by Mark Johnston
Housing and mortgage market sentiment has improved a little over recent weeks.
For the time being at least, funding conditions have eased as a result of European Central Bank Operations, therefore lessening the need for UK banks to tighten mortgage pricing and terms.
The return of certain lenders and the return of higher loan to value (LTV) products in 2011 reflected the intense political pressure that was and still is put on institutions to lend are they are also some reasons to be positive about the mortgage market, even if they are limited.
Bob Pannell, the Council of Mortgage Lenders chief economist, stated “the closing months of 2011 saw stronger mortgage lending activity and housing transactions, despite the fact that short term economic prospects are challenging”.
The UK mortgage market is one of the top most innovative and competitive markets in the world; this market differs in comparison to other countries on the grounds that there is no intervention with in the market by the state or state entities.
There are around 4,000 products on the market at this current time for customers to choose from and it is one of the most competitive as there is constantly a growing need for lenders to devise wining strategies in order to keep in the market.
So what’s next for this market in 2012?
Economic gloom means interest rates are likely to stay low for longer and economists now forecast that the first ‘hike’ from the record low of 0.5% may come as late as autumn 2014.
Therefore lenders still have some room to lower rates further, though there is no guarantee that they will do so and many are more likely to use chunky margins to rebuild balance sheets rather than push rate down further.
Some research has shown that many lenders are now trying to ration mortgages due to their own lack of funding availability. Although the Council of Mortgage Lenders has said that “product innovation may help mortgage credit availability over the coming months”.
The fear for borrowers though is the threat of a fresh credit crunch, trigged by the euro zone debt crisis taking a chronic turn for the worse. Continuing euro zone problems mean that mortgage funding prospects are uncertain.
Therefore banks and building societies alike are experiencing higher funding costs as a result and they are now being put under pressure to pass these through to their customers.
In light of this the Council of Mortgage Lenders anticipates that gross lending will fall in 2012 to around £133 billion compared with levels of £138 billion in 2011 and many experts believe it is unlikely that significant improvements to the conditions affecting the mortgage market will be seen at anytime during 2012.
All in all then UK mortgage market conditions for the year ahead still remain difficult to call.
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