For every ten homes sold last month one was a remortgage. Until more mortgages arranged are remortgages each month I very doubt that property prices will drop any further. The reason for the house prices being unreasonably buoyant is due to the fact that for every ten houses sold only six new homes are coming on to the market – this shortage of new homes onto the property market is keeping the price of houses artificially high. It’s the law of Supply and Demand that keeping prices high.
The mortgage market needs to be stimulated in order to encourage homeowners to remortgage and to move up or down the property ladder. This will only happen when lenders who currently have no appetite start to seriously lend to first-time-buyers, homemovers and remortgage borrowers looking for a 90% to 95%. Mortgage lenders will need to also re-evaluate their lending criteria and start relaxing their criteria if they are to increase borrowing and stimulate the mortgage market.
Many homeowners do not feel they need to remortgage in the current economic climate. As they come off a previous high interest rate deal and move onto their mortgage lenders lower standard variable rate (SVR). Complacency sets in with homeowners as they are lulled into enjoying some of the lowest SVR interest rates in many years. We are currently seeing some of the best mortgage rates but only for low loan-to-value mortgages
When interest rates start to rise again in the next twelve to eighteen months there will be a mad panic as homeowners rush around to find a new interest rate deal. Many will be caught on a rising standard variable rate (SVR) as they do not match their mortgage lenders criteria, or they need a high loan-to-value mortgage. Many will have incurred arrears and defaults during the recession due to loss of a job, or a redundancy or a drop in hours and pay.
Others homeowners with out of control debts will have tried to get out of debt by contacting Debt Management companies and charities to easy their situations through a Debt Management plan or an IVA. These homeowners will find themselves unable to change mortgage lenders and will be forced to stay with their current lenders and accept the interest rates offered.
So far all the Bank of England’s quantitative easing has not helped the mortgage market apart from stabilise the banking system. We need savers to start receiving more interest for saving and investing their hard earned money in the banks. Unfortunately a side-effect of this will be an increase in mortgage costs to borrowers.
This will happen when we come out of this recession. The cost of borrowing will starts to rise, workers will demand higher wages, mortgages will become more expensive and savers will start to receive better interest rates for investing their hard earned money; fuel costs and gold will start to rocket and inflation will rise to dizzy heights. This is a truly daunting realisation of the future as we struggle in the future to reduce our government borrowing and try to control inflation.
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