Figures from the Council of Mortgage Lenders show that in July
gross lending in totalled £25.2 billion, with fixed rate deal
mortgages are at their most popular for nearly six years.
Nonetheless, "July's growth in lending to individuals slowed
from the recent trend," said British Bankers Association (BBA)
spokesman David Dooks, "this could have reflected consumers
waiting for the widely anticipated cut in interest rates."
Miles Shipside, Commercial Director of Rightmove (
http://www.rightmove.co.uk/ ), comments, "The belated but
welcome drop in interest rates will be a real boost for
sentiment in the market and a springboard for a better 2006."
However, more than half of all mortgage lenders have failed to
pass on the full Bank of England interest rate cut to
borrowers, and those that haven't done so already look unlikely
to do so in the future.
"How these things usually work is that if the lender is going
to pass on the full cut they announce so fairly quickly", Ray
Boulger of John Charcol mortgage advisers.
Several lenders stated the rates on fixed mortgage deals from
some providers had already started to drop in anticipation of
the cut in interest rates earlier this month, while others
argued that replicating the rate cut is not necessary because
they did not pass on past increases.
A few lenders, including the Halifax, the UK's largest mortgage
lender, immediately reduced its rates, but others have held off
cutting borrowing costs or have trimmed them by less than the
bank's quarter of a percent.
Despite the rate cut anticipation and the increases in the
take-up of fixed rate deals, the British Bankers Association
(BBA) said that net mortgage lending by its own members slowed
down last month.
Rightmove in its latest house price index has indicated that
house sales have slowed down. The numbers of completed sales
for the three months from April to June are the lowest since
1998. To improve the chances of achieving sales, many new
sellers are adjusting their prices in an attempt to undercut
the competition. Asking prices have now dropped by an average
of 1.2% over the past two consecutive months.
Rightmove believe that the housing market is gradually
recovering, but "there is currently too much unsold property
still available to expect anything other than a continuation of
static asking prices this year".
Miles Shipside adds, "Sellers are finally becoming more
realistic on their asking prices, which when combined with
cheaper mortgages and rising wages, means that more buyers can
now afford to enter the market." He went on to point out that,
"We still need more first time buyers for the long term health
of the property market."
Financial comparison site, Moneynet (
http://www.moneynet.co.uk/ ), puts the current first time
buyers' average joint salary at £39,382, with an average
mortgage amount required of £135,239 constituting a 66%
borrowing on the cost of a property. This means that with
sellers asking prices remaining static, or even falling, and
wages gradually rising, for many potential first time buyers,
there is an increase in the realistic prospect of getting onto
the property ladder.
Halifax hoped that the interest rate reduction by the Bank of
England would, "reduce mortgage payments as a proportion of
gross income for the average new borrower from 20% to 19%, the
average for the past 20 years and well below the 34% peak in
1990".
With the mortgage market especially competitive at present and
rate comparison sources easily accessible, lenders who do not
offer reasonable rates are liable to lose out. All this appears
to be good news for buyers as Rightmove states, "there are now
clear signs that the market is making sensible adjustments in
prices to improve buyers' affordability."
About The Author: Richard lives in Edinburgh, occasionally
writing for the personal finance blog Cashzilla (
http://cashzilla.blogspot.com/ ), and thinks "Half Man Half
Biscuit" were a good band.
