Banks and building societies are hoping to woo savers with new low interest rate business bank accounts ahead if a possible crisis in the home loan market. More than half a million customers have deals that end this month and the financial institutions are keen to lock them into new ones.
Banks need savers to invest due to fears of a second credit crunch. The Bank of England has already warned of a mortgage drought in the coming months, with the number of home loans expected to decrease over the coming three months. The CML has also voiced concerns that the housing market will be restricted when the £300 billion of Treasury support for home loans is withdrawn.
This all spells bad news for freelancers looking for a contractor mortgage, first time buyers, people hoping to remortgage, or those moving home. Bernard Clarke from the CML explained that banks rely more on retail customers to provide mortgage funding than they did three or more years ago. He believes that any change in mortgage interest rates should be reflected in the rates paid to savers.
However, such a change is not going to come immediately. The Bank of England has just announced that the Base Rate will remain at 0.5%. This is the 15th consecutive month that we have seen this unprecedented low and it will no doubt please people who have a tracker mortgage linked to the Bank Base Rate.
Some experts believe that when rates do eventually start to rise, the increases will be small and incremental and will be unlikely to have an adverse effect on the housing market.
Meanwhile, the latest Halifax House Price Index for June shows that the average UK home is currently worth £166,203. This reflects a drop of 0.6% on the previous month and is the second consecutive decline.
A property analyst said he was not surprised by the figures. It’s becoming a buyer’s market and sellers must come up with more competitive prices if they want to make a sale.
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