House prices will continue to rise as gross mortgage lending hits a five-year high next year, mortgage broker John Charcol has predicted.
Speaking to FTAdviser, Ray Boulger, senior technical manager at John Charcol, suggested that gross lending will be around £225bn in 2015.
This year gross mortgage lending is set to be around £205bn, compared to £176bn in 2013, £145.3bn in 2012 and £141.3bn in 2011.
Mr Boulger also said he expects house prices to rise by 4-5 per cent in 2015.
He believes that the rate of house price increases will continue slowing, but ongoing low interest rates mean that for most people affordability will continue to be more around the deposit than the monthly payments.
“The recent sharp fall in the oil price also has a huge impact on the economy, but today central banks have the opposite challenge - staving off deflation. In the UK a fall in CPI to below 1 per cent early next year looks probable and if the oil price remains weak sub 1 per cent, inflation could easily persist for much of the year.
“In this environment it is more likely the economy will need some stimulus than a bank rate increase.”
Mr Boulger added that the last sustained period of low inflation and low interest rates, albeit not as low as today, ended in the 1960s, meaning that few borrowers and even less so regulators, lenders and advisers, have experience of a long-term low interest rate economy.
“Even though it looks like rates may take a while to rise, it doesn’t mean fixed rate mortgages are not good value, because pricing reflects this long-term low interest rate expectation.
“We’ve even seen 10-year fixed rate deals appear recently. However, it does mean discount and tracker rates should not be ignored.
He added that the recent stamp duty changes will potentially stimulate the bottom end of the London market in particular, with borrowers looking at homes around £250,000 benefitting the most.
Mr Boulger stated that next year John Charcol will meet increased demand by recruiting new mortgage advisers, both through experienced talent and training up new advisers via its in-house Charcol Academy.
“We expect 2015 to be a busy year, with more and more lenders engaging with intermediaries. We also expect to see more borrowers turning to brokers for independent advice and access to a wide range of lenders.”