Positive prospects

15 January 2010 8:00 am

Two crucial statistics for brokers and lenders are mortgage purchase approvals and completions. Both these numbers rose for most of 2009 and even if they now only stay at a plateau, the totals for 2010 will be comfortably in excess of 2009.

Another positive comes from the recent increased lender competition and, in particular, the significant improvement in the number and pricing of deals to 80 per cent, 85 per cent and even 90 per cent loan to value. This will make it easier for frustrated potential buyers and I would not even be surprised to see a few 95 per cent LTV mortgages re-emerge towards the end of 2010.

Transaction levels should benefit from the bounce in property prices, although one must bear in mind there were substantial regional variations.

Nationwide reported a rise of 5.9 per cent in 2009 but the increase from the bottom of the market in February was 9.7 per cent. This will enable some homeowners who wanted to move last year but did not have enough equity in their property to fund the deposit for a new home.

Many borrowers on a very low tracker rate, or even a low SVR, will also have been able to overpay or save extra for the deposit to help with a move.

However, many aspirational movers on a very low non-tracker rate which they cannot port (even if the mortgage is, in theory, portable, some borrowers will not be able to meet their lender’s current criteria) may decide to stay put, although those moving because they need more space to accommodate a bigger family or because of a new job in a different location are more likely to bite the bullet. It is hard to see any meaningful increase in remortgage activity in 2010 from current lows and remortgage completions this year are likely to be lower than in 2009.

However, the volume of product transfer deals with lenders who offer competitive fixed rates to their existing borrowers, including those on a high
LTV, is likely to be more stable. Most of 2009’s negative economic factors will continue next year, with unemployment likely to increase further
after the election, particularly into 2011, as the necessary public spending cuts cannot be achieved without very significant job cuts.

Despite the UK’s major economic problems, the depth of the crisis provided the catalyst for the housing market’s recovery last year. Interest rates are such a critical influence on the housing market that the positive impact of the Bank of England bank rate falling to an unprecedented 0.5 per cent and staying there more than outweighed all the negative factors.

Thiswill also be the key to house prices in 2010 and bank rate is likely to remain very low for several years. The rate of increase in house prices is likely to slow after the strong surge in 2009 and I expect the Nationwide index to end the year 4 per cent higher, again with significant
regional variations.

Ray Boulger is senior technical manager at John Charcol

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