After months in the doldrums, mortgage lending in March 2011 rose by 21% according to lenders, although it still remained 2% lower than in March 2010.
The month on month rise is good news and has been driven by a lower combination of February mortgage applications being lower than expected, mortgage availability increasing and remortgages continuing to show strong performance as people worry that higher base rates will be coming later this year. February had show the highest level of re-mortgages for over two years and March has continued to build on this.
The concern over higher mortgage rates has been caused by the increasing hawkish stance of the Bank of England, with three members of the Monetary Policy Committee voting for interest rate increases last month, and also increasing inflation rates. With inflation now double the Bank’s target many suspect that it is only a matter of time until base interest rates rise. A recent BBC poll of economists showed that the majority of them expected an increase in interest rates within the next three months.
This concern over interest rates has had a two-fold impact on the mortgage market, with fixed rate loans, once the most popular in the UK, now falling out of favour as buyers look for more flexibility with their home loans. In addition, as we noted above many more people are looking to re mortgage before any increases kick in although in reality the increases have probably already been factored into the current rates being offered for home loans.
