Mainstream borrowers will be the winners in this current economic climate despite claims that the sub-prime turmoil is spreading to the prime UK mortgage market.
John Charcol senior technical manager Ray Boulger told the Money Marketing sub-prime round table last week that he has seen a lot of commentators who do not understand the mortgage markets saying that people will have to pay more for their mortgages.
He said: “I do not think that is right. If you are in the mainstream, the spread between what lenders pay for their money and what they charge will increase because there will be less money available.”
But Boulger said that whereas two months ago most people thought that bank base rate would rise to at least 6 per cent, the question now is when will it fall.
He said that by the first quarter of next year, the likelihood is that base rate will be 5.5 per cent or lower.
Boulger said: “If you are talking about bank rate purely as a result of the credit crunch, it is going to be at least 0.5 per cent lower than would have been the case. Even though the spread between the cost of funds and what lenders charge might be 25-26 per cent more, what borrowers actually pay, which is what is most important to them, will still be less.”
He said that most borrowers will benefit in terms of mortgage rates, which is already happening with fixed rates, and he believes that it will also happen with tracker rates in the near future.
Mortgage Force managing director Rob Clifford added: “I think that where the cross-sector damage has been done is in banking and savings, I do not think this is a problem for a mortgage consumer.We have not seen any dip in the level of interest from mortgage customers.”