Mortgage News

RBS to commit to a boost in mortgage lending
27 February 2009

As part of the government's strategy to enhance financial stability and increase lending to homeowners and businesses, they yesterday announced the introduction of the asset protection scheme, aimed at increasing confidence by reducing uncertainty about banks' asset valuations and cleaning up balance sheets.


The Royal Bank of Scotland (RBS) is keen to take advantage of this and as part of the deal will commit to lending £25bn, with £9bn of that aimed at homeowners.This follows the news that Northern Rock is committing to lend £14bn over the next two years and Lloyds Banking Group are also to pledge billions of pounds for extra mortgage lending.

Source: www.introduceruk.com

House prices still falling
27 February 2009

In spite of last months surprising increase in average house prices, February has seen a return to the expected fall of prices.

Nationwide's house price survey shows a drop of 1.8% in February, meaning a 17.6% drop in the last 12 months and a giant 20.6% from their peak in October 2007.

The Nationwide figures for actual average price differ to that of Halifax, although both show a similar pattern. Nationwide are now showing the average house price in the UK at below £150,000, which is similar to levels of May 2004.

It seems that the increase in buyer enquiries in estate agents, possibly due to lower mortgage rates and house prices, isn't leading to increased purchases as buyers continue to hold off with expectations of further falls.

As our latest article shows, similar banking crises in the past have resulted in house prices dropping on average 35% from peak to trough during the crisis, which leaves scope for another 10% or so.

Source: www.ft.com

Mortgage lending increases
26 February 2009

According to figures from the British Bankers' Association (BBA) net mortgage lending rose in January by £2.9bn.

David Dooks, statistics director for the BBA explains the growth stating "lower borrowing costs and falling property prices have underpinned demand".

www.bba.org.uk

Lloyds to increase mortgage lending
24 February 2009

Lloyds Banking Group is set to pledge billions of pounds for extra mortgage lending in return for the government dropping its £480m interest bill.

The government is keen to find quantifiable ways of ensuring increased lending and is prepared to convert £4bn of preference shares if the bank will commit to increasing lending in a bid to combat the recession, which is somewhat fuelled by the lack of availability of credit.

This comes just days after Northern Rock announce plans to increase mortgage lending to £14bn over the next two years, confirming that the government sees the mortgage industry as key to steering the economy through these turbulent times.

Source: www.ft.com

Councils hit by development slowdown
24 February 2009

Councils could find themselves with a loss of £6bn in contributions from property companies due to a slowdown in development caused by the current economic crisis.

The official target of 240,000 new homes to be built in 2009 is likely to be nearer to 80,000 with many housing projects ground to a halt due to lack of finance.

Local councils generate income from developers by giving planning permission in return for affordable housing and monetary contributions, so the slowdown in developments will have a direct effect on their income.

Source: www.ft.com

We do like to live beside the seaside
24 February 2009

Halifax has published findings on the locations home movers tend to be heading for and has found that many are heading towards the coast.

It seems city dwellers tend to only want to live in urban areas for a limited time, with the 10 areas to show the highest outflow of people being Birmingham and 9 parts of London. Coastal areas such as Cornwall are proving rather popular with many wanting to leave the stress of the city behind and enjoy a better quality of life by the sea.

Source: www.moneynews.co.uk
 

The end of 100% mortgages?
23 February 2009 

Prime Minister Gordon Brown has called for an end to 100% mortgages and a return to more prudent lending practices in the wake of the financial disaster associated with such loans. The suggested ban is designed to minimise the chances of another property price crash and the Financial Services Authority (FSA) has been asked to look into the proposal of banning these loans.

This has led to several comments pointing out that it was while Gordon Brown was Chancellor that these high loan to value mortgages were taken up by thousands of individuals and that his call for a ban has come at a time when such mortgages no longer exist anyway.

Many first time buyers are disappointed by the proposed ban as they were waiting for the return of these products to get themselves on the property ladder.

The Council of Mortgage Lenders (CML) questions the policy, pointing out that any policy regarding such loans should, amongst other points, not ignore the fact that many people top up there mortgage borrowing with second mortgages and unsecured loans at much higher rates.

Source:
www.guardian.co.uk
www.cml.org.uk

Government under pressure over house building
23 February 2009

The newly formed 2020 Group, made up of the National Housing Federation (NHF), housing charity Shelter, the Local Government Association (LGA) and the Trades Union Congress (TUC), have called on the government to increase funding for housing in an attempt to build the country out of recession, suggesting an injection of an extra £6bn is required.

