The mortgage market has new challenges to face up to following the decision to leave the European Union, Mortgages for Business managing director David Whittaker has warned.
Following the launch of the Bank of England’s Financial Stability Report yesterday Whittaker said a lower interest rate will not necessarily translate to a drop in mortgage rates.
He said: “The mortgage market has new challenges to face up to, but the chance of a lower base rate doesn’t mean that mortgage rates will be reduced. Only those on existing Bank Rate trackers will really benefit.
“Mortgage pricing is largely dictated by the cost of borrowing on the money markets, and the current uncertainty around liquidity will mean that some lenders will not want to reduce their rates. They may even be keen to sustain current rates, or increase pricing in order to regain recent months’ lost margins.”
He also praised the FPC for having its “ear to the ground over the risks buy to let poses to stability”.
He said: “Mark Carney was correct when he said there was a downside to buy to let growing unsustainably, and I maintain that around 17% of total lending is a sensible size for the sector. While BTL lending may fluctuate in the short-term, there is a very strong core of stable low loan-to-value (LTV) lending to landlords, which is unlikely to contribute to instability. The current regulatory regime adds to this strength.
“Ultimately, property will remain an attractive investment, and we are highly unlikely to see any kind of investor exodus on the scale feared by the FPC. Demand for rental accommodation will remain high, and the sector is much more stable as an investment than the wildly fluctuating post-Brexit bond and equity markets.”