Latest Mortgage News
Fixed rates drifting upwards
20 May 2009
According to Moneyfacts, fixed rates seem to be creeping upwards. The average fixed rate, regardless of loan to value or fixed period, have all began to gradually creep up, with 10yr fixed rates at up to 85% LTV rising the most at 0.2% over the last month.
Even at lower LTVs, such as 60% LTV where the best deals can be found, rates have increased, with 2 year fixed deals up 0.07% on average over the last month.
With many people currently sitting on low variable rates and wanting to hold off from taking a fixed deal for as long as possible, this could be seen as evidence that the time to fix could soon be approaching.
Property sales highest in 18 months
20 May 2009
Latest figured from the National Association of Estate Agents (NAEA) show that estate agents sold on average 10 properties in April, up from 8 in March and the highest level in 18 months.
Chief Executive of NAEA Peter Bolton King comments “What we are beginning to see now are consistent positive indicators that have held firm or improved since the beginning of the year…. These figures show that (market) confidence is returning”
Other interesting facts from the NAEA Housing Market Survey include that the average selling price across all house types in April was 6.2% lower than the asking price and the average number of properties available for sale increased from 67 in March to 76 in April.
Mortgage servicing costs lowest in 5 years
14 May 2009
According to the Council of Mortgage Lenders (CML) the costs of servicing mortgage debt is at it’s lowest in 5 years.
Current figures show first time buyers are borrowing on average three times there income and 75% of the value of their homes, with average monthly interest payments equating to 15.1% of their income.
For home movers, the average mortgage loan is £115,000 and interest payments equated to an average of 11.4% of income.
Homebuyer enquiries continue to grow
12 May 2009
New buyer enquiries have increased for the 6th consecutive month and in April were at their highest levels for almost a decade according to RICS’ housing market survey.
Sales also increased in April, with estate agents having sold an average of 10.6 properties over the last 3 months.
Nationwide withdraws SVR guarantee
28 April 2009
Previously, Nationwide Building Society has pegged its Standard Variable Rate (SVR) to the Bank of England base rate, guaranteed to be no more than 2% above it. This meant that when any fixed deal ended, assuming the customer did not arrange a new deal, they would automatically transfer to the SVR which was for all essential purposes a tracker rate.
However new customers will no longer benefit from this guarantee as Nationwide have withdrawn it for all new deals which will now default to the lenders new “standard mortgage rate”, currently 3.99%, with no guarantee as to what the rate will be in the future.
Source: BBC News
Homeowners Mortgage Support Scheme commences
21 April 2009
The Homeowners Mortgage Support Scheme (HMSS), announced in December 2008, has finally begun. The scheme is aimed at supporting those who are struggling with their mortgages and will allow borrowers to defer up to 70% of mortgage interest payments if they lose a portion of their income. Lenders who support the scheme will have the option of government support in the way of a guarantee in some circumstances against part of the risk.
To qualify, applicants need to have savings of less than £16,000, a mortgage of less than £400,000 and still have some income and the ability to pay at least 30% of their interest payments.
Housing Minister Margaret Beckett explains the scheme is an offer of temporary help for hard-pressed homeowners, stating:
“the idea of this is to try and help people who haven’t lost everything… but who nevertheless are having difficulties”
“Maybe one of them has lost their job but not both, maybe it’s just that they’ve lost their overtime, but one way or another… they are struggling with the mortgage level payments that they could meet before,”
The scheme is being supported by several of the main mortgage lenders, while others have set up similar comparable schemes.
The Council of Mortgage Lenders (CML) says it welcomes the scheme, but that it is simply one means to an end, and stresses the importance of lenders working with their borrowers during these tough times.
Stamp duty holiday extended
21 April 2009
As part of Wednesday’s budget, Chancellor Alistair Darling is set to extend the stamp duty holiday on properties under £175,000 by a further 3 months, to the end of the year.
This is expected to be part of a £1bn package aimed at housing, details of which will follow once announced.
Source: BBC News
Negative equity growing
21 April 2009
Recent research conducted by James Tatch, senior statistician at the Council of Mortgage Lenders (CML), suggests that as many as 900,000 UK homeowners could already be facing negative equity.
Tatch goes on to explain that the majority of these homeowners may well have low levels of negative equity at less than 10%, and also points out that there is very little difference between low levels of negative equity and low levels of positive equity, as either way borrowers will find it very difficult to obtain credit.
On a slightly brighter note, it seems far less homeowners are experiencing negative equity this time round compared to the recession of the 1990′s.
New buyer enthusiasm continues
16 April 2009
The Royal Institute of Chartered Surveyors (RICS) published its housing market survey on the 15th of April and it showed that enquiries increased for the fifth consecutive month. It seems the continual fall in house prices and gradually increasing availability of funds is generating more and more interest from buyers. With the recent release of new 90% LTV mortgage loan products on the market, the opportunities are increasing for more and more people.
