Falling Mortgage Rates Boost Housing Market.

by Mark Johnston

Falling Mortgage Rates Boost Housing Market.

The property market has suffered greatly since 2008 due to the after effects of the credit crunch and also the banking crisis.

However, the bank of England launched the funding for lending scheme in August 2012 and this seems to have certainly improved things within the housing market as funding has become cheaper.

It appears then that now mortgage lenders have started to compete for more business and therefore mortgage rates have continued to fall over the past 12 months. This then may have helped to boost the housing market.

Ray Boulger, of mortgage broker John Charcol, said “there are definitely better options now than there were even 6 months ago and I suspect the options will be better again by the end of this year”.

The Royal Institution of Chartered Surveyors (RICS) latest report revealed that better mortgage rates and banks and building societies becoming slightly keener to lend has helped to lift the property market mood.

The Halifax, now part of Lloyds banking group, reported that the ‘signs of improvement’ in the market, which started in late 2012, is to continue in to the new year.

Kevin Mountford, head of banking at moneysupermarket, the UK’s comparison website, said “the availability of cheaper funding for lenders is helping to boost overall competition in the market”.

Recent figures have shown that the number of completed house sales rose by 6 per cent last year to around 930,000.

Research has shown that the explosion of cheap mortgage deals on to the market has encouraged more first time buyers to purchase their own property as well as helping many other borrowers secure a better deal when remortgaging.

Current data has also revealed that the average house price in England and Wales in January 2013 hit £227,478, which is a 3.1 per cent rise on the same month in 2012.

Martin Ellis, Halifax’s housing economist, said that  “the bank of England’s funding for lending scheme was likely to have been a factor in a pick up of sales and prices”.

David Brown, commercial director of LSL property Services, added “house prices have jumped around £7,000 in the last twelve months thanks to a competitive mortgage market”.

However, Peter Bolton King, the Royal Institution of Chartered Surveyors (RICS) global residential director, suggest that “although the funding for lending scheme appears to be improving mortgage availability, those at the very bottom of the housing ladder are still struggling”.

While home loan rates have dropped over recent months it seems that the top deals are the ones that require huge deposits of up to 40 per cent. Therefore some experts believe that all borrowers should reap the rewards of the funding for lending scheme.

Richard Lloyd, executive director of Which?, the consumer group, suggests that “the housing market is failing not just one, but two generations of consumers”.

In conclusion it seems that despite the funding for lending scheme problems still exist within the housing market and therefore more needs to be done to get the market moving further.



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