It has been a strange and difficult time for everyone in the property industry and mortgage brokers are no exception. With doom and gloom screaming at us from the front pages of every newspaper it is easy to believe that mortgages have become a rare commodity.
The truth is, however, that for the average property buyer or those looking to remortgage, they have not gone anywhere.
The reality is that if you’ve got a good credit history, a good job and a deposit of 15%-25% (or a fair bit of equity in your home), then despite all the scaremongering out there at the moment, getting a mortgage won't be a problem.
It's a myth that lenders have shut up shop, although they have tightened up their criteria considerably and are only lending to people they deem to be low, or lower, risk. But the majority of people can still get a mortgage, not the minority as you may be led to believe.
What we're seeing now is a return to how the mortgage market was 10–15 years ago. Mortgages, in other words, aren't impossible to get. For the majority of people, they’re just harder to get.
The people that will struggle to get a mortgage at present are first time buyers with little deposit, and those with poor credit histories or who, for whatever reason, are deemed a higher risk.
But ultimately we’re all going to have to adapt. After many years of being spoilt with ridiculously low interest rates, we will now have to pay more for our debt. 10 years back people would have bitten your arm off for a mortgage rate of 6%. These days, when I tell a client they’ll be looking at an interest rate of 6%, they almost start to hyperventilate, even though, historically, this is a competitive rate of interest.
The latest stunning interest rate cut of 1.5%, coming a month after another 0.5% cut, has gone some way to make up for a few months of procrastination. My only concern is that it's a little too late.
If the Bank had cut rates sooner, the recession we are entering into may not have been as deep and protracted as it's now likely to be.
The good news is that many of the major lenders have passed on the full rate cut, although some have certain conditions in the small print that mean that those on tracker rates may not see the full benefit.
The key to the crises in the mortgage industry does however, ultimately still end up in the hands of the lenders and whether their appetite to lend again returns sooner rather than later.
SWAP rates, the rates on which fixed rate mortgages are usually based, have fallen by quite a bit, so there could well be some good fixed rates on the way. 3 month LIBOR, the important measure that governs the rates bank lend to each other at, although it has fallen dramatically to 4.42%, is still 1.42% above Bank Base rather than its normal 0.25% and reflects the continuing problems.
However, LIBOR falling this low should be enough for them to price up some more competitive rates and lenders such as Abbey and Cheltenham & Gloucester have been quicker off the mark than anticipated.
Historically speaking, rates that start with a 4 or a 5 are not to be sniffed at, and with property prices falling to a more affordable level, the biggest issue has been the supply of mortgages at an affordable level.
We are all aware of the wider economic issues, but where housing is concerned, once people begin to think that property AND the mortgage are at realistic and affordable levels I expect some to start to take the plunge
For now, do not believe the hype that the mortgage market has shut up shop. There are still products out there, whether for remortgaging, large loans or even commercial borrowing. It’s just knowing where to look or who to speak to.
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