Funding for lending taking effect as UK economy grows
“The UK economy returned to growth during the third quarter of 2012, bucking the trend set over the 3 previous quarters. However, it unfortunately wasn’t good news all round, with a number of sectors, notably manufacturing and construction still continuing to struggle.
“A number of forecasters were of the view that The Bank of England’s Monetary Policy Committee would announce a further injection of funding following their November meeting. However, it appears that the committee is adopting a cautious approach all round as the base rate also holds at 0.5%.
“The “Funding for Lending” scheme introduced in August, partly aimed at encouraging lending to potential home buyers, does appear to be having a positive impact on the market as lenders continue to jostle for business. The average mortgage pricing fell with on both 2 and 3-year fixed products, with 5 year rates unchanged from October.
“Although these reductions in average rates are modest when viewed as a single figure, the recent overall trend shows interest rates on 2-year fixed deals declining in each of the last five months, 3-year fixed rates having fallen in each of the last three months, and 5-year fixed rates having declined in four out of the last five months.
“As a consequence at the beginning of November average rates now stand at 4.40% for 2-year fixed rates, 4.73% for 3-year fixed rates and 4.57% for 5-year rates.
“Fixed rate mortgages still appear to be the choice products amongst borrowers as many look for stability. During October we have seen further take up of fixed rates with more than 85% of all borrowers who arranged mortgages last month electing to fix their mortgages, a new high for 2012.
“Mortgage product numbers typically available to intermediaries once again continued to improve in October, rising to above 6,000, the highest level since January. This is yet further evidence of the confidence that the “Funding for Lending” scheme is bringing to lenders, and as a result, to the whole of the market.”