B&B publishes quarterly market review

Amanda Jarvis

January 10, 2006

Duncan Pownall, mortgage development manager at Bradford & Bingley, has commented on the mortgage market in the last quarter of 2005 and looks ahead to what’s in store in 2006.

“As 2005 drew to a close, this traditionally quieter period saw historically high lending figures demonstrating that the market had indeed gained strength throughout the year. The housing crash some doom mongers forecast never materialised and house prices ended the year 5.1 per cent up on 2004. Looking ahead, we predict further stability in the housing and mortgage markets and house prices up 2-3 per cent at the end of this year.

“The MPC held base rate stable at 4.5 per cent, despite cries from the high street for a Christmas cut in order to bolster consumer spending. However, we foresee at least a quarter point cut in base rate in the first half of this year which should further fortify confidence and home buying activity. Lenders are also expected to launch competitive retention deals this year in a bid to retain custom which will spell good news for borrowers.

“For the lending industry, 2005 ended on a high note. CML figures demonstrated just how robust the sector was, with a marked increase in house purchasing activity and remortgaging. Indeed gross mortgage lending rose to an estimated 28.5 billion in November – the second highest monthly lending figure on record. Confidence levels climbed as indicators pointed to stability in the housing market and many of the cheap fixed rate deals of two years ago matured meaning many remortgaged away from lenders’ pricier standard variable rates.

“The last quarter of the year usually sees lenders fall into two camps. One side will offer very aggressively priced products to attract custom giving them a ‘full pipeline’ of business to start the year and then relax their pricing. The other side tend to wind down existing product ranges and launch exciting new deals in January/February to win new borrowers, then put a brake on the competitive deals as the year progresses. Consequently, as lenders launch competitive deals at different times it’s vital borrowers look around when deciding on a mortgage.

“This year will also see many lenders offering fantastic retention deals in a bid to keep their existing customer base. This is great news for borrowers but they should still ensure they shop because competition will be fierce and they could still end up with a better deal by switching.

“The fundamentals that support the housing market should remain strong for the foreseeable future. Unemployment and interest rates are low compared to historic levels and can be expected to remain stable. The housing and mortgage markets are also expected to be very stable and, perhaps, show a further modest increase.

“We foresee at least a 0.25 per cent cut in base rate in the first half of this year which will further stimulate activity and we predict house prices will end 2006 around 2 per cent to 3 per cent higher than they are now.”

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