Name: David Thomas
Company: Chadney Bulgin
I do not believe that anyone could have predicted the speed at which the ‘air brakes’ were applied to the mortgage market, following the events of late 2007/2008. With that backdrop, five years is a very long time, and nobody canaccurately predict over that timeframe. In the shorter term however, with the UK economy struggling to come out of recession, interest rates are certainly likely to remain low. In this scenario, the remortgage market is unlikely to recover, as borrowers continue to benefit from low standard variable rates (SVRs) andtrackers. Recent research by HSBC clearly showed that with current fixed rate offers,
the maths simply does not work without increases up to and over 5%. The remortgage market will also suffer if the Mortgage Market Review proposals are adopted in full. The purchase market is key. We have seen recent heightened levels of competition between lenders, as lending appetites increase and the distinct possibility of a small number of new entrants emerges. This may mean potentially resulting in increased gross lending in 2010 of around £160bn, from likely figures of £140bn this year. There are signs of latent demand coming through as prices have stabilised, and first time buyers explore potential. A limiting factor here continues to be the size of deposit required.
We are seeing signs of enhanced LTV availabilities, albeit priced accordingly. If prices stabilise, demand will return and a strengthening market will ensue.
Name: Lee Gladwell
While it is difficult to make predictions, we believe interest rates may
remain low for the foreseeable future. The likelihood of further unemployment, potential
increases in taxation and cuts in public expenditure will all reduce demand in the
economy. This will encourage a continued low interest rate environment. On that basis, we expect an increase in demand for shorter-term tracker and fixed rate deals.
Lower interest rates will also maintain the recovery of the housing
market and could stimulate buy-to-let purchases with investors buoyed by lower
repayments and their comparatively higher rental yields.
However, while lower interest rates provide many positives, they also put
pressure on retails deposits and place a reduction on retail funding at a time when
liquidity is already tight. Some commentators have pointed out that the fall in the pound and the fact that inflation levels have not fallen as low as expected early this year could lead to interest rate issues towards the end of 2010.
We believe that the role and professionalism of advisers could not be more important at this period in the market. Brokers are needed even more to inform people of the issues in the market. They must ensure the advice is appropriate for the borrowers’ circumstances.
Advisers play a critical role in helping borrowers to understand the longer-term
implications of their decisions, depending on what happens with interest rates. I see
their role increasing in importance in the future.
Name: Fahim Antoniades
Company: Mortgage Centre IFA
If I was told a couple of years ago that today the Bank of England
Base rate would be just 0.5%, my reaction would have been one of bemusement.
I am sure that the analysts at CEBR have better tools at their disposal than
I do, but I would find it hard to forecast where rates will be beyond one to two
years, let alone the next five. Forecasting is an imprecise science and for every expert’s
opinion, there will be another with an entirely opposite one. No doubt there will
be another prediction made in the next few months.
If they are right, then the immediate benefits of low interest rates are clear.
Speaking from a personal point of view, I think it is great: my mortgage payments
are just 29% of what they used to be at its peak, and needless to say, a low interest
rate environment has and will continue to throw a lifeline to many in these harsh
economic times. While it would be nice for this scenario to last forever, we must not lose sight of the fact that the reasons behind rates being so low are far from healthy.
If interest rates are to be used as an indicator of economic health, then the
basic assumptions are easy enough to follow: as the economy recovers, production
and output increases; thus fuelling inflation and so prompting interest rates to
So, as far as the CEBR are concerned, Britain will be a sick man for the next five
years, thus making it seven years running.Therefore, for the economies sake, I hope
my mortgage payments start going up again.