There is growing concern that increased financial stability in the UK will lead to mortgage rate rises.
The Bank of England has kept the base rate at 0.5% for the past 5 years and has stated that this will not rise until unemployment reduces to 7%.
This may happen by the end of the year, although most commentators do not expect to see rate rises until 2015.
Higher base rates would immediately increase the cost of variable rate mortgages for home movers, first time buyers, remortgage buyers and buy-to-let landlords.
The impact of the government’s Funding for Lending scheme led to an influx of cheap money into the markets and last month this reduced the best rates even further.
Longer term mortgages better
However, the governor has said that there will be no more funding of this kind and this may mean that the ‘best’ rates start to increase, with consumers showing an increased interested in longer term 5 year fixed rate deals.
Longer term fixed term mortgages can make the market more stable and are encouraged by the Bank of England.
There has been a trend away from two year mortgages to five year mortgages as people are expecting a rise in base rates.
For older equity release mortgage buyers, fixed rates of 5.9% upwards can be secure for a lifetime mortgage without any evidence of earnings which is important for borrowers with only pension income.
Mortgage lending increases
This follows the latest figures from the Council of Mortgage Lenders (CML) that £17 billion was lent during the month and gross lending for the last quarter was £52 billion.
This represents a 38% increase on the same time last year and is currently stronger than expected according to the CML.
Lenders have experienced a surge in new mortgage lending with a 49% increase in December although overall lending is still down.
Lenders have experienced a surge in new mortgage lending to first time buyers, home movers and buy-to-let investors with a 49% increase in December although overall lending is still down.
In 2013 lending was at £176 billion compared to the high of £362 billion in 2007 and the average for the property market of £240 billion.
What are your next steps?
Talk to our London City Mortgage brokers for advice if you remortgage your existing home and want the best mortgage deal or release capital, buying your first home, moving home or are a buy-to-let investor.
For older homeowners releasing equity from your property, our LCM mortgage advisers can recommend the lifetime mortgage, accessing wealth to maintain your lifestyle or even give to a family member.
Start with a free mortgage quote or call us and we can take your details. Learn more by using the equity release mortgage calculator, mortgage cost calculators, and property value tracker chart.
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