It's not exactly boom time but don't panic! The housing and mortgage markets are not bust either.
OK it’s not been a brilliant summer for the property market. In fact, it’s been dreadful if you believe yesterday's headline from Cliff D'Arcy. And it's not just lovemoney.com. The phrase everyone dreads, ‘double dip’, is bandied about all over the financial press, and any reported price fall is seized on.
So should we all be feeling very gloomy given the summer downpour of negative reports and forecasts?
I don’t think so because, while things are clearly still very challenging and the future uncertain, there are plenty of positive stats about for those who want to find them.
In other words, Cliff's view is not the only view. And while one of the great things about lovemoney.com is that us writers get to say exactly what we think, I want to present the other side of the story.
So, in response to Cliff's doom and gloom, here are five reasons to look on the bright side!
1. Lending stable
Yesterday, Cliff D’Arcy reported that mortgage lending has ‘slumped’. When you compare it to the boom times, yes it is definitely is, and it’s true in July gross mortgage lending was 3% down on last year (though 2009 was a good year!).
But it’s not all negative. Lending in July was up on June, which was up on May, which was up on April, according to the Council of Mortgage Lenders (CML). Plus, this week the Bank of England noted a rise in net secured lending to individuals of £0.1bn in July.
However small, these increases have got to be good news, especially given the political and economic uncertainty during the same period. It’s likely that the market will slow during the rest of this year, especially around the time of the much awaited Autumn Spending Review. Indeed, the CML has already revised its lending forecast for 2010 slightly downwards to account for it.
So when lending figures show a dip in August, September or whenever it comes, let’s not panic. It’s precisely what’s expected.
2. House price reports not all bad
In July house prices fell back by 0.5% according to Nationwide after rising in March, April, May, and June. The doom mongers screamed that a double dip is on the cards following this tiny fall.
But on the same day the same lender released its quarterly stats, which showed that house prices in the second quarter of this year were 1.9% up on the first. And as if to prove the point that one month’s house price index should not be viewed in isolation, where Nationwide noted a fall in July, Halifax noted a rise in house prices of 0.6% in the same month.
All indicators show house prices higher, significantly higher, than a year ago, so why is everyone so worried?
Well, each index, including others from Hometrack and Rightmove, has noted small ups and downs in prices this year, with the annual rate of inflation easing. All the hallmarks of a slowing market are there (but not a falling market). Truth is it could go either way, but I think it’s too soon to call an inevitable drop in house prices.
3. Base rate set to stay low
The majority of economists now expect the Bank of England Base Rate to remain at its current level of 0.5% for the rest of 2010 and beyond. Governor of the Bank, Mervyn King, recently made it clear that he does not expect to have to increase rates to deal with inflation, saying that the debate was "about the appropriate degree of stimulus, not about applying the brakes".
In its recent Quarterly Inflation Report, the Bank said it judged it appropriate to maintain rates at 0.5% for the medium term, despite forecasting a rise in near-term inflation.
The Reuters poll of leading economists now estimates that the first rate rise will be between April and June 2011. It also predicts that Base Rate will have only crept up to 1.5% by the end of 2011.
For mortgage holders on a variable or tracker rate this consensus on Base Rate staying low offers welcome relief that your repayments are not set to rocket soon.
4. Mortgage rates at seven year low
You may have read about lenders widening their profit margins while the Bank of England Base Rate remains low. Indeed, I covered this topic last week in 16 super low fixed rate mortgages.
But while there is some truth in this, mortgage pay rates are currently extremely low, whether you are looking for a tracker, discounted variable or a fixed rate. If you have a large deposit you can bag a tracker rate at 2.19% from HSBC and NatWest for example, and two-year fixed rates start at under 3%, with ING Direct’s two-year fix at 2.79% available with a fee of just £945.
You can even lock into a five-year fix for less than 4% with both Yorkshire Building Society at 3.99% and HSBC at 3.95%. These are historically great rates.
In fact, fixed rates are at their lowest level in seven years according to financial information provider Moneyfacts. Of course, borrowers with smaller deposits still have limited choice, but between April 2009 and March 2010 the number of 90% loan-to value mortgages on offer shot up 114%. Now that’s something to smile about!
5. Help is at hand if you want a great deal
There is so much information online, on TV and in the newspapers about the property and mortgage markets it can be easy to be confused.
Luckily, there are experts who can help you to navigate your way through the mortgage market and find the best deal for you. Independent mortgage brokers are fully authorised by the regulator and they must pass professional qualifications in order to advise -- so they know their onions.
As well as being able to search the market to find a deal that meets your exact needs, a broker knows which lenders are likely to accept you, and which are currently providing good service, or experiencing delays.
This means you don’t waste time applying for deals you won’t get and are more likely to receive a fast and efficient service.
Finally, they do the hard work for you, helping you to fill in forms and chasing the lender for you -- reason enough to be cheerful! If you want professional advice from one of lovemoney.com’s whole-of-market fee-free brokers, call 0800 804 8045 or email mortgages@lovemoney.com for more help.
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This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article.
Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term may revert to the lender's standard variable rate or a tracker rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.
Your home or property may be repossessed if you do not keep up repayments on your mortgage.
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