As far as interest rates are concerned you could argue, as I have said before, that Bank Base has now entered a new phase – I call it “the expectation phase”. This is where many people expect a change but are not quite sure when, or by how much, and it is this expectation that can be a driver for all manner of decisions.

The real issue is how all of us are going to be affected as the artificial stimulus is slowly removed. As the end of QE, the car scrappage scheme, VAT concessions, etc, begin there are some real questions to be answered, not least is that the possibility of a second mortgage shortage is rearing its head as lenders struggle to find the cash to lend out.

I have always thought that this year will be “front-end loaded”, in other words that there will be better mortgage products, lower rates and more mortgage availability in the first half of the year than the latter.

This means that whilst it feels like things are improving now, with property prices recovering and lenders looking to lend at higher Loan-To-Values do not be surprised if it all turns around again after the election and the hiatus of the World Cup.

However, whilst things will remain tough for the remainder of the year, the positive signs and shifting in attitudes is everywhere to be seen and just as it will not take much to tip into the dark again, likewise it may not take too much to grab the reigns of a recovery. A decisive election, or rather whoever is elected, (hung parliament or not), delivering a decisive budget, together with a successful World Cup to harness the good feeling would help inordinately.

We have seen a massive rise in enquiry levels, from purchasers wanting to take advantage of low rates and competitive house prices, to remortgage customers looking at fixing before variable rates inevitably rise. As soon as there is any decisive action on rates, or the mere sniff of it, I expect fixed rates to burst with popularity and rise accordingly.

For first time buyers I do not see much change in the current status quo. Whilst there will be more availability of products aimed at the lifeblood of the housing market, a decent deposit, a good credit history and a sensible level of borrowing to income will remain for a long time yet. This means that without the Bank of Mum & Dad stepping in to assist those looking enviously at the property market now need to carry on saving like crazy.

However, activity picked up towards the end of January and into February so we expect to see stronger figures from February on until they begin to tail off again in the second half of the year.

January’s figures shouldn’t dampen the spirits as the mortgage market has got off to a flyer compared to this time last year, with hundreds of new products hitting the market and enquiry levels rising dramatically.

Many people have put their lives on hold for two years and increasingly seem to have decided that now is the time to make that move, or hedge against future rate rises.

As competition has seeped slowly back into the market, lenders are being forced to look beyond the 60% Loan-To-Value and below market, which is now saturated. They are starting to venture into higher LTVs and are even returning tentatively to the buy-to-let arena in search of higher margins.

But let’s not be under any illusions here, the mortgage market, like the economy, is still in the very early stages of recovery and could be set off course by any number of external factors. But in the meantime, now is the best time in a long time to take advantage of some highly competitive products.

Some of us have already been talking about this since the start of the year, and it is nice to be backed up by some weighty reports. Moneysupermarket.com, for example, have stated that even when taking the new mortgage product arrangement fees into account the “best” fixed rate and the “best” tracker product over 2 years will beat the majority of lenders SVR’s.

With a lot of publicity around those mortgage lenders who have already increased their SVR’s recently and other lenders rumoured to be following suit, many borrowers are looking to mitigate the risk of further rises and taking advantage of some great fixed rate product offerings.

Others are finally jumping on the much trumpeted Offset bandwagon, with offset tracker rates below 3% currently this is a marvellous time to really make the offset work and shed years off the mortgage term.

Of course, it is important to note that whilst this is the case, generally speaking this only applies to those with at least 25% equity in their properties. Whilst this area of the mortgage market will always have the very best headline rates, the continued squeezing of lenders in this area has meant that some are beginning to look further afield for higher margins.

We have therefore seen not just an increase in mortgage products available at higher loan-to-values, with 90% LTV looking like the new 100% LTV, but also lenders are returning to the large loan and buy-to-let arenas.

The buy-to-let mortgage market is most interesting, as this seems to have started to return much quicker than many expected with lenders such as BM Solutions and The Mortgage Works actively looking for new business. BM Solutions have also made a tentative step at reducing the high percentage  Arrangement Fees that discouraged many and have reintroduced products with competitive rates and much lower, flat Arrangement Fees.

