01 Aug 2014

What’s next for the Mortgage Market?

What’s next for the Mortgage Market?

Donna Brown, Financial Services Operations Manager, looks at what is next for the mortgage market following the introduction of the Mortgage Market Review in April.

Donna Brown, Financial Services Operations Manager, looks at what is next for the mortgage market following the introduction of the Mortgage Market Review in April.

The Bank of England were recently accused of sending out contradicting messages on interest rates after governor Mark Carney played down expectations of an increase to interest rates this year,  even though he gave the first warning of an increase during his Mansion House speech.

However, during Mr Carney’s evidence to the recent Common’s Treasury Select Committee he seemed to play down the prospect of rate rises.  He also refuted claims the Bank had sent out mixed messages on interest rates rather than consistent “forward guidance” policy he promised when he took the post of governor last year.

We should be sensitive to the downside of raising mortgage rates.  It will make mortgages more expensive and discourage people from buying houses, therefore slowing down the growth in house prices. 

Interest rates are a blunt instrument in tackling a housing boom.  As things stand the FCA can set the rules for mortgage lending, and with the introduction in April 2014 of the Mortgage Market Review (MMR) we are beginning to feel its effects; although we don’t know the full extent yet, early indications are certainly pointing to a slowdown in mortgage approvals.   The MMR is one of the most important changes to how mortgages are sold and assessed since the introduction of regulation 10 years ago.  One thing is certain there have been teething problems which have made it more difficult and increased the length of time it takes for people to obtain a mortgage offer.

Raising interest rates may not be the best solution in the UK to ensure the housing market doesn’t slow down and to ensure the UK recovery doesn’t falter.

Moving forward, it is even more important to seek professional mortgage advice to ensure you get the right mortgage to suit your individual situation.

If you are thinking of moving, buying an investment property or your current deal is coming to an end, please contact us to discuss further.

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