They argue that there is a need for 100,000 new affordable homes over the next two years and that investment in this area would bring substantial benefits to the economy in terms of saving jobs in the construction industry and the increased amount of taxation that this would bring, enabling continued investment from developers, creating more jobs and increasing apprenticeships which will prevent the loss of key skills in this important area,

The Royal Society of Chartered Surveyors (RICS) echoes these comments, with a RICS spokesperson stating that a failure to act by the government will result in "serious undersupply problems" in the housing market in the near future as the current economic situation is "making it almost impossible for developers to get the loan finance needed to deliver the UK's housing needs for the future"1.

Sources:
www.rics.org
http://news.bbc.co.uk
1. www.introduceruk.com

Northern Rock to increase mortgage lending
23 February 2009

Northern Rock is looking to increase its presence in the mortgage market with plans to make up to £14bn in new loans over the next two years, including loans of up to 90% loan to value (LTV).

This is great news for potential mortgage borrowers as currently only one lender offers 90% LTV mortgages at much less than 7%. Hopefully Northern Rock will release some competitive products which may in turn increase the level of competition in a currently somewhat sluggish mortgage market.

The new plan is to be funded by further government money, deposits and repayments from currently existing loans.

The Council of Mortgage Lenders (CML) has stated that they are pleased with the announcement with CML director general Michael Coogan saying "anything that improves the supply of lending is a positive"1.

Source: BBC news
1. www.cml.org.uk

The effect of the base rate cuts on mortgage rates
18 February 2009

Although many of the larger lenders have been passing on the base rate cuts in full via their standard variable rates (SVR), the average SVR has not moved as much as might have been hoped for.

The average SVR on the 1st January 2009 was 5.14%, after the January 0.5% base rate cut, the average SVR on the 1st February 2009 was 4.99% and after the February 0.5% base rate cut, the average SVR now stands at 4.83%. So since 1st January the base rate has fallen by 1% yet the average SVR has only fallen by 0.31%.

If we compare this to the fall in the average 2 year fixed and 2 year tracker rates, a fall of 0.58% & 0.49% respectively, it could be argued as a sign that lenders are not particularly keen for borrowers to sit on their SVR but would rather encourage them to opt for a new deal.

However it is interesting to note that none of the various types of rate have fallen as far as the base rate, and each subsequent cut in the base rate seems to be having less of an effect on average mortgage rates. Again leading one to question the value of further base rate cuts.

Source: www.moneyfactsgroup.co.uk

Home improvements proving popular
17 February 2009

A report from Sainsbury's Finance estimated that approximately 425,000 loans were taken out during 2008 for the purpose of home improvement which is an increase of 53% from the previous year.1

This is an interesting statistic that demonstrates the changing attitudes of consumers since the credit crunch kicked in and mortgages became more and more difficult to obtain. Rather than letting the feelings of dissatisfaction with their current home lead to them moving to another one, people are now improving the current home instead.

If we look at a typical example and analyse the costs, it is easy to see why some people may be tempted.

Let's assume a current home to sell valued at £250,000, and a new home you wish to purchase valued at £300,000. (Perhaps a nicer location or larger property).

The costs to moving could involve the following:

Estate agents fee @ 2% of sale price = £5,000

Home information pack = £400

Stamp duty on purchase @ 3% = £9,000

Solicitors fees = £1,500

Valuation fee = £500

Mortgage lender product/arrangement fee = £100

Removal costs = £600

Total £18,000

Its easy to see why, with nearly £20k in costs to move house, not to mention the stresses and strains involved, combined with the difficulty in obtaining a mortgage, some individuals would rather improve their current home than find a new one.

Obtaining a home improvement loan can be quite easily achieved at reasonably competitive rates by securing it against your property in a similar manner to your mortgage. This can be done either via a further advance on your current mortgage, by increasing the loan size when you remortgage or by obtaining a secured second charge loan. Any of these options could allow you to create the feel of a new home whilst avoiding the hassle and costs of actually moving, and also increasing the value of your home.

www.sainsburysbank.co.uk

Property asking prices increase
16 February 2009

According to rightmove asking prices for new properties coming on to the market over the last month are on average 1.2% higher than the previous month. That’s an average of £2,953 above last month's average.

