As the days become shorter and a little colder, what has the mortgage market got in store for us over the coming months?
Interest rate rises?
House prices slowing?
Unfortunately, the answer to both these questions is undoubtedly "yes".
I expect interest rates to go up in early 2015. It could be late 2014 but the Bank of England won't ruin Christmas for us surely! Inflation has been below its target for the last 7 months now and the employment market is picking up so the indicators are present for a rate rise. It is just a matter of when.
The predictions for the longer term picture of interest rates do vary but the consensus seems to be that the Bank of England Base Rate will be 0.75% in 6 months time (currently 0.5%) and will slowly but surely rise to 2.25% in 3 years time and will be up at 2.5% in 5 years time.
So we are looking at rate rises of up to 2% over the next 5 years if the predictions are proved to be correct. On an interest only mortgage of £100,000, this would mean an increase of £167 per month.
It therefore looks like some belt-tightening will need to be done yet again so don't go mad at Christmas - higher mortgage payments are on their way.
The best way to avoid these rises is to lock in on a fixed rate now. So if you are on a tracker rate or a standard variable rate with your current lender, give me a call on 0844 736 1920 to see what options you have.
According to Nationwide Building Society, house prices were on the rise yet again in July. However, the increase was only 0.1% which is the lowest rise since April 2013. This is a sure sign that the market is slowing down.
Traditionally there does tend to be less property around in the summer and then when the children go back to school, there is a flurry of activity once again in the pre-Christmas rush. This year is not proving any different with local agents in Bournemouth and Poole reporting less supply and demand over the last few weeks.
On the positive side, house prices in July 2014 are still 10.6% higher than July 2013 which makes for a pretty good return.
The mortgage market continues to both frustrate and amaze. At the Bank of England's request, Help to Buy mortgages are now capped at a maximum borrowing size of 4.5 times income. This can be detrimental to some people given the cost of housing and low wages that many are experiencing.
The Mortgage Market Review has been implemented and is seen by some as a reason that mortgage approvals were down 20% between January and May of this year. I do not share the doom and gloom that surrounds this figure as I see lenders trying to lend - but not being afraid of saying "no" as well.
I will continue to keep you posted on the latest developments in the mortgage world and hope to add some new and interesting articles in the coming weeks!!