2004 heralds a period of significant change for the mortgage market, with sweeping new rules coming into force to regulate the selling of mortgage products. Inevitably, this is going to have an impact on the types of products that are available in the market.
During 2003 for example, self-certification mortgages have helped fuel demand in the housing market by allowing many borrowers to take out larger mortgages than they would otherwise have been able to afford. And this phenomenon has had a knock on effect on house prices in general. In 2004,
the selling of such products will be more tightly controlled, restricting demand.
We expect that, over the course of the year, interest rates will probably rise to 4 1/2% or maybe 5%. This again will effectively slow down the massive house price rises that we have seen over the last couple of years. This type of increase will prove to be unsustainable as 2004 progresses, especially with first time and even second time buyers struggling to afford to move up
the property ladder. Banks and building societies may choose to unveil a raft of new products aimed at helping first time buyers, numbers of which have fallen to an all time low.
Demand predictions for 2004 remain high, especially in the new build sector, and there will still be areas of strong geographical growth, particularly in the North. The investor market may cool off, continuing a trend from the latter part of 2003, while the re-mortgage market is set to grow further.