Predicting 2012 mortgage rate trends will depend on the eurozone crisis

Predicting future mortgage rate trends will depend on what happens in the eurozone. Fresh fears over banks liquidity in the face of the eurozone crisis have bumped up money market funding costs and fed through to a slight rise in rates. This comes despite the likelihood of a bank rate rise being a long way off, according to the markets. The Bank of England have warned that home buyers will find it even harder to obtain a mortgage in the coming months.

The Bank said: "Lenders expected the proportion of total loan applications being approved to fall over the coming quarter with some lenders commenting that they had revised down expectations for households' disposable incomes and hence the affordability of taking out new secured loans.”

Banks and building societies told the BOE that this stringency had put off many potential house buyers from applying for mortgages. Lenders have said that any increase in lending over the next few months, is likely to be concentrated on those borrowers who can afford to put down a large deposit.

Reports have suggested that there has been a rise in credit availability in 2011, particularly for high LTV mortgages, however current predictions of mortgage rate trends point to mortgage rate increases and tighter lending criteria in 2012.

In his prediction of mortgage rate trends, the Halifax's housing economist Martin Ellis has said that as long as rates stay low, the market will be favourable for those who already have a mortgage and those who are able to raise the required deposit.