Starting with the mortgage market, competition continues to increase.
The September Moneyfacts Treasury Report demonstrated that mortgage numbers hit a three-year high, with the choice of products increasing by 165 last month, largely driven by increases to product numbers in the fixed rate residential market.
Clearly, we have seen greater competition in lower and mid-range loan-to-values, but we’re also starting to see longer-term fixed products become more common and higher LTV products are also starting to drip slowly into the market.
We expect broad stability in both house prices and activity over the coming months.
As the most recent Halifax house price index showed, the underlying trend, as measured by the latest three months compared with the preceding three months, showed a modest improvement in house prices for the second consecutive month in August.
Prices in the three months to August were 1.0% higher than in the previous three months. Home affordability has been boosted by a decline in average mortgage rates, clearly influenced by the increased competition in the market.
Interest rates are still a talking point, but it is likely they will remain very low for a while yet and continue to support the market.
However, there has been increased uncertainty over the economic outlook and the pressures on householders’ finances are continuing to constrain housing demand in the UK.
The ONS have reported that the total number of unemployed people increased by 80,000 in the three months to July, reaching 2.51 million. The ONS also showed the consumer prices index measure of inflation rose to 4.5% last month, from 4.4 per cent in July.
Pressures are also coming from without, creating greater uncertainty. Most evidently pressing is the Eurozone crisis.
Greece has been at the centre of most of the concerns, of course, but the problems elsewhere in the Eurozone are being revealed as ever more interconnected and complex.
This week the credit agency Moody’s downgraded French banks Société Générale and Crédit Agricole over concerns about their exposure to Greek debt and the related pressures on Italy and Spain are causing added pressures on the Eurozone as a whole.
Within these shores, the Vickers Report has attracted most of the column inches recently and there are many interested in how the proposals will impact the mortgage market.
Of course, it is difficult to say at this stage just how pricing and availability will be affected, particularly as the proposals do not have to be implemented until 2019.
What is clear is that it will be one of several significant elements that will continue to shape the market over the coming years, along with Basel 3, for example, the deadline for which is also 2019.
We shall wait and see how the market adapts.
Mike Jones is interim director of intermediaries, Lloyds Banking Group
