07 Dec UK mortgage rate predictions 2013
Mortgage rates have fallen recently as lenders compete and the Bank of England ‘Funding For Lending Scheme’ has helped push down money borrowing costs. Rates are constantly changing and there are many reasons why rates may increase in 2013.
So what are our UK mortgage rate predictions for 2013?
Bank of England Base rate has historically been a fair indicator of where lending rates should be, but with it sitting for over 3 years on an emergency rate of 0.5%, it has less influence and does not really drive new mortgage rates any more.
UK mortgage rate predictions for 2013
The three main drivers of mortgage rates are:
The price of funding on the wholesale money markets
The cost of getting funds in from savers
The amount of capital regulators demand banks hold against their loans.
Until proper competition returns to the mortgage market, lenders will hold all the cards. It is highly unlikely high loan to value rates will return quickly. The Bank of England Funding For Lending scheme needs to be seismically increased.
Bank of England Funding For Lending Scheme
Many economists believe for the mortgage lending market to revive, Bank of England Base Rate needs to be around 3% or more. The Bank of England needs to control future inflation. Until this takes place lending cannot improve. We need to know whether Zombie Business and people are a reality or just a newspaper headline.
Pushing mortgage rates up obviously would put extra pressure on household income and may increase defaults and repossessions. As ever, securing a very low mortgage rate now before rate rises, could really make sense.
Mortgage Lending Criteria
It is no secret that the banks are currently restricting lending through tight underwriting. At worst this will continue unabated but more likely 2013 will see lending gradually ease. Before the crash 90,000 mortgages were issued every month, the current level is 40,000. This shows a huge upside for banks to reach just average levels.
We continue to work hard to ensure we understand the bank’s requirements better than their own employees do.
London Property Prices
With strong rental margins, steady asset growth, lack of stock and waves of foreign buyers, we do not foresee any negative positions for those holding or buying property in the London area.