Mortgage brokers remain optimistic

The Association of Mortgage Intermediaries (AMI), the trade body that represents the UK’s mortgage brokers, is predicting that a continued decline in mortgage transaction levels will not necessarily lead to a sharp fall in house prices.

AMI also expects remortgaging transactions to remain level or grow this year, whether or not borrowers continue to withdraw equity from their homes at recent levels.

In a report on the outlook for 2008, the Association urges the Bank of England’s Monetary Policy Committee to balance inflationary pressures with the deflationary effect of a slower economy.

Richard Farr, Director of AMI, says: “With continuing volatility in the financial markets and steep rate cuts by the Fed, the UK will also look at reducing rates. However, as the Bank of England recognises, it is a difficult balance keeping inflation under control with increasing energy, food and fuel prices and at the same time looking to cut rates to boost the economy.”

Mr Farr adds: “Even if house prices do fall for the whole year, they will not do so every month, so we should expect mixed signals to continue from the various market watchers.”

He believes that there is “little impetus” for prices to fall rapidly, and that only “a large rise in unemployment, combined with rising mortgage costs” would turn the trickle of homes coming onto the market into a flood.

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