There is however, one potential drawback of this policy. The cost to lenders in terms of capital adequacy requirements of lending in perceived “riskier” areas or at higher LTV’s, means that overall lenders may have to lend less in pure volume terms. This is a worrying thought as lenders are not exactly throwing their, or rather our, money around at the moment.

Overall, it is nice to have a broader spread of mortgage products back and I suspect that lending will continue to ease, albeit it slowly over the remainder of the year. Whether rates remain this low remains to be seen, however, and I do believe that the first half of this year will be the best time to remortgage, potentially for quite a while.

What is more interesting is that not only have the MPC decided to take a pause in their campaign of Quantitative Easing, £200 billion seems to have been enough of a spending spree for now at least, but you could argue that Bank Base has now entered a new phase – I call it “the expectation phase”. This is where many people expect a change but are not quite sure when and it is this expectation that can be a driver for all manner of decisions.

We are entering an interesting phase which, to nick a famous phrase off Sir Winston Churchill, may be looked back at as “the end of the beginning”. Whilst we may have tripped half-heartedly over the recession line into some semblance of growth, to see how strong the economy really is we need a period of time without artificial stimulus.

As the end of QE, the car scrappage scheme, VAT concessions, etc, begin there are some real concerns that we may see the infamous “double-dip” which everyone is so desperate to avoid.

However, the end of the beginning is a momentous occasion, and whilst things will remain tough for the remainder of the year, the positive signs and shifting in attitudes is everywhere to be seen.

In the property market, respected Estate Agents such as Douglas & Gordon have taken on 70% more instructions than they did in January last year. In fact, as Ivor Dickinson writes, “we actually took on the highest number of instructions in a month since March 2008, two years ago.”

Whilst stock shortages are still an issue for agents, many more are starting to see signs of improvement. This is much needed, as demand still remains high. Again, taking D&G as an example, last month they “registered the most number of applicants since January 2007”.

This has a clear implication for house prices, with many properties especially in the most desirable locations having already made up any ground they lost in the preceding couple of years.

Mortgage lenders are also finally getting in on the act with reports yesterday that almost 1,000 new mortgage products hit the market in January, the biggest increase for over a year.

We have also seen a massive rise in enquiry levels, from purchasers wanting to take advantage of low rates and competitive house prices, to remortgage customers looking at fixing before variable rates inevitably rise.

With mortgage rates now as low as 3.39% for a 2 year fixed, (5.8% APR), or 2.39% for a 2 year tracker rate, (5.6% APR), this does not come as a surprise.

The political soothsayers have been having a field day showing how we were the first into recession and the last out, and that the road ahead is going to be a frankly tortuous affair. Even Alistair Darling could not rule out the possibility of a dip back into the negative almost on the eve of the election.

The fact is that many economists have been caught a little short yet again with the apparent weakness of the recovery and there will no doubt be a lot more scratching of heads and gnashing of teeth in the days ahead.

So where does that leave us all? Well, I like to think I am a glass half full type of guy, (though my wife may disagree), and to be fair a 0.1% rise is a hell of a lot better than a 0.1% drop or a big fat 0! There is hope!

In fact, the International Monetary Fund, (IMF), has just raised its projection on how much the global economy will actually grow this year. It expects unemployment to stay roughly at the same levels, however they also stated that “a key risk is that a premature and incoherent exit from supportive policies may undermine global growth and its rebalancing”.

Meanwhile the World Economic Forum in Davos has begun which should provide an interesting boxing match between bankers and regulators, with many bankers railing against the Obama plans in the US already.

It is likely to be a heated few days, but everyone needs to understand that for the financial industry to move forward with confidence there needs to be a balance between financial institutions competitiveness and effective regulation.

Too much weight on either side could only add to the issues.

Meanwhile, the mortgage market seems to have a little spring in its step if early enquiry levels are anything to go by. More products are popping up left, right and centre and lenders are starting to get back to doing what they should be doing, lending.

I don’t expect too much to change leading up to the election, with the main issues potentially coming with a hard budget by the new Government, whatever the colour. Together with the end of support like the car scrappage scheme and Quantitative Easing, as well as measures to start cutting the deficit there are some undoubted tough times ahead.

