The Inside Edge
The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%.
Despite the continuance of low base rates, mortgage deals still do not reflect the low rates and wide availability we experienced in the pre-crunch days. Banks and building societies argue that the base rate is not the key driver in their own cost of funding mortgages, however the profit margins being made by mortgage providers seem to be many percentage points higher than in the pre-crunch days.
It seems to be a lenders’ market, where the criteria have swung from lax or reckless to overly cautious and in many cases prohibitive. Here at TBPL we’ve got our fingers crossed that the criteria will eventually land somewhere in the middle and be just plain sensible.
One example of tightening criteria is the new rule for Buy To Let mortgages that stipulates the mortgagee must have an income of at least £30,000 in addition to proving the affordability of the mortgage based on the incoming rent. This could have a big effect on professional landlords with a small portfolio providing an income less than £30,000. Self employed landlords with less than 3 years’ accounts will be similarly restricted.
There is also a great differentiation of mortgage offerings based on the Loan To Value, with those people who were lured into low LTV deals with a zero, 5 or 25 % deposit now losing out on the availability of preferential rates being offered to customers with a deposit of 25 to 50% or more.
No-one really knows what’s going to happen to mortgage deals, interest rates and house prices, but lets just hope the banking industry supports us through it by offering sensible deals on sensible terms.