A funny thing appears to be happening in the mortgage market, and it's of precisely no help to me, seeing as I just want to buy a house to live in. First some facts to set the scene.

  • Bank of England base rate here in the UK is down at 1%.
  • But you can't get a new mortgage with a rate any better than 5% if you only have a 15% deposit. That's the same rate you could get just 2 years ago, when the BoE base rate was 5.25% as far as I recall.
  • 15% is a not unreasonable deposit by standards of recent years, and it's certainly a huge chunk of cash given the astronomical price of a three bed semi these days.
  • If you have a 40% deposit, you can get a new mortgage with a 2.29% rate. 
  • The price of houses is by the way still about double what it was just ten short years ago.

The net result of this is that people with vast stacks of money just sitting around in savings accounts are realising that they're not getting any interest on their stash and might be better off investing in bricks and mortar. Seeing as they have these giant piles of cash they can pay a 40% deposit no problem and take advantage of the seriously cheap mortgage deals available only to the already mega-rich. I'm told by local estate agents that young folk are now streaming into their offices with their parents in tow (they supply the briefcase full of gold bars) to get their investment property sorted as a nice little earner.

And guess what this influx does? Pushes up property prices, keeping the money-go-round spinning for those lucky enough to be on it. So, I put forward the bold statement that the decrease in base rates combined with the existing lack of credit is actually shutting non-investors out of the market. Which is really annoying because I was hoping for a cheap-houses-for-all feeding frenzy of which I could be a part :-(

Of course, I'm just bitter.

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