Mortgage chicken..

No one will be surprised by the news that the MPC has kept the base rate on hold at 0.5% for the 11th consecutive month. Whilst borrowers with tracker mortgages will be delighted to see the bank rate remain untouched, those borrowers sitting on their lenders standard variable rate will be keeping a close eye on their letterbox. In the past month we have seen Skipton and recently Norwich and Peterborough increase their SVRs. With building societies struggling for funds, I doubt these will be the last SVR increases we will see. Borrowers on other lenders SVRs face a financial version of chicken as they sit tight on a nice low rate hoping they will be able to remortgage away at the last minute before they get hit by rate rises.
With more and more borrowers considering remortgaging, one important area to note is that any increase in remortgage volumes will reduce funding for purchases, as overall mortgage funding is so tightly constrained, any reduction in the volumes of funding for purchases is likely to have a negative impact on house prices.