Newsletter | January 2012 | 2012 - an Olympic year for mortgages or steady as she goes?

This year the Olympics are coming and the Queen celebrates 60 years on the throne.  As well as two and a half weeks of top flight sporting endeavour in July and August, the Diamond Jubilee means a four day Bank holiday weekend in June with plenty to increase the nation’s 'feel good factor'.  All this will prove a welcome distraction for the Press from their usual diet of austerity, doom and gloom and more importantly put London centre stage attracting attention the world over.  As a large part of the housing market relies on confidence and a positive sentiment, this is likely to be good news.

Interest Rates - Bank of England Base Rate fell to a record low of 0.5% in March 2009, and has remained at that level since.  Due to the weak level of growth in the UK economy and inflation pressures forecast to ease, it looks like Base Rate is set to stay low for a prolonged period.  Lower inflation and record low interest rates mean that mortgage affordability stands to improve as disposable incomes rise.  Eurozone melt-down and credit crunch 2.0 pose possible downside threats but at least the UK is not a member of the Euro so will not be at the centre of the storm.

House Prices - Halifax’s House Price Index showed a dip of 1.3% nationally last year, however it has to be remembered that Kensington & Chelsea cannot be compared with Kettering and Corby and national figures hide large regional variations.  Central London prices continue to increase due to a lack of supply and strong international demand for this perceived 'safe haven' against wider global economic and political turmoil.  There is little sign of this abating in 2012.

Mortgage Lending - Gross mortgage lending in 2011 has been estimated at £138bn, very similar to the previous year and 2012 is likely to be comparable, according the Council of Mortgage Lenders.  While this is far from setting any new records, it is relatively stable and a base to grow from as the economy recovers.

A number of the High Street lenders have quietly returned to the £1m+ mortgage market, whether officially by publishing lending criteria and rates or unofficially on a case by case basis....for the right client, of course.

There is a similar story with Buy to Let lending where a number of lenders who withdrew from Buy to Let lending in the down-turn are gradually returning as conditions for rental property look stronger. Increased lender competition is always to be welcomed.

So although we are not expecting a record breaking year for mortgages, there will be plenty of things to celebrate along the way. Best wishes for 2012, whatever it holds for you.