We are learning to live in a world that has changed

5 July 2010

The national press is notorious for spreading doom and gloom. After all, it’s well known that bad news sells newspapers.

So when I did a quick trawl of the latest press coverage of the mortgage market when deciding what to write about in my column this week I was heartened to find so many upbeat headlines.

’Mortgage approvals hit new high’, ’Second home owners have generous tax breaks reinstated’ and ’Mortgage rates drop to seven-year low’ are just some of the optimistic headlines that took me by surprise.

Either journalists on the national papers are going soft or there is a positive vibe around. I suspect it’s the latter.

I don’t want to dwell too much on the emergency Budget because it’s already been debated to high heaven elsewhere and life must go on.

Yes, it’s clear the next few years will be difficult but my feeling is that the public is becoming more resilient and even comfortable about living in recessionary times.

Human nature is such that we all learn to adapt. Of course, this is easier for some than others but nonetheless we all have the ability to get on with our lives regardless of the state of the economy.

Similarly, with regard to the housing market and those headlines I mentioned, my sense is that things are on the up.

For starters, May was the third consecutive month in which mortgage approvals rose.

Then tax advantages on furnished holiday lets which were abolished in April by the previous government were reinstated by chancellor George Osborne.

One of the most important tax reasons for having a furnished holiday let is that owners can offset any losses against their other income, such as that derived from employment.

The tax advantages on furnished holiday lets which were abolished in April have been reinstated

Another attractive tax break is that some investors showing capital gains could delay paying their tax bills by investing the proceeds from their property sales in furnished holiday lets.

Such investors include those selling their businesses or other furnished holiday lets and commercial farmers.

Meanwhile, lenders are beginning to offer cheaper home loans for borrowers with smaller deposits.

And latest figures suggest the average rate on a two-year fixed rate mortgage is 4.52% - the lowest level since September 2003.

Two years ago, at the height of the global economic turmoil, the average rate reached more than 7%. At the beginning of this year it was 4.93%, according to Moneyfacts.co.uk.

It seems that lenders are trying to incentivise borrowers to move across to new deals by making significant reductions to their rates.

But unsurprisingly, many borrowers are opting to remain on low SVRs instead to avoid paying a higher rate on a new deal. Some lenders’ SVRs are now as low as 2.5%.

Previously, only borrowers with large deposits have enjoyed reduced rates but as the market improves those with smaller deposits are also being offered more competitive deals.

I think it’s time for us all to adapt to the new market reality. Things are getting better but it will be a long road to full recovery, so let’s draw strength from the positives that are beginning to emerge and keep moving onwards and upwards.

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