In 2002 many analysts said the revived housing boom was not sustainable. We were apparently heading for boom and bust, just as we had in the 1990s, leaving many homeowners with their worst fears... negative equity. However, Gordon Brown’s tight fiscal policy and fortune in economic growth, have meant that the housing market has continued to thrive throughout the last 4 years. Yes we have just a recent interest rise, but this has been linked to raising fuel prices, which are beginning to stabilize. Persimmon the UK’s largest house builder has reported strong profits in the last quarter of 2006 and have stated that the recent interest rise has had little impact on proposed contracts or sales. So the boom continues for homeowners, agents and the building industry alike. But the fear still remains at government level that this now giant bubble will one day burst. In theory this is unlikely to happen any time soon, with housing short across most cities and with the UK offering EU ascension countries unlimited employment access, demand will continue to outstrip supply.

One of the main advantages of such a prolonged period of low interest rates is the development of self-employed property developers. The market has never been so ripe for taking out an interest only mortgage, developing a run down home and selling on for profit. The also steady influx of reality based property programs has fuelled great interest and more pride within the UK homeowner mindset. Such behaviour has sparked not just re-mortgaging, but further lending from the likes of secured loans providers, who use the capital from assets to secure the debt taken by the homeowner. Loan brokers and aggregators are the biggest growth area, with demand falling for the more cheesy established loan providers, who fill daytime TV with their patronizing and poorly made adverts. The likes of betterlending with their professional site and efficient service, aim to search through 100s of loans, based on the applicant’s personal situation, meaning rejection will be lower and the rate is likely to be more attractive. Homeowner loans are taking up an increasing amount of Betterlendings’s loan spread, Mark Turner owner of Better Lending states “the general public has got renewed pride in their homes and with the interest rates so low, they can now afford to take out a loan and spruce up that bathroom or enjoy some more sun with a new conservatory.” The fact is that the public are cashing-in on the boom and that loans and re-mortgages are set to continue to be extremely profitable for the likes of the big banks and the fiercely competitive secured loan provider industry.

Posted by: Daniel J Morgan
Date: 22nd August 2006