Mortgages could continue to get more expensive
According to a recent report banking officials have warned MPs and the Chancellor, Alistair Darling, that the cost of mortgages may continue to climb over the coming months, despite the launch of a £50 billion mortgage rescue plan introduced by the government, where banks will be able to exchange mortgage assets for government bonds for increased security. Banking officials have stated that the plan may take a number of months to take effect, and in the meantime the cost of mortgage borrowing may continue to get higher.
One official stated: ‘For now, mortgage pricing will remain high. If anything, it will increase in the short term.’
An official from the Council of Mortgage Lenders added: ‘In the short term the trend of increasing prices and products being removed from the market is not going to be reversed. As and when the banks start lending to each other, the rate for lending will go down and that means that that will start to bring the price down but it is not going to be a dramatic reversal. It is going to be a slow process at best.’
A Treasury official said: ‘We expect to see an impact but over time.’
In a stark warning one former Monetary Policy Committee member said: ‘The likelihood of getting the mortgage market going again is slim. This just prevents things from getting worse. It is a backstop.’
A broker from Mform stated: ‘The past month has been the most manic ever in the UK mortgage market.’ There have been rising concerns over repossession levels over recent months, and the Housing Minister Caroline Flint said: ‘We want to ensure that the support is in place for consumers who may need it right now.’
Recent additions:
- Abbey takes huge slice of the mortgage market
- Bank of England cuts base rate
- Mortgage approval levels remain on a low
- Huge drop in range of mortgage deals available
- Disaster could lie ahead for those on interest only mortgages
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