Any Room for Optimism?

In the wake of an election result that posed as many questions as answers, much of the discussion moved to what impact the continued uncertainty could have. Worries over the potential for a bad reaction from the markets prompted the question of whether this could hit UK mortgage borrowers in the pocket.

The protracted talks between parties to try and establish some form of stable Government did nothing to shift the ash cloud of uncertainty and the speculation over a lift in funding costs. At the time of writing there at least seems to be some light at the end of the tunnel regards the political uncertainty but plenty left to play out yet. In any event it would appear that mortgage products have proven to be more resilient in their reaction to money market movement.

A hike in swap rates following the recent inflation figures did absolutely nothing to impact on the fixed rate offerings. This was an indication of how the higher margin that now applies on mortgage products gives something of a cushion to short term fluctuation in market rates. In other words there is still something of a disconnect between market rates and the product rates applying to mortgage deals.

This does have some advantages and gives more stability in the current product pricing. In fact Nationwide and Northern Rock sharpened their pencil in the days following the election to improve their competitive position. Perhaps there is even some room for guarded optimism in the current market.

There are even signs of further product advancement as The Mortgage Works refocuses on the Buy to Let market and launches products available up to 80% LTV to bring some small cheer to landlords. Clearly the rates are relatively high but it does make that initial move that could coax others into doing the same and ultimately start to broaden the market.

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