Conflicting house price reports
16 April 2009
The house price reports from Nationwide and the Halifax are showing very different price movements for the month of March.
Halifax’s house price index showed a continuation of the current trend with the average price falling a further 1.9%. Nationwide’s index shows that the average price actually increased in March by 0.9%. Nationwide’s chief economist Foinnuala Earley was quick to point out that one month’s figures can not be seen as real evidence that prices have reached bottom.
Base Rate held at 0.5%
16 April 2009
Last week the monetary policy committee voted to maintain the base rate at its lowest historic level of 0.5%. This was generally expected and came as no surprise to most.
The bank also pledged to continue with quantitative easing as it attempts to aid the economic recovery, having so far injected £26.4bn into the system.
Source: BBC News
Homeowners focusing on reducing their mortgages
3 April 2009
The governments decision to temporarily reduce VAT and cut interest rates had been done in the hope of increasing consumer spending in an effort to boost the economy. However, as predicted in the article The credit crunch – What on earth is that then?, with interest rates on mortgages lower than ever for many homeowners, the extra disposable income is being used to reduce their mortgages rather than for funding spending.
The final 3 months of 2008 saw homeowners reduce their mortgages by a staggering £8bn, the biggest injection of cash since 1970 according to the Bank of England.
The rising fear of unemployment, low savings rates and falling house prices eroding peoples equity, has led many to concentrate on debt reduction rather than spending. This is major change in attitudes from the days of homes being used as cash machines to fund excessive spending and holidays, with the peak of equity withdrawals being in the last quarter of 2003 when a massive £17bn was added to people’s mortgages.
Interest rates could rise sharply
27 March 2009
At a research conference today, Spencer Dale, the chief economist for the Bank of England commented to the Association of British Insurers that interest rates could be increased just as aggressively as they were cut once the economy begins to stabilise.
Mr Dale explained that the MPC made the interest rate cuts with the full understanding that they would need to be increased in equal measure to combat inflation. Stating
“The committee adjusted monetary policy boldly and decisively on the way down in order to meet the inflation target”
“And, let me assure you that, when the time comes, we will be prepared to respond with equal vigour on the way back up.”
And also commenting that he expected to see signs of recovery by the end of this year.
This may worry the large amount of households currently sitting on their lenders standard variable rate and enjoying the temporary low payments as a result. We always knew this couldn’t last forever, but the news that rates could be increasing as early as the end of this year may prompt some to start considering refinance mortgages.
Land Registry confirms house price drop
27 March 2009
According to the Land Registry, property prices fell another 2% in February, confirming what the Halifax and Nationwide have already stated.
This pushes the annual rate of decline to 16.5%, with the average property price now standing at £153,862, that’s £30,361 down in the past year (figures from Land Registry).
This is particularly worrying for anyone with a mortgage loan that was taken out within the last few years, as there is a real danger of many people facing negative equity.
Source: BBC News
New long term fixed deal available
26 March 2009
In these troubling times, as we look to the future, many of us have concerns over whether we will be able to afford our mortgages. A new mortgage product has been launched which aims to alleviate these fears by allowing you to take a fixed deal for 20 years.
The rate you are fixed at is 4.99%, which in the current climate is a competitive rate, and it comes with the added feature of being able to reassess every 5 years and if required leave with no early repayment fee. The arrangement fee is a reasonable £999 with a maximum loan to value of 75%.
This may prove popular with many the people currently sitting on their lenders standard variable rate and considering refinance mortgages, as although they may seem cheap now, they come with no guarantee that it won’t rise in the near future
Mortgage approvals increase in February
24 March 2009
Mortgage approvals for house purchases rose in February by approx 4000, over 16% up on January’s figures and nearly 28% up on December. There was a net rise of £3.9bn in mortgage lending but deposits fell for a second month.
In spite of this monthly increase in net lending, the annual net lending growth rate moved into single figures, it’s lowest since 2001. But at least more mortgage loans seem to be being agreed and things are moving in the right direction.
Fixed deals proving popular
23 March 2009
A recent report by Legal & General Mortgage Club, the fifth in their “Mortgage Purchase Index” series, has shown that 72% of residential mortgage borrowers are now opting for a fixed rate deal. This is up from 68% in Q4 2008.
It also highlights that Buy to Let mortgage borrowers are also now favouring fixed deals, with 68% now choosing to fix, up from 43% in Q4 2008.
It seems the recent rate cuts and drops in standard variable rates have lead to people choosing to overpay on their mortgage, with average loan to values on residential mortgages down to 58%, down from 66%.
New mortgage product aimed at first time buyers
23 March 2009
A major UK mortgage lender has this month launched a new product aimed at assisting first time buyers by allowing parents to help their children get on the property ladder.
This product allows the parents to act as guarantors to the mortgage loan and will allow mortgages of up to 90% LTV. The buyer can also take into account rent received from renting out a room in the property.
This mortgage product can also be used for next time buyers wanting to climb further up the property ladder but struggling with affordability, enabling parents to help in this case as well.
