Knight Frank Finance: "the full service property finance company saw a marked upturn in business towards the end of the second quarter"
7 July 2011
Knight Frank Finance boss reflects on a “steady as you go” policy from Bank of England as rates remain unchanged for July
Simon Gammon, managing partner at Knight Frank Finance, has likened the Bank of England’s interest rate policy to a ship navigating through rough waters. Following an historic 28th consecutive month of no interest rate rises, the full service property finance company saw a marked upturn in business towards the end of the second quarter, despite otherwise unfavourable market conditions in the property market.
“Although house prices in general are at a relatively low point, and inflation rates are higher than we had hoped, the effect of maintaining a steady as you go outlook in terms of base rates is beginning to have a positive impact on borrowers,” said the head of the property finance division. “We experienced a strong increase in deals towards the end of the first half of the year, and I sense the tide may be turning.”
The majority of the Bank of England’s Monetary Policy Committee (MPC) voted to keep rates on hold last month, and today’s decision further heightens expectations that the base rate is set to stay put for some months to come.
At the same time, other factors, such as the economic turmoil in Greece, are known to be affecting the UK mortgage market as well as the wider UK economy. Last month, the private banking arm of BNP Paribas withdraw from the UK mortgage market amid concerns over its exposure to Greece, while BPI, another French lender, has also cut back its loan availability in recent weeks.
“It is not inconceivable that a large or unexpected shift in external factors could force Mervyn King and his colleagues on the MPC to take action on rates sooner than anticipated,” added Gammon. “In the meantime, fixed rate loans are becoming ever more attractive as lenders drop their rates, as swap prices fall.”
However, Gammon cautioned borrowers against simply searching for headline low rates amongst lenders. “Simply targeting the lowest rate does not guarantee that borrowers will get the deal, as high street banks are still cherry-picking the best applicants. I suspect that borrowers will start to get wise to this in the second half of 2011 and will be searching for more bespoke deals as a result, a trend we can only welcome.”
Knight Frank Finance
Knight Frank Finance is the independent financial advisory arm of Knight Frank, the world’s largest privately owned global real estate agency and consultancy. The company offers advice across the full spectrum of property financing requirements, including commercial, residential, buy-to-let, bridging, development and investment property finance, and for loans of very diverse value, from around £100,000 to £50 million. Through its close, often long-standing relationships with lending institutions, Knight Frank Finance is dedicated to arranging bespoke deals with the most attractive terms for its clients, regardless of the size of the deal. Since being founded in 2007 the company has advised on financings amounting to more than £2 billion.