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Conflicting economic reports leave new mortgage customers confused
Anyone looking for a new mortgage or considering a change of mortgage provider will this week find themselves struggling to make sense of the conflicting reports and surveys that have been released from trusted sources. It seems that no-one can agree whether the economy is likely to recover or go into freefall over the coming months.
Of course the real situation has been unclear for a while now but it seems that there is still a huge amount of disagreement amongst professional economists about the likely success of Government policies that reduce public spending and rely upon trade and investment industries to bolster the economy.
The respected analysts Ernst & Young have released a new report which suggests that the Bank of England interest rate may stay unchanged at 0.5% for at least two more years. The company seems to approve of budget changes announced in June to increase VAT and make sweeping financial cuts across all sectors of public spending. If the report is correct it will be welcome news for people who are considering arranging a new mortgage and would rather not apply for a fixed rate product.
Chief economic advisor Peter Spencer is quoted as saying “On the assumption that the government is able to implement the overall reduction of £40bn it set out in the budget, we expect that UK growth will struggle to reach 1% this year but will gradually speed up in the following years to give the UK a high-quality recovery based on trade and investment.”
Other commentators have expressed doubts that the new coalition government will be able to implement the cuts on such a wide scale and warn that this may mean interest rates will rise. The news from Ernst & Young conflicts with the majority of recent economic forecasts and reports, especially considering that one member of the Monetary Policy Committee has now voted twice for an increase to be introduced.
YouGov and Markit surveys have discovered that 47% of households expect their income to fall over the coming year and many have accepted that the value of their property either will decline or has already fallen. It is clear that public sector workers are gearing themselves up for job cuts and salary freezes with some expressing more concern about their financial situation than at any time during the economic crisis.
On the other hand 33% of respondents thought that their property may rise in value and 22% think that their household income may also rise. A spokesperson for YouGov concludes that the general public agree with the Government that austerity measures are necessary in order to bring future stability but also questioned how long this sentiment will last when the cuts begin to be implemented.
Given the number of conflicting surveys and reports announced every week it is not surprising to hear that according to Karen Barrett, chief executive at unbiased.co.uk the number of people seeking advice from a mortgage broker over the last twelve months has risen by 24%. New mortgage customers are concerned that interest rates will rise and are looking for independent advice about fixed rate mortgage products that will protect them from any increases to the BOE interest rate.
New buyers are also confused about the best product for their home loan and realise that internet comparison sites are often misleading when they advertise a headline rate that only applies to customers who have substantial deposits. A professional financial advisor will have access to all of the latest figures, be aware of special deals that are available and recommend a new mortgage that suits individual circumstances - so seeking out an independent mortgage broker seems a very sensible idea for both first time buyers and current homeowners looking to change lender, re-mortgage or secure a better deal.
The best course of action for most borrowers may be to seek advice and then choose a new mortgage product that is compatible with their personal view of the situation.
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