Eight years ago, in the summer of 2007, hardly anyone had
heard of the term ‘credit crunch’, but now the expression has entered our daily
language and even the Oxford Dictionary.
It took a few months throughout the autumn of 2007, before the crunch
started to hit the Grantham Property market, but in November / December 2007,
and for the following seventeen months, Grantham property values dropped each
and every month like the proverbial stone. The Bank of England soon realised in
the late summer of 2008 that the British economy was stalling under the
continued pressure of the Credit Crunch. Therefore, between October 2008 and
March 2009, interest rates dropped six times in six months from 5% to 0.5% to
try and stimulate the British economy.
Thankfully, after a period of stagnation, the Grantham
property market started to recover slowly in 2012, but really took off strongly
in late 2013 / early 2014 as property prices started to rocket. However, the
heat was taken out of the market in late 2014/early 2015, with the new mortgage
lending rules and some uncertainty, when some people had a dose of pre–election
nerves.
With the Conservatives having been re-elected in May, the
Grantham property market regained its composure and in fact, there has been
some ferocious competition among mortgage lenders, which has driven mortgage
rates to record lows. Whilst I have no actual figures to back this up, I know
an awful lot of long serving bank managers, mortgage arrangers and people in
the finance industry, all of whom have told me on previous occasions when
interest rates rose (1987, 1992, 1997 and 2003), it wasn’t the first rate rise
that was the catalyst for many homeowners and landlords to remortgage but the
second or third increase. The reason
being that it was only by the time of the third rate rise, it started to hit the wallet. However, the issue is, by the time of the
second or third rate rise the best fixed rates, were in all instances, no
longer available as they had been pulled by the banks months before.
But here is the good news for Grantham homeowners and
landlords, over the last few months a mortgage price war has broken out between
lenders, with many slashing the rates on their deals to the lowest they have
ever offered. I read that the well
respected UK
financial website Moneyfacts said only a couple of weeks ago, the average two
year fixed rate mortgage has fallen from 3.6% twelve months ago to just under
2.8%.
Interestingly, according to the Council of Mortgage Lenders,
the level of mortgage lending had soared to a seven year high in the UK. So what about Grantham? In Grantham, if you added up everyone’s
mortgage, it would total £814.3 million.
Even more interesting is when we look at Grantham and split it down into
the individual areas of the town,
- NG31 - Grantham £479.9m
- NG32 – Grantham villages mainly to the West and North inc. Croxton Kerrial, Sedgebrook £193.6m
- NG33 - Grantham villages mainly to the South and East inc. Castle Bytham, Corby Glen £140.8m
Since 1971, the average interest rate has been 7.93%, making
the current 0.5% very low. So, if
interest rates were to rise by only 2%, according to my research, the 3,548 Grantham
homeowners, who have a variable rate mortgage would, combined, have to pay an
approximate additional £9,279,600 a year in mortgage
payments. That means every Grantham
homeowner with a variable rate mortgage, will on average have to pay an
additional £2,616 a year or £218 a month in
interest payments.
I know over the last couple of posts, I have talked about
mortgages a lot however, I am not a mortgage arranger but a property writer and
as regular readers know, I always talk about what I consider to be the most
important issues when it comes to the Grantham Property market and at the
moment, in my humble opinion, this is the most important thing!
