With recent news that rental values are increasing, along with revelations that house prices are continuing to rise, getting a foot on the property ladder will remain a struggle, according to the Managing Director of leading UK niche-mortgage broker Contractor Mortgages Made Easy.
“While recent statistics suggest that the economy is improving, it all adds up to bad news for potential first time buyers” said Sat Singh.
“Until now, inflation remaining low has relieved some of the pressure on the Monetary Policy Committee to increase interest rates, however governor Mark Carney has indicated this week that that could soon change.”
The Consumer Price Index (CPI) fell to its lowest level for four years in May, at just 1.5%.
"This is very good news for consumers' purchasing power and it also affords the Bank of England flexibility, as it toys with the idea of raising interest rates before the end of 2014" said Howard Archer, chief UK and European Economist at IHS Global Insight, adding that he expected inflation to remain below 2% for the rest of the year and "very possibly beyond".
However, minutes of the meeting of the MPC from 4th and 5th June, suggested that this hope could be misplaced. “The relatively low probability attached to a bank rate increase this year implied by some financial market prices was somewhat surprising,” the minutes said.
“Prior to this month’s meeting, it was thought that there was around a 15% chance of rates increasing before 2015” said Sat Singh. “Since then, the outlook has changed, and has seen the pound pass the $1.70 mark, approaching its strongest level for five years, amid fears of earlier-than-expected rate rises.”
“This all adds up to bad news for soon-to-be homeowners, as the cost of buying property will inevitably swell as mortgages become more expensive.”
With other news coming from Lloyds Banking Group recently confirming a cap on lending above half a million pounds, as well as easing away from the new-build part of the Help to Buy scheme, the nation’s Contractors are finding that their avenues for lending are becoming more difficult to find.
“We’re at something of a cross-road in the mortgage market for Contractors at the moment” said Steve Clements of Contractor Mortgages Made Easy. “Whilst we have plentiful options for the many different ways of working as a Contractor or freelancer, without specialist help you could find that your options are drastically reduced, as banks continue to flounder when assessing contract income correctly.”
“My strong advice would be to engage a specialist Contractor broker, and let them compile a report of your options, before going to a bank. You could find that it’s too late afterwards.”
Article By: Mark McBurney, Senior Mortgage Consultant at Contractor Mortgages Made Easy
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