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The Bank of England's monetary policy committee voted to keep interest rates on hold again this month at 0.5%. This wasn't a surprise, and many people might think it will mean that nothing much is happening in the mortgage and savings market, but this isn't necessarily the case.
Latest figures from the Council of Mortgage Lenders reveal that the number of completions on house purchases was up 35% in April from March, suggesting that there may be improvements in the mortgage market.
Well Louise Cuming, who is a mortgage expert at moneysupermarket.com, is with me just to talk about what is going on and whether things are beginning to improve.
Q1: So Louise, what is happening - obviously interest rates are left on hold again but are we seeing any improvement?
Louise Cuming: Well, over the last few months what we have seen is that what happens to the Bank of England rate isn't really having a direct effect on the mortgage market; it's got a bit of a life of its own at the moment, and there is increasing competition now for a certain set of borrowers, which means that we are seeing some extremely competitive deals coming out there.
Q2: And that is good news isn't it, because the lack of competition has been a real factor affecting the market recently?
LC: Absolutely, I think there is two things: one is that there is a realisation that rates are probably about as low as they are going to be - so people who have been waiting to see what is going to happen are now starting to take some action - and secondly there is a real competition for borrowers with a bit more equity and some really strong credit profiles, and that competition is driving out these very good deals.
Q3: But this is still for people with significant deposits as you were saying - we are talking 25% or more. What is happening with people who have got less then that to put down, are things getting any better for them?
LC: Well I think that is still the issue, it's the 'haves and have not's' - if you have got what the lenders are look for then they are falling over themselves for you. For people they're not quite so willing to lend to then that competition is still needed and probably we keep pointing to first time buyers, and unless they have got a 10% deposit there is nothing much for them, and even with a 10% deposit the cost of borrowing tends to be on average much higher.
Q4: Is that going to change do you think in the near future, is anything going to get better for those with smaller deposits?
LC: There is a real push and the whole market understands that they need to be a lot more inclusive to get the market really moving. We have seen a little bit of movement with Lloyds coming out with quite an innovative product for first time buyers, but that needed support from relations.
Q5: And that's the 'Lend a Hand' mortgage isn't it?
LC: That's right, but all these entrance into the 95% arena have got to help and I think that is what we are looking for at the moment.
Q6: And I suppose as the housing market stabilises, the fear subsides that house prices are going to carry on falling significantly that might help boost confidence among lenders to lend at these higher levels, because there is less chance of the borrower finding themselves in negative equity?
LC: Absolutely, I think it is a bit of a catch 22, and we have seen a couple of indications from the Nationwide house price index of prices starting to edge up again and that gives people confidence, a) to sell because they think 'well, maybe the market is rising' and b) to buy because they are thinking 'better dive in now because the bargains might start to go' and I think that will propel the market somewhat as well.
Q7: And in turn it helps the confidence of the lenders...
LC: Absolutely!
CF: Brilliant, Thank you Lou.
LC: Okay, thank you very much.
