Brian Murphy, Head of Lending at Mortgage Advice Bureau (MAB), comments:
“Mortgage affordability has improved radically in recent months, and rock bottom mortgage rates combined with falling unemployment have pushed the level of repossessions in the UK to an eight year low. Today’s Inflation Report confirms that the Bank Base Rate – which will have been at a historic low of 0.5% for six years in March – is unlikely to rise in the immediate future, providing borrowers with an extra window of ultra-low borrowing costs and further minimising the risk of repossession. In a U-turn from previous guidance, BoE governor Mark Carney also stated this morning they would be willing to cut the Bank Rate closer towards 0% if low inflation persisted.
“Repossessions are always a last resort and lenders are obligated to help those who are struggling with their mortgage repayments as much as possible. Crucially, lenders have also put in considerable leg-work to improve communications and forewarn borrowers of market changes that could impact their mortgage repayments.
“While current market conditions are certainly positive, lenders are well aware that an eventual rise in interest rates must remain at the front of borrowers’ minds. That’s why today’s loans are vigorously stress-tested to ensure borrowers can still afford their repayments once interest rates rise. No-one is offered a mortgage they cannot afford in the long-term and lenders are also building in extra checks by setting additional loan to income (LTI) limits. Once they do increase, interest rates are set to follow a gently rising path to minimise the financial impact on borrowers.”