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Mortgage Rates Start To Come Down

2nd May 2008 | back to article listings BACK    print this article PRINT

Abbey this week announced mortgage rates were to drop and RBS dropped rates a few days earlier. http://www.ft.com/cms/s/0/020ecfa4-170d-11dd-bbfc-0000779fd2ac.html

This is probably the first sign that the squeeze on mortgage lending is beginning to slacken off but it will take a few more months before things return to a degree of normality, around September is my best guess at present.

What is normality post credit crunch? We still think base rates will stop going down at around 4.75% but we are beginning to think there is some evidence that they could go a lot further down without affecting inflation. More on that in a future post. We suspect typical buy to let mortgage rates will drop to around 5.5%, with home loans slightly more than that at around 5.75%. Anybody with poor credit is unlikely to get a mortgage in the next 18 months at least, helping fuel the rental market. The Bank of England intervention will ensure that there is enough money to go around for those that require mortgages but it will have taken several months from the announcement a couple of weeks ago by the time this new liquidity helps ease the mortgage markets.

The squeeze on mortgages might be temporarily painful if you've just had to remortgage or come out of a fixed rate period but for the many people still in the market buying property, the extra money off property prices from distressed sellers more than makes up for this.




This news story has come from the property investment blog by Stuart Law, CEO Assetz plc.

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