Market Comment

April 2010.

Mortgage Market Update.

April has begun with two very unsurprising announcements, The General Election has been called and hard on the heels of this the Bank Of England Base Rate was pegged at 0.5% for a further month giving us, as we suggested previously, the longest period of Bank of England Base Rate stability since an Eighteen Month Period ending in September 1953, the next decision will be announced on Monday 10th May after the General Election is over (as the Monetary Policy Committee were due to announce their decision on 6th May which is now a rather more significant date).

Easter has in the past, usually, been a time when home buyers decide to come out of hibernation and revive the flagging housing market and with an outbreak of less raining and the longer evenings of BST it would seem that there is more confidence and demand in the market than we have seen for some time. Mortgage transaction levels over March for TMM were over twice the levels we saw in January 2010. On the face of it that seems like an excellent indication of a revival of interest from buyers and homeowners. We are certainly pleased with the uplift in enquiries and transactions and perhaps a tiny amount of loosening of criteria from some of the larger lenders who are finding a little more competition in the market.

Overall most of the predictions for volume changes in 2010 have been very conservative and a possible 10% increase in transaction numbers has been generally accepted as a sensible expectation. The better news for Brokers is that it is probable that most of that 10% uplift will come through to the broker market and if this occurs it could lead to 20–30% increase in transactions for brokers as most of the “direct” lenders are already working close to capacity.

March for TMM saw the addition of 2 further ex Chase De Vere brokers to the team and a third has now joined us in April, so we are looking forward to sustaining the increase in mortgage cases throughout 2010 – with your assistance.

As well as an increased amount of buyers and mortgage transactions we are seeing a definite increase in opportunity for remortgaging. For many years from the early 1990’s it was often beneficial to switch from one lender to another to gain a better rate than the Standard Variable Rate offered by most lenders after the end of an initially attractive rate. With the amount of new lenders in the market over the last 20 years competition increased for market share and borrowers could better their circumstances and get artificially competitive products from a new lender. From the start of the Credit Crisis the remortgage market rapidly withered on the vine as lenders withdrew from such competition and, as a result of plummeting market rates, Standard Variable Rates and reversionary rates fell to unprecedented levels. Now as confidence returns to borrowers’ minds and job security (in the private sector in particular) is less of an issue, those borrowers who are paying their mortgages linked to higher Standard Variable Rates are beginning to look favourably at some of the better priced Base Rate Tracking and fixed rates in the market today. The purpose of the remortgage is either to get a worthwhile cash flow saving in the coming months or to fix at a similar rate to the Variable rate being enjoyed today and remove any concerns about rising housing costs for a few years. Of course you may have to pay an early repayment charge to your existing lender if you remortgage but we will not recommend such a change unless, even with such a cost taken into account, this makes financial sense With a far from clear potential result of the General Election to consider and the possibility of further pressure on the Pound if no clear winner emerges from the election there could well be some pressure to increase Bank Base Rate across the Summer especially if a new Government encourages a view that the sooner harsh medicine is delivered to the economy the sooner it will recover. This scenario has sparked renewed interest in fixed rates from some of our clients in the last couple of weeks.

In addition to the uncertainty about the Election result there has been some upbeat news about the economy over the last couple of weeks – apparently the figures show we in the UK are coming out of recession faster than predicted based on the growth of the Economy in the final Quarter of 2009 which has given the Government a reason to point out how well they have steered the Economy since 2008 – it still seems pretty fragile to us... none the less this kind of positive reporting of every fractional improvement can only be good for the general well being and confidence in the economy and ultimately will underpin and sustain housing values and increase demand for housing and mortgages which will create a more vibrant market for us all to benefit from in 2010/2011.

In our experience in the run-up to previous elections mortgage transactions and housing sales have often slowed up as people were unsure as to how the election would affect future housing activity. This time as transactions are so low and whichever result the Election brings there will be no major change to our Economic outlook we are looking forward to no slow up and a continuation of a slow and sustainable recovery in the mortgage and housing market continuing throughout April and May.

To see just how we can help you achieve your mortgage-linked aims simply email or call one of the team who you can select from the appropriate page on this site or call us on 0207 930 7242 – we look forward from hearing from you.

Simon Tyler, 12th April 2010.

Post-Election update Due 11th May.