Housing & mortgage round upA rare week of good news for the housing and mortgage market, when we look at the possibility of fixed rate mortgages becoming cheaper, a sharp rise in sales and evidence, if ever it was needed, that location is key to property prices.

Mortgage interest rates set to fall?

For the second time in a month we are reporting that mortgage interest rates could fall as lender’s wholesale funding costs continue to drop.

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Mortgage lenders typically have two sources of finance, deposits made by savers and the wholesale funding market, where short term ‘swap’ rates have fallen to all time lows, raising the prospect of lower interest rates for fixed rate mortgages.

Mortgage lenders were already expecting business levels to be hit this summer, in particular by the Olympics, and many were gearing up for this potential fall in applications by offering some extremely competitive rates. The recent cut in ‘swap’ rates could now mean even more attractive mortgage deals for a short period of time.

However, mortgage experts have warned that the reduction in ‘swap’ rates could reverse at any time, and the most competitive mortgage deals could be withdrawn at short notice. Leaving borrowers who have not acted quickly with potentially less competitive deals.

At last, some good news!

Rarely has the mortgage and housing market been as volatile as it is currently, this month is no different, with the Council of Mortgage Lenders (CML) announcing a rise in mortgage lending and HMRC reporting an increase in house sales.

Following a fall in April, after the end of the Stamp Duty holiday for first time buyers, figures from the CML show that mortgage lending jumped by 24% in May to £12.2 billion.

At the same time figures from HMRC showed that completions rose to 71,000 in May from 64,000 in April.

It is clear that the property market will continue to experience significant fluctuations on a for some time to come. Indeed Coutts, the private bank, are reported by the Daily Telegraph to be expecting an 11% drop in house prices.

Commenting on the latest figures Bob Pannell of the CML said: “Mortgage lending continues to seesaw, albeit against a broadly flat market.”

Pannell continued: “Unfortunately, a number of one-off factors, such as the Diamond Jubilee and the Olympics, are set to distort market indicators over the coming months, and it may be the autumn before we can more accurately gauge the state of the market.”

Average rents rise

New figures from LSL Property Services show that the average rent paid by tenants in England and Wales has risen for the second month in a row to £712 per month.

The rise represents an increase of 0.4% and takes average rents to levels last seen at the start of the year.

Tenants are now paying 2.3% more than this time last year, with rents pushed up partly due to the inability of some people, particularly first time buyers, to get a mortgage.

Commenting on the figures David Newnes of LSL said: “Rents have returned to the level seen before the impact of the stamp duty deadline rush by first-time buyers.”

He continued: “Historically high rents and rock-bottom savings rates are hampering attempts to save for the larger deposits banks now require.
“In turn, fewer tenants are able to leave the sector, and the strong tenant competition is pushing up rents as a result, making saving for a deposit harder still.”

Location, location, location

New figures from the Office for National Statistics (ONS) have demonstrated once and for all how closely location is linked to house prices.

Unsurprisingly London house prices are the highest in the country and experiencing the best levels of growth. In the year to the end of April prices in the capital rose by 4.9%, significantly higher than the national average of 1.4%.

Other parts of the UK have not fared so well, for example the North West of England, Yorkshire and the Humber fell by 1.3% over the same period. Although the largest fall was in Northern Ireland where prices plunged by 8.1% over the past 12 months.

The ONS figures also highlighted the differences in average house prices across the UK. Houses in the UK have the highest average value driven in no small part by the London housing market where the average house is worth £338,000.

Average house prices in the UK:

•    UK: £229,000
•    England: £237,000
•    Wales: £151,000
•    Scotland: £178,000
•    Northern Ireland: £129,000

Our mortgage adviser, Linda Wood, is here to help you. If you would like advice on your options or you are affected by any of the stories in this week’s housing round up please call Linda today on 0115 933 8433, alternatively enquire online or email linda.wood@investmentsense.co.uk

Your property may be repossessed if you do not keep up repayments on your mortgage.

For providing mortgage advice we will charge an application fee of £299 and we may also be paid a fee from the lender, any fee paid by the lender will be disclosed to you. Alternatively we will charge an arrangement fee of 0.5% of the loan and refund to you any payment received by us from the lender.