Anyone trying to gain an insight into the current situation could be forgiven for thinking most commentators start with whatever they want the answer to be and work backwards.
Those wanting to be bullish could point to research this month from Barclays showing mortgage repayments now represent just 15.4% of household incomes – a smaller proportion than ever before.
Indeed, given the implicit but emphatic message from the MPC that rates could well stay ultra-low into 2013, lenders have an unprecedented opportunity to pass the low cost of finance to borrowers.
The result, according to data from the CML, was five consecutive months of rising mortgage advances between May and September last year. The latest data shows advances in November were the highest in 23 months.
This has helped bolster house prices. In the second half of 2011, sovereign debt problems in the eurozone developed into a crisis which leaves Greece teetering on the brink of default and has led to downgrades not just for the PIIGS countries, but for France and Austria too.
But according to the LSL/Acadametrics house price index, all this impending economic turmoil caused house prices in England and Wales to fall 0.5%. Hardly the apocalyptic crash that some commentators have described.
On the other hand, the MPC has little control over the LIBOR rates that determine the cost of interbank finance and ultimately have a far greater impact on the cost and availability of mortgage finance than the Bank Rate.
LIBOR has risen steadily since August and has begun to push up mortgage rates. As RPI inflation remains stubbornly above 5%, rising mortgage rates and spiralling prices will cut deeper and deeper into household finances, creating a risk of burgeoning arrears as the year goes on.
What’s more, high inflation means stagnant property prices actually represent a substantial real loss for property owners.
This isn’t all that much good for buyers either, as their salaries aren’t rising anywhere near as quickly as inflation.
The FSA has – most recently in December’s gargantuan MMR – shown it is increasingly willing to bear its teeth and restrict lenders from higher risk practices.
Meanwhile, the government is pulling in the other direction by calling for lenders to open the purse strings to boost the market and allow those trapped in the private rental sector to enter the first-time buyers’ market.
With an uncertain economic, regulatory and political picture, it can be hard to see the wood for the trees. But for a level-headed analyst, the most important factor is the attitude of mortgage lenders themselves.
The gross lending figures demonstrate a vital point – that lenders have shown in the last 12 months they are prepared to make finance available wherever possible.
So long as this remains the case in 2012, we can afford muted optimism in the knowledge that the industry has shown it won’t retreat into its shell at the first sign of trouble.