Whilst we all want decisive action to get us out of this mess, as with any issue, there is a danger of being too decisive and over-correcting.

Whether we will indeed be limping for a generation remains to be seen, so sing us out Dr Robert, sing us out.

It is of course no surprise that in recent times the popularity of the fixed rate product has waned as people come to terms with the financial environment. The “as cheap as possible please” line has been even more popular than usual as not only have many clients expected that Bank Base will stay low, but also that low tracker rates now are a shot in the arm to many, helping to keep the wolf from the door.

It is however, easy to become blasé about this status quo and get sucked into the cheapest is best vacuum. The reality is rates are going to rise and margins on tracker products are higher than ever. The conversation with those clients in these times perhaps should not just be around can you afford a 1% rise, rather over the next few years, can you afford a 2%, 3% or even more rise?

I suspect as we get closer to the time that it looks like rates will finally rise again we will see a growth in the number of fixed rate products being taken. We are at least starting to see more enquiries from those who see a fixed rate as their next logical move.

Of course it all depends on your interest rate point of view, but I do worry that actually more fixed rates should be being taken now, especially by those who have been enjoying a prolonged “holiday” on a lenders low variable rate.

The good news is that with some competition returning to the market fixed rate products are becoming more attractive, so the difference between a tracker and the security of a fixed is becoming more blurred. Once that first change in Bank Base occurs no doubt there will be a panic rush to the sanctuary of a fixed by many, but as ever, it all comes down to obtaining sensible advice.

It is not all about whether a tracker rate “beats” a fixed rate, it is about what is good for each individual client, and for many, even if they do end up paying a little more, the knowledge of security is priceless.

Whilst there are suggestions that this spike in inflation has been expected and is merely temporary, it is unlikely to drop off sharply if recovery does continue to grow and will undoubtedly put pressure on the Bank of England to seriously consider finally raising interest rates.

This is a real shot across the bows for borrowers, many of whom are quietly banking on a low interest rate environment in the short term. But this is a risky game to play.

More people than ever are on variable rate mortgages at present, either because they cannot remortgage or because they have decided not to given the discount on variable rates relative to fixed.

If rates do indeed rise to contain inflation then many borrowers will find themselves with significantly higher monthly payments and many borrowers who should be fixing may well be leaving it dangerously late.

The prices of fixed rate mortgages have fallen slightly due to an increase in competition in the mortgage market, although this trend could well reverse given today’s figures.

Most lenders seem to have got in on the act with some competitive tracker products and fixes as well as more higher loan-to-value products making an appearance.

This is of course good news for consumers and mortgage brokers alike as more choice comes back into the market. The one thing to watch, however, is the continuance of not just some strict underwriting policy, which is hard to really argue against, but some more “unfair” policies if that is the right word.

As usual it seems that the self-employed often bear the brunt of this, and one particular rule adopted by a couple of lenders is that of the effect a reduction in net profits have. For example, take an equity partner in a leading law or accountancy firm who earns a share of net profit. They earn six figures and the net profit of the main multinational firm runs into millions. Obviously we have just been through one mother of a crunch, just emerging from recession so many businesses have had a down turn in figures.

So, this firm has a slight downturn in net profits which means the partner’s share of equity reduces by no more than a few thousand, i.e. less than £10k. At least one lender stated they would not lend because net profits had reduced! Of course they have, is this not expected given the financial turmoil of the time?

It seems unfair to say to self-employed people if you have a good established business and you have just had a dip due to world events that you would not lend at all. Many employed people have agreed to take a cut in wages or bonuses to see themselves through and keep a job, but they are not told they cannot get a loan at all.

At least base it on the reduced figure, as you would on an employed person’s current salary, rather than having a broad stick approach of we can’t lend! Am I wrong to think that? Surely this downturn is all expected and does not mean that every self-employed persons business is going down the tube? Many of these people are safer bets than an employee who could be shed at any time, and I am not talking about those in a new business with no accounts, but long standing businesses that can show years of audited accounts!

I also understand why some lenders still seem to be carefully cherry picking those clients they want to lend to, but would rather see sensible reasons written into a policy rather than making more random excuses.

