Mortgage predictions for 2015
Thanks to wide-ranging pension reforms, changes to the property market with the Help to Buy mortgage guarantee and the Mortgage Market Review (MMR), plus rock-bottom savings rates, it's fair to say 2014 was a tricky year for personal finance.
But what will 2015 bring? Moneywise put that very question to three of the personal finance world's leading experts to give us their predictions for the year ahead.
Andrew Montlake is brand, marketing and communications director of mortgage broker Coreco
As we embark on another bright new year, we should reflect on what a tumultuous year 2014 was - one that saw a fundamental shift in the whole mortgage market. It is easy to understate just what effect the Mortgage Market Review had on the way lenders do business and we will continue to see the ramifications of this spread into 2015 and beyond.
The initial upheaval caused by new training and processes ultimately led to many lenders chasing their tails in the latter part of the year as they tried to catch up on targets and build up a decent pipeline to kick off the new year with. Exacerbated by a fall in swap rates and expectations of rate rises being pushed further out due to low inflation figures, there were some extraordinarily low mortgage products on offer.
This shows no signs of abating in the first quarter of 2015, although any further price falls are likely to be smaller, gradual tit-for-tat moves among lenders jockeying for position rather than wholesale cuts as it seems that we are once more close to the bottom of the current cycle.
The issue at the moment, however, is that low rates will only go so far in attracting new business and until lenders start to look at easing some of the overly restrictive criteria that has come into play since MMR they will struggle to bring in the levels of business they require.
Mortgage prisoners and transitional rules need to be looked at, as well as improvements to self-employed and contractors, older borrowers and the whole interest-only debate.
This does not mean lenders should become lax overnight but they need to return to a sensible middle ground that does not discriminate against such borrowers and cause consumer detriment.
The General Election in May will generate a great deal of uncertainty and this traditionally leads to a slowdown immediately before and potentially a rebound after.
Many believe this will finally be the year that the Bank of England will increase rates. The closer we get to this point, the more we will see products beginning to rise once more and an associated spike in mortgage activity as borrowers finally look to fix in before it is too late.
Although any changes are expected to be slow and gradual, the average borrower has become used to the current status quo and any change will be proportionally more pronounced.
The future of many of the government's policies, such as Help To Buy, also rests on the outcome of the election, but while the equity loan part of Help To Buy designed primarily to assist house builders looks like it is here to stay, the more controversial second part – the mortgage guarantee – will probably be scaled down gradually.
In essence, 2015 looks like it will be similar to 2014, with steady if unspectacular growth in the mortgage market, but the message to borrowers is clear – the earlier you lock in to the extraordinary rates now on offer, the better.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).