The Council of Mortgage Lenders (CML) is confident that even though there has been a reduction in the amount of mortgage products available as a result of the global credit squeeze, house prices will remain unaffected, due to the underlying demand for property.
Spokesman for the CML, Bernard Clarke, explains their reasoning: âThe basic economic principle of supply and demand will keep house prices high. The housing market is underpinned by a shortage of available properties and the UK populationâs strong aspiration for home ownership. It is those fundamentals that will continue to drive the market, overriding any shortage of mortgage products to customers.
âIndeed, if prices did ease then that would make housing more affordable for those currently priced out of the market, meaning that demand would increase pushing prices up further,â he added. But, he did concede that he expected the market would âflatten outâ in the short term.
The area most affected by the withdrawal of mortgage products is the buy-to-let sector, which has seen an overall 40% reduction over the last three months, according to website Moneyfacts. Most of the product withdrawals have come from the bad credit category, with 72% of bad credit buy-to-let mortgages discontinued. However, residential mortgages have not escaped unscathed either, with 54% of bad credit products being withdrawn over the same period.
The reduction in mortgage products is proving a concern for those homeowners who have fixed-rate or discounted mortgages that are due to switch to Standard Variable Rate (SVR) in the near future. Those with fixed-rate mortgages will have been insulated against the five interest rate rises over the last 18 months. Now they are in a position to either re-mortgage to another deal, or face paying much higher repayments they will find that there are less UK mortgages available; on the plus side it is easier to compare mortgage products as there are less available, but the downside of that is there is less choice and therefore they are unlikely to get anywhere near as favourable a deal as previously.
But it is the withdrawal of the buy-to-let mortgage products that could affect the market most. With many commentators now agreeing that the housing market is over-valued, it is the reduction in demand from the buy-to-let sector that could eventually see the long-predicted price correction. However, that pessimism flies in the face of the confidence expressed by the Council of Mortgage Lenders, highlighting the fact that even industry experts are divided when it comes to predicting the future state of the housing market.
Source: http://www.articlealley.com/article_245194_19.html
