Follow Us on Facebook Follow Us on Twitter Follow Us on Google+ Follow Us on Pinterest Follow Us on Tumblr Visit our YouTube Channel Subscribe to our Feed Subscribe via FriendFeed

Connect With Us

As Quantitative Easing 2 Begins Lenders Encouraged To Increase Loans

by Jim ONeil on October 13, 2011

in uk loans news

The Bank of England recently decided to allot an additional £75 billion to its quantitative easing program. Industry experts believe this could provide the mortgage market with a boost. Interest rates were kept steady at 0.5 percent by the Monetary Policy Committee (MPC) last week as the quantitative easing program was increased to £275 billion.

According to the MPC, inflation will exceed five percent within approximately the next month. However, it is expected to decline sharply in 2012. The MPC felt that the quantitative easing increase was needed to keep inflation under its two percent target. Mortgage lenders are now required to shift from offering low loans APR to increasing their willingness to lend.

Phoebus Software Managing Director Paul Hunt stated that the decision regarding quantitative easing provides lenders with increased confidence. They are more likely to view individuals taking mortgage loans as being able to sustain debts over the long term. Ray Boulger, a senior technical manager with John Charcol, believes that lenders will offer fixed loans APR that are more competitive over the long term.

Mr. Boulger said that by concentrating purchasing power at the long end of the market, the Bank of England can contract yield spread. This will pave the way for lenders to offer fixed rates for ten year and longer loans that feature a better margin over the five-year rates witnessed thus far. The cost of this, said Mortgages For Business Managing Director David Whittaker, is inflation exceeding the target rate.

In the opinion of Mr. Whittaker, being faced with higher than targeted inflation in the short-term worries some UK consumers. First-time homebuyers saving money for large deposits required to secure a mortgage find little comfort in an increase in the cost of living. Mr. Whitaker believes the situation will only expand the already growing market of private rentals.

Comments on this entry are closed.

Previous post:

Next post: