Market Update - 06.08.2009

Author: Jeni Browne Posted on: 05 August 2009

With the reported increase in house prices from the Nationwide, it looks like the housing market is finally starting to recover.  So where does this leave residential mortgages right now?

While keeping a beady eye on the whole of the UK mortgage market, we are seeing some interesting developments.  Some larger institutions (who arguably benchmark rate pricing to a certain extent) are starting to reduce their margins a little bit.  This is more apparent on the tracker rate residential mortgages than the fixed rate mortgages, as SWAP rates have recently spiked, so even though the lenders margins are starting to reduce, the actual cost for them to buy the money in has increased, with the net effect of fixed rates creeping up.  More encouragingly, today has seen one of the largest UK banks (and its not one thats been nationalised) increase their loan to values on deals and overall on their portfolio which indicates not only a increased appetite to lend, but also a growing confidence in the market.

While I do not expect a instant flurry of rate reductions and loan to value increases to happen overnight, this is one of our strongest signals to date that things are indeed starting to move favorably for the borrower.

We have also seen a couple of newer lenders to the UK market appear (again indicating a growing confidence in the UK market) and also some 'packaging houses' get access to funding lines, having not have any for nearly two years.

I expect the Autumn to be a interesting time as many lenders write the summer off as a 'quiet period' and expect lower levels of borrowing than they would at other times of the year.  However come September, lenders are going to be forced to look at their overall lending year to date, and decide whether to sit back and ride the rest of the year out quietly, or whether they would prefer to start doing some serious lending at a time when it is extremely profitable for them to do so.

Of course, we will keep you duly updated!

Author: Jeni Browne