Demand for property has slumped as a direct result of the global crisis following the terrorist attacks in the US. Research from Alliance & Leicester has shown the number of UK homeowners intending to move fell from 7% before 11 September to 5% after, with London figures slumping from 12% to 7% over the same period.
Geoff Mozley, head of mortgages and insurance at Alliance & Leicester, said: ‘This is the first time in a year our research has pointed to a significant decline in homebuyers’ confidence in the coming months. The global crisis appears to have impacted immediately, although it is too early to say whether this is a knee-jerk reaction, or a true decline in confidence that may impact over the longer term.’
Martin Ellis, chief economist at Halifax, agreed: ‘It is too early to accurately assess what the economic impact of the terrorist attacks will be, or how long these effects will last.’
Nicky Ekin, product development manager at Verso said the impact on mortgage products will depend on interest rates.
She said: ‘The major factor to bear in mind is whether or not the run on share values precipitated by the disaster will have a long-term effect on the UK domestic mortgage market.’
Since 11 September, a number of attractive mortgage rates have emerged, as lenders slashed rates to incentivise borrowing. Portman BS, for example, is offering a two-year fixed rate at 2.75%, alongside Northern Rock with a fix at 2.69% for three years. Meanwhile Universal BS is offering a two-year fixed at 2.95%, as seen in the table below. The Bank of England’s decision on 4 October to cut the base rate from 4.75% to 4.50% should ensure the continuation of more attractive mortgage deals.
However, Ekin warned such reductions will not necessarily mean that loans become more accessible. She said: ‘Would-be borrowers struggling on income multiple limits will get no extra comfort from a drop in rates. However, such a decrease may have a subtler effect on demand, as borrowers can see that the actual monthly mortgage payments for a particular sum borrowed have reduced.