Mortgage Market Set for Change

Mortgage lending has reached its highest point since August 2008 after reaching a monthly total of £19.1 billion in July, but how long will the swell in demand last?

Mortgage lending has reached its highest point since August 2008 after reaching a monthly total of £19.1 billion in July, but how long will the swell in demand last?

In total there are 11.1 million mortgages in the UK that equate to £1.2 trillion in loans, many of which are not on fixed rates.

Base Rate

model house and keys symbolising getting a mortgageTwo external members of the Bank of England’s Monetary Policy Committee, Martin Weale and Ian McCafferty voted for a 0.25% rise in the base rate.

The rate has stood at an all time low of 0.5% since 2009, but with the economy now well on the way to recovery, an increase seems inevitable and Weale and McCafferty believe that it would be to the benefit of the British public.

They argue that with decreasing unemployment and a shortfall in labour workers, inflated interest rates would cause wage growth that workers should be encouraged to save their surplus cash.

Tough Times Ahead

Despite evidence of good reason for an increase in the base rate, expansion would have to be gradual to avoid financially crippling British families across the country.

Even with a gentle increase, there will be seriously negative consequences:

  • Earlier this summer, the Bank of England proposed the base rate gradually rise to 2.9% by 2018
  • A study by the Resolution Think Tank shows this would cause one in four households to struggle to repay mortgages.

As it stands, house prices are already rapidly rising after the Office for National Statistics reported a 10.2% increase in the last twelve months to an average of £265,000 and a London average of £500,000.

If the Bank of England’s long term plans are implemented then the interest to be paid on those outstanding mortgages will have multiplied nearly six times over, a debt that will likely shock many mortgage holders.

To see what roles we have available within the mortgage industry or in related fields, take a look at what our wealth management department is offering.

– Tom Storer

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