It is all very well to have tighter criteria, but there does need to be some common sense attached rather than a computer says no approach. It is a shame that some good people are struggling to take advantage of the low rates at present, whether trying to buy their dream home or trying to remortgage onto a fixed rate in the face of a potentially rising rate environment.

While no-one wants a return to the lax policies of the past when a passport and a smile got you a large mortgage loan, there is still room surely for a sensible middle ground.

I would say, however, that this does mean many more people seem to be coming to Professional Mortgage Brokers for proper advice after having had issues direct with lenders; so as they say, every cloud…

I guess that is why in much online writing and message boards many use the kind of annotation symbols I used to find rather annoying but have now embraced with glee, you know the ones; lol,
:-0)* (no idea on the last one, but you get the idea).

Anyway, the point is that because much of what I write, certainly in the banter with colleagues over company issues, is tongue in cheek, I think I am going to have to go further and start annotating my expressions after almost every line. Maybe I should do that with all my writing so people understand the tone in which I am addressing them.

In fact maybe all people in business should do that, and it could be very useful in our own industry. I would love to see new rate release emails from lenders with a bit of honest annotation, as well as some media releases.

Go on, try it

I know you may well be asking what is mortgage related about that, but not everything in this blog needs to be about that does it (genuinely furrowed brow)? I often think my best blogs are when someone says to me, “what the hell were you on yesterday?” (self-obsessed smirk as if anyone actually reads this).

But, talk about mortgages I shall (stifling yawn), after all that is ostensibly what I do!

There does seem to be a bit more get-up-and-go about the market at the moment with a plethora of new product releases, some of which fly in the face of recent SWAP rate increases, especially on a fixed rate basis. Lenders do seem to be a bit more relaxed about the future and are starting to concentrate on the core business of actually lending money again, (about bloody time to).

Whilst there is an undoubted return of a semblance of competition to the market, I still feel it is highly likely that the fixed products available in the first part of the year will be better than those available in the latter.

It was also a little bit sad to see the Abbey and Bradford & Bingley brands disappear into the ether of the past and it is a shame to lose something so quintessentially British , certainly where B&B were concerned.  However, Santander is a strong brand with a good reputation and I like what they have been doing, (slight crawl).

Anyway that’s progress folks, something we badly need and I am all for that.

QXRSUDQZ6FTK for all those wondering this is my Technorati claim reference I have to post into a blog - I don’t really know why either

One of the main areas of concern was not just the confusion that surrounds rates at present but the fact that some lenders have actually already started putting up their Standard Variable Rates, (SVR’s). To be fair this has generally been the smaller Building Society’s such as Mansfield and Cambridge but it does highlight the perils of staying on a lenders SVR.

These institutions have an issue. They claim that they need to do this in order to compete with state-assisted banks, as they have a delicate balancing act. Arguably it is more important at the moment for them to attract savers rather than lend money, and therefore they need to up their savings rate to attract business. Basic business sense means they can’t have high savings rates and low mortgage rates so mortgage rates need to increase.

As lenders seek to address their balance sheets it will not be surprising if more mainstream lenders also follow this trend. So again, it is important for consumers to look not just at the headline rate they may be getting now, but also to look at what the lenders variable rate is doing - at present we have SVR’s ranging from 2.5% to 6.45%! I would also tend to keep away from products discounted off the lenders SVR and stick with trackers.

There is however, some argument that in the medium to long-term the difference between the Bank Base and the lenders SVR will start to shrink again. In other words will we really still see SVR’s 5% higher than Bank Base once Bank Base is up at 4% again?

So, some economists believe we will still be at 0.5% by the end of the year whilst others see us at 2.5%. That is a big difference of opinion and I was also asked where I sat on that. To be honest I do believe we will see a change by the 3rd quarter of the year, and see a Bank Base of 1% to 1.5% by the end of the year.

I put a proviso on that however. Firstly that there is a decisive election outcome, a hung parliament helps no-one, and that there is no double dip recession.

Either way, even if competition does return to the mortgage market, and there is a lot of evidence to suggest it will further, it may well be worth reserving a product now at the very least as you may not be able to get such good products as you can now.