Increased Optimism for the housing market
19 March 2009
Optimism on the housing market is increasing according to the latest property tracker survey by the Building Societies Association (BSA). Back in June 2007 only 27% of people surveyed believed it was to some extent a good time to purchase a house. This increased to 46% in the December BSA survey and in the most recent survey increased again to 54%.
The biggest barriers to home purchases are the same now as they were in December, namely raising a large enough deposit, obtaining a sufficient mortgage & job security.
It seems the fact that property prices have fallen considerably over the last year and that interest rates have dropped has led to increased interest in property purchases, in spite of the fact that general opinion is that property prices will continue to fall. It is the current economic outlook that is still discouraging people, and it could take an improvement here before purchase figures start to dramatically increase.
Offsets are off-putting
13 March 2009
According to a popular price comparison site nearly 1.9 million people are considering the option of switching to an offset mortgage in order to take advantage of the offsetting facility at a time when interest rates on savings are particularly low.
However the majority of these individuals end up rejecting the idea as they consider it to be too complicated.
Offset mortgage products usually involve a savings account linked to the mortgage account so your savings can be offset against your mortgage balance. This can result in lower mortgage payments or paying off your mortgage earlier. However many people find the calculations of how much interest they are to pay and what exactly is involved is more complicated than the savings are worth.
CML states concerns over low interest rates
11 March 2009
New data from the Royal Institute of Chartered Surveyors (RICS) shows new buyer enquiries have increased at there fastest rate since Aug 2006, increasing for the 4th consecutive month.
However this rise in demand has not fed through to sales, with newly agreed sales and completed sales both falling. The average number of transactions per estate agent is down to 9.5, the lowest since the survey began in 1978.
Reduced mortgage options
9 March 2009
The number of mortgage products available via online sourcing system Trigold, the sourcing system favoured by 70% of mortgage brokers and showing more mortgage products than any other system in the UK, shows a staggering drop of over 28,000 mortgage products since February 2008. This is a drop of over 90% and demonstrates the changes in the industry over the last year.
On the plus side, the system shows that on average, monthly mortgage payments have fallen by £120 per month
March base rate cut
5 March 2009
The Bank of England’s Monetary Policy Committee has again decided to cut the base rate by a further 0.5% to a new all time low of 0.5%.
The chief economist of the Confederation of British Industry (CBI), Ian McCafferty comments “With interest rates already at historic lows, the conventional rate cutting tool is becoming less and less effective as a means of stimulating the economy” and “it is unlikely to have a dramatic impact on the cost or availability of credit”
His viewpoint echoes many who believe the rate cut is no longer beneficial and instead simply harms savers.
This is the 6th consecutive rate cut sine October 2008.
How the base rate has affected standard variable rates
5 March 2009
With this months Monetary Policy Committee meeting due today and speculation showing general expectations of another interest rate cut, it’s an interesting time to examine how lenders have reacted to the previous rate cuts.
Since October 2008, the base rate has dropped by 4 percentage points from 5% to 1%.
Currently, the lowest Standard Variable Rates (SVR) are with Lloyds TSB (also Cheltenham & Gloucester) and Nationwide Building Society, both with SVR’s of 3% as of the 1st March 2009. Since October 2008 that is a drop of 3.49% & 4% respectively.
Bristol & West have cut there SVR by 3.6% in the same period to a current rate of 3.49%.
Halifax, Royal Bank of Scotland & Skipton Building Society all have their SVR’s at 4% which are cuts since Oct 08 of 3%, 3.19% & 2.45% respectively.
All other major lenders have SVR’s of above 4%, with one lender as high as 7.94%
If another cut in rates takes place today, it leads one to wonder how much will be passed on and by how many.
Source: BBC News
Property price news
5 March 2009
Halifax released its latest property price date and echoed the news from Nationwide, stating that the average price of a home was down 2.3% in February.
This was back to the general downward trend of property prices over the last year as opposed to the increase that was seen in January.
HBOS housing economist Martin Ellis did however have some positive comments stating “While market activity remains at very low levels, there are some tentative signs that activity may be beginning to stabilise. The house price to earnings ratio – a key measure of housing affordability – has fallen to its lowest level for six years”.
Source BBC News
Building Societies Association fears rate cut
2 March 2009
The Building Societies Association (BSA) has given a statement calling for the Bank of England’s monetary policy committee to avoid cutting the base rate further, stating that it would actually be detrimental to both the housing market and mortgage market and also be a further blow to savers.
Adrian Coles, Director-General of the BSA stated “If the Bank of England wishes to make a contribution to a recovery in the housing and mortgage markets, it should not cut interest rates this month. We need to encourage an increase in the flow of funds into the mortgage market, not take steps that would further restrict that flow.”
Commenting on the best way to support the housing market, Mr Coles mentioned quantitative easing as the best way forward and calls on the government to fully assess the impact of its past few decisions before cutting them again
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