11.11.08 by Andrew Montlake

Key To Recovery Now In Lenders Hands

With the recent sharp cuts in Bank Base Rate to 3%, and the fact that 3 month LIBOR has also now plummeted to 4.42%, it is tempting to believe that the credit crunch is now over. Unfortunately it is not as simple as that.

The key to the crises in the mortgage industry does however, ultimately still end up in the hands of the lenders and whether their appetite to lend again returns sooner rather than later.

LIBOR is still 1.42% above Bank Base rather than its normal 0.25% and reflects the continuing problems. However, LIBOR falling this low should be enough for them to price up some more competitive rates.

Leading by example already are Abbey, who have bravely and cleverly come out of the trenches with guns blazing. Two year fixes from 4.49% with a £995 Arrangement Fee, and more welcome, an early return to tracker products, starting at a reasonable 4.89% with just a £499 fee.

Cheltenham & Gloucester have also released some better fixed rates, with the promise of a competitive 90% rate to follow shortly.

These are just some early examples and the hope is that the other main lenders will soon follow suit.

Historically speaking, rates that start with a 4 are not to be sniffed at, and with property prices falling to a more affordable level, the biggest issue has been the supply of mortgages at an affordable level. If this does continue to change then this is indeed a promising sign.

We are all aware of the wider economic issues, but where housing is concerned, once people begin to think that property AND the mortgage are at realistic and affordable levels I expect some to start to take the plunge.

After all, many do not want to miss the bottom of the property market, and I still believe that those that buy any time from now for the next 6 months will be sitting pretty in 5 years time.

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