Employment and demand set to drive 2008 mortgage market

Published: December 13, 2007

High levels of employment and strong housing demand are set to ensure the mortgage market remains strong in 2008, according to a new survey.

Research undertaken by the Intermediary Mortgage Lender's Association (IMLA) discovered that over two thirds of lenders believe that re-mortgaging volumes will either remain the same or increase.

While the majority of lenders reported tightening their criteria relating to loan-to-value ratios, the organisation called on the Treasury to boost confidence in the market by cutting interest rates further.

"Lenders have a realistic but optimistic perspective on the market, which will be supported by good levels of re-mortgaging activity and a reaffirmation of prudent lending practices," said Peter Williams, executive director of the IMLA.

"We believe the Bank of England has further potential to reduce borrowing costs and increase confidence. While Mr King and his colleagues must walk the tightrope between the risk of a slowingeconomy and the threat of rising inflationary pressures, we think the Monetary Policy Committee. (MPC) can and should cut rates again, possibly as early as in January," he added.

In the wake of last week's decision by the MPC to reduce interest rates by 0.25 per cent to 5.5 per cent, two more lenders have today (December 13th) cut their mortgage interest rates, with the NatWest reducing its standard variable mortgage rate to 7.69 per cent and the Royal Bank of Scotland taking the same step with its SVR product.