Words of comfort In uncertain times

Welcome back to Mortgage Strategy and Happy New Year! 2003 has barely started, yet already the doom mongers are on the march and the mortgage market is a hive of activity. As we explore in our cover feature starting on page 17, had some of December&#39s headlines to have been believed, many of us would be out of a job by now.

But, as GMAC-RFC&#39s Stephen Knight points out, latest estimates from the Council of Mortgage Lenders suggest gross advances will break through £215bn this year – a new record. Subsidised new business rates, product and distribution complexity and flexibility, and access to international capital markets have allowed lenders to launch and expand, offering both you and your clients wider choice.

A combination of low interest rates, affordability, benign inflation, low interest rates and economic growth has contributed to this. But can it last?

Only last week, Sir Edward George set out to smooth fears that the economy was heading for a nosedive over the coming year. The governor of the Bank of England dismissed warnings of a slump and forecast steady growth in house prices, pointing out that consumer spending would help protect the UK from the worst of the global downturn. And he said the Bank would cut interest rates if the state of the economy worsened. Speaking on Radio 4&#39s excellent Today programme last Friday, Sir Edward pointed out that interest rates remained low and that household debt levels were manageable. “What we are anticipating is that the rate of increase in house prices will moderate quite sharply. We are not expecting there to be a fall in the level of house prices generally. It&#39s not easy to see why there should be a crash in house prices,” he said.

Sir Edward went on to say that the Bank expects a “gradual moderation” in consumer spending: “We have clearly identified the risks and uncertainties to the global economy… and we will respond as necessary if those risks appear to be crystallising.”

These are comforting words in troubled times. And, with the prospect of interest rates holding at 4% (the Bank&#39s Monetary Policy Committee will announce its latest rate-setting decision on Thursday), intermediaries and lenders will no doubt enjoy a fruitful beginning to the year. And don&#39t forget, you can read instant analysis of the MPC&#39s decision on Thursday, as well as all the latest news, by visiting our website at www.mortgagestrategy.co.uk.