Mortgage Approvals Rise as Base Rate Holds

alignleft size-full wp-i...

Jill Smith from our Financial Advisor comments on the resulting actions and issues arising from the latest meeting of the MPC.

The Government's Monetary Policy Committee (MPC) has once again voted to pump more relief funding into the UK economy during their meeting this month.  Despite employing a patient approach in June, a 0.3% decrease to the economy and the effects of a double dip recession have forced decisive action, with £50bn set to be injected.  The decision means that the total amount spent rises to a £375bn.

Another hot topic for the MPC to mull over was the possibility of slashing the Bank of England's Base Rate.  However, many mortgage lenders have Standard Variable Rates which are linked directly to changes in the Base Rate, and it was feared that those lenders would be too negatively affected by pushing the rate to a new all-time low of less than 0.5%.

Lending figures have provided some source of optimism as overall gross mortgage lending to May 2012 is currently 8% ahead of the corresponding period last year.  However, for this to continue, the housing and mortgage markets will need the continual support of the mutual sector as several banks have recently announced their intentions to reduce lending levels during the remainder of the year.

Another positive sign comes in the form of mortgage approval numbers, where figures have risen considerably year-on-year; a total increase of 13%.  Though this is only a small step in the right direction, it is hopefully at least an indication that more of Britain's prospective first time buyers are getting their first foot on the ladder. In uncertain times, it is no surprise that borrowers are seeking stability and remain firmly in favour of fixed rates.  In fact, in June almost four out of every five purchasers and three out of every four remortgage borrowers opted to fix their payments.  It would seem that lenders are taking note, with the growing demand for stability being reflected through minor changes to average mortgage rates in July.  Average fixed mortgage rates for July are 4.68% (2 year), 5.02% (3 year) and 4.87% (5 year). *

To find out how this affects you or to review your current mortgage, you can contact Jill our Financial Advisor on 01782 664995 or email jillsmi@mab.org.uk

Your home may be repossessed if you do not keep up repayments on your mortgage. There will be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed. *Moneyfacts, 2012.