The Bank of England has again decided to hold the base rate and any further quantitative easing, as they welcome the arrival of new Governor Mark Carney before making any wholesale changes. It was highly unlikely that the Bank would have made any rash decisions for Mr Carney’s first meeting, as recent economic figures have shown positive movement which may encourage a ‘wait and see’ strategy.
Bank of England figures for May show that mortgage approvals for home purchasing have risen to the highest level in over three years. The spike in activity has seen 58,242 loans for purchases provided over the whole month, compared to an average of 54,139 that were approved for the previous six months.
In addition, the Building Societies Association produced statistics that state first-time buyer activity has significantly improved, with the level of loans approved for this sector up by 50% over the first half of the year. The Bank of England also provided evidence that remortgage activity has increased, with a total of 32,611 mortgage debts moving from lender to lender.
Despite the positive outlook for lending and the knock-on effect on the housing market, there are still pessimistic voices regarding government housing initiatives. Certain market experts fear that the government’s attempts to stimulate the market may create a short-term rise in house prices, which could ultimately lead to future troubles in future years.
Howard Archer, the chief economist at HIS Global Insight, noted that, “policymakers must be prepared to quickly pull the plug on the Help to Buy mortgage guarantee scheme at the first sign of any housing price bubble developing.”
Contractors who are looking to take advantage of initiatives such as the Help to Buy scheme to buy their home need to time things correctly. The scheme is only open to new homes until the end of this year. At that point it will be opened up to resale properties as well, and demand is expected to increase on a large scale.
With more lending options opening up for flexible contract-based income assessment, the remainder of this year presents an ideal opportunity for contractors to ensure they have carefully assessed, and had agreed, mortgage options to act on the right property when it becomes available. It is not a given that mortgage rates will remain low for the foreseeable future after all.
Mr Carney made some bold decisions when he was Governor of the Canadian central bank. In order to stimulate spending he guaranteed that the central bank would not increase rates for a specified period, which resulted in more borrowing and spending. He did insert some small print into this guarantee, which meant that he started to increase rates once certain trigger points were achieved in a shorter time than the original guarantee.
In short, the new Governor is not afraid to make bold decisions regarding base rate movement, which is one of the main reasons he got the job. His honeymoon period in the new role may be the time to review what is done with any new mortgage arrangements for contractors.
Article by: Taj Kang, Business Development Director at Contractor Mortgages Made Easy
Media Contact: Raman Kaur, Public Relations Manager
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