This is further evidence of consumer optimism in the housing market, but to put it into perspective, asking prices have dropped approximately 10% since the peak of the housing market, while prices achieved are closer to 25% below the peak prices.

www.rightmove.co.uk

And some positive news
12 February 2009

Rightmove.co.uk released it’s consumer confidence survey and revealed some positive results for the housing market.

Over 28,000 people responded and many were surprisingly upbeat with an intention of purchasing a new home over the coming year. Almost half stated they plan to buy in the next 12 months with two thirds believing it is a buyers market.

Rigtmove.co.uk also echoed the comments of others situated within the housing market by stating that they have seen an increase in general interest in house buying over the month of January.

www.rightmove.co.uk

Negative equity threatens up to one fifth of UK mortgage borrowers
12 February 2008

A recent survey by fairinvestment.co.uk found that up to 21% of mortgage holders in the Britain could be due to face negative equity. A survey of 2000 people in the UK found that 3% had borrowed 125% loan to value (LTV), 5% had borrowed between 101% & 125% LTV and 15% had borrowed over 90% LTV.

These figures highlight the potential danger faced by people in the current financial climate, with house prices still facing potential falls.

Those who aren't planning on selling any time soon will hopefully be able to ride out the storm until the market makes a recovery. However these figures should emphasize the importance of finding the best mortgage deal possible, as if your mortgage becomes a burden, it is not as easy to sell up and walk away as it has been over the last few years.

If your current deal is due to expire, it is vital that you contact your mortgage broker as soon as possible to ensure you get the best advice possible.

www.fairinvestment.co.uk

Buyer interest yet to lead to increased purchases
10 February 2009

Although buyer interest is up in the housing market, and has steadily increased over the last 3 months, this interest is yet to transfer into an increase in actual purchases, with the average number of transactions per agency holding steady over the last 3 months, currently at 9.9, according to the Royal Institute of Chartered Surveyors (RICS).

RICS spokesperson Jeremy Leaf says “The latest survey provides further evidence of the eagerness of buyers to try and pick up bargains."

With current economic difficulties, some optimistic news is most welcome. At least the increase in buyer interest shows a slight boost in confidence and hopefully this interest, combined with the falling base rate and the government's loan guarantee scheme for banks, will lead to an easing of credit markets.

www.rics.org

Renewed interest from first time buyers
9 February 2009

The National Association of Estate Agents (NAEA) has stated that the number of first time buyers (FTB) looking to purchase a home has increased considerably in the first two weeks of 2009. 22.5% of registered buyers were FTB, up from 10% in December 2008.

Although this shouldn't be taken as a sign that the housing market is entering a recovery, it is certainly a positive note and can be seen as a sign of increased consumer confidence.

www.naea.co.uk/

Another base rate reduction
5 February 2009

The Bank of England today reduced the base rate for the 5th consecutive month. This month the ½% reduction brings the base rate to a new historic low of 1%1.

Adrian Coles, the Director General of the Building Societies Association (BSA), is one of many who feel the rate cut is a mistake, calling the decision "an assault on savers". He also claims that the decision will have a detrimental effect on mortgage lending, particularly affecting the flow of funds in to the mortgage market through a drop in savings, therefore making it even more difficult for new borrowers to obtain the funds they require.2

This will be at odds to anyone currently on a tracker or variable rate mortgage, who will be more than happy if they see their mortgage payments go down. So far Lloyds TSB3, Halifax3, Woolwich4 & Nationwide5 have all promised to pass on the full ½% cut to all of their variable rate mortgage customers.

Nationwide however, have enforced a tracker floor of 2%, meaning customers who reserved a mortgage before 6th November 2008 on a tracker rate will not feel the effects of base rate cuts below 2% It should be noted however, that the floor originally stated was at 2.75% and this had previously been waived.5

1. www.bankofengland.co.uk
2. www.bsa.org.uk/
3. www.moneynews.co.uk
4. www.woolwich.co.uk
5. www.nationwide.co.uk

Base rate cut yet again
5 February 2009

The Bank of England base rate has been cut to 1% today. Hopefully we will see funding cost reduce and fixed rate mortgage rates begin to fall once more.

A positive start to the year for the housing market
5 February 2009According to the Halifax House Price Index, there was an increase in the average UK house price in January this year. The average price increased by 1.9%, to an average of £163,996. However, Halifax were quick to point out that it is important not to place too much weight on any one month's figures, and they still expect 2009 to be a tough year for the housing market.

1.www.hbosplc.com