2012 was a year that promised much in terms of mortgage rates. With an increasingly stable economic situation emerging, you would be forgiven for thinking that the housing market would follow suit. In reality, 2012 was a year of somewhat mixed fortunes for both potential and current home owners.
Although the average house price actually dropped, mortgage lenders were often forced to restrict their borrowing criteria as the repercussions of the financial crisis continued to bite. The challenge of securing a mortgage remained a seemingly impossible one for many first-time buyers, but there were deals to be found. Indeed, those who took the time and care to seek independent mortgage advice benefited from a slight increase in the range of financial products on offer from some lenders.
A number of these mortgage deals capitalised on appealing to those with small deposits seeking a low rate – which is now increasingly true of not just first-time buyers, but second-time purchasers too.
For those already tied in to a fixed-rate mortgage there will have been little change to their repayments in 2012. In fact, margins between five- and two-year fixed-rate products became increasingly small. A sound piece of mortgage advice was to opt for the five-year fix over its shorter counterpart, primarily because the rates remain so difficult to predict. In 2012, it was almost a case of ‘better the devil you know’ in terms of long-term fixed-rate products versus short-term products and tracker mortgages too.
So what is next for the relationship between borrowers and lenders? Even though the Bank of England’s base rate continues to stubbornly show no sign of movement, there are further positives on the horizon for 2013. Chief among them are two of the government’s initiatives: the Funding for Lending scheme and the New Buy scheme. The former allows banks to borrow at a cheaper rate on the understanding that they prioritise lending to businesses and individuals. The latter is designed to bridge the gap between first- and second-time buyers by encouraging the purchase of new-build homes with only a 5% deposit.
Of course, the ultimate success of schemes such as these, along with the recovery of the mortgage industry, is under the influence of the banking sector as a whole. However, experts predict that with economic activity across the board still nowhere near pre-economic-downturn levels, a dramatic upturn is too much to hope for. But good mortgage advice would conservatively suggest that an increase in the number of financial products available and a fall in lending rates could result in a modest improvement as the year progresses.
So with some lenders dropping their deposit requirements below 20% for the first time since 2008, 2012 can be described as ending optimistically. Indeed, this development saw the gradual re-emergence of the lifeblood of the housing industry: first-time buyers. And with 2012 concluding on this positive note, it is hoped that 2013 will follow suit.