"On one side the Chancellor has asked lenders to continue to lend, and be nice to those borrowers in arrears to support the flagging housing market."
"On the other hand lenders want to do anything but lend. Such is the dearth of supply in the mortgage market that any lender with a half good product is immediately swamped by applications. At the same time lenders are quite happy to charge existing borrowers more, and would be delighted if those borrowers paid of their mortgages to go elsewhere. This is especially true if the borrower is more risky or is having trouble paying. If anything they'd like to shrink their mortgage books over the next few months, whilst they are struggling to find funding.
"On the savings side, the cost of lenders raising funds is still decoupled from the base rate. The current bank base rate is 4.5% but it is still quite easy to find savings rate 2% higher than this on the high street. And this is still cheaper for banks and building societies than raising funds elsewhere. For example Barclays is paying Qatar Holding LLC 14% in order to borrow money from them.
"Until the cost of funding comes down significantly for lenders, and this is not related to what the Monetary Policy Committee announces on Thursday, it is extremely unlikely that mortgage rates will come down significantly. The exception to this is the lucky 33% or so of borrowers who are already on a tracker mortgage, although these borrowers would do well to check their terms and conditions to see if they contain a floor or collar below which their mortgage rate cant fall."
Advice for first time buyers
* Unless you have at least a 25% deposit you may well suffer from significantly higher rates, so come back when you've saved up.
Advice for existing borrowers thinking of remortgaging
* Get a realistic valuation of your property, and deduct 10% from it. If you still have a loan to value of 75% or better and you have an excellent payment record Lenders will be fighting over you.
* If you have LTV between 75% and 85% and a perfect payment record you will be able to remortgage, but not at the market leading rates
* If you have an LTV of 85% and over you will have little choice even with a perfect payment record
* If you have a bad payment history and an LTV of 75% and over it will be nigh impossible to remortgage
If you need to move house
* The problem is buying its selling, so there is no point in looking for a new property until you have an offer on the one you are selling
* Again, to get a mortgage you should aim to purchase a property valued to give you a 25% deposit if you want to qualify for the best rates. And if you don't have a perfect payment record it will be significantly harder to find a lender willing to lend.
