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Remortgages increase over February out of fear of jumping mortgage rates

[ Posted March 31st, 2011 ]

In the face of fears that interest rates will soon skyrocket causing mortgage rates to launch right along aside of them, the amount of people that choose to remortgage their homes over last month soared to the highest it has been an a 26 month period.  New figures from the Bank of England reveal that a little under 36,000 people choose to remortgage their homes during the month which is the largest amount of people to do so since December of 2008 making it a busy month for bankers even though the amount of new mortgages for the period only peaked slightly.

The jump in remortgages is thought to have been driven by reports from the Bank of England that the base rate is going to increase sharply as a response to the rate of inflation which continues to increase.  This prediction led many people who had variable mortgages to quickly head into lender’s offices in search of fixed mortgages to protect themselves from higher monthly payments.  The base rates is expected to steadily increase over the next few months leading many people into paying much more on their monthly loans which will put a strain on already strained household budgets.

Even though there was a rush of people over the month of February searching to secure their monthly payments and even some who were concerned about their commercial mortgage rates, remortgage amounts are still much lower than what was seen on a typical basis before the recession when approximately 100,000 remortgages were approved every month.  This is due to the attributed to the fact that many people do not have the credit to be eligible for a remortgage with the stricter lending terms preventing them from seeking out the remortgage that they also may be in need of to protect their investments.

February also saw a slight peak in new mortgages that were approved making it the most productive month since November of 2010, but when compared to the average amount of a stable housing market mortgage approvals are still down by about 40% of their previous standard.  Net mortgage lending was also shown to decline down to £1.2bn over the course of last month from its previous amount of £1.8bn in January although when compared over a six month period the rate is still considered to have increased.

Last year’s low mortgage rates led to large uptake in holiday properties

[ Posted March 31st, 2011 ]

While the residential housing market may still be stagnant and in a depression due to rising mortgage rates and other concerns leftover from the credit crunch, holiday homes are continuing to sell well on the market as investors are using the buy to let profits to help fund their own mortgages.  The National Association of Realtor’s 2011 survey revealed that those with the equity and investment power to purchase holiday homes at low market values are taking advantage of the stagnant market due to the potential to snag low mortgage rates for the time being to get quick profit and return on their investments.

Research from the survey revealed that 38% of all holiday home owners decided o take advantage of the momentary low drop of the buy to let mortgage rates and the overall low prices of the real estate properties.  The survey showed that the average house prices for these properties dropped by about 11.2% which can also be attributed to the amount of people forced to sell holiday properties in order to deal with the tight budget that the economy created in many households;  with the flooding of the market came the quick reduction in overall house prices.

According to the research, 27% of holiday property buyers made the purchase for their own personal use, 12% did so simply because of the low prices and the investment opportunities when the prices go back up, 11% did so due to the best mortgage rates, and the rest for undisclosed reasons.  Many people also reportedly mixed pleasure with profit as they hired the properties out to travellers while not in use to turn a profit and help pay their own mortgages but still have a holiday home to go to for a few weeks during the year.

Seven out of ten of the buyers questioned in the survey reported that rental income was a large portion of the decision to invest in holiday homes since they could hire it out while into in use.  94% of all those questioned stated that over the year of 2011 they plan to hire out their rental properties purchased last year with 60% of those stating that they think that the rental income will cover around half of mortgage on their primary residence.

Flexible but responsible mortgage laws may be on the way according to the FSA

[ Posted March 24th, 2011 ]

The FSA (Financial Services Authority) has shown initial signs of loosening up the stringent affordability criteria that lenders use to assign mortgage rates in the hope of making owning a home more affordable and practical.  The new move by the City watchdog is just one step towards its complete overhaul of the new mortgage market.

Originally the FSA stated that they would forcibly make lenders assess all mortgages based on if the borrower could afford the assigned mortgage rate based on a twenty five year repayment period regardless of the actual length of the loan or if it would be an interest only mortgage.  However, today it seems that the watchdog may be rethinking its strategy as they announced that this may not be practical since there are many individual circumstances that potential lenders face that the new regulation will not allow for.

The FSA explained that they have taken a closer look at the ‘one size fits all’ theory and realized that they need to consider how advantageous the simple approach would be when compared with the disadvantages that the inflexible plan would create.  They added that they will not be banning interest only mortgage rates as was once thought to be the case, but lenders will still have to consider if the borrower could afford a credible repayment plan before they decide to grant the mortgage.

Continuing with the development of the Mortgage Market Review, the FSA will also be placing a large responsibility on lenders to make sure that all borrowers will be able to keep up with their repayment plans against the expected rise in interest rates.  This is due to the fact that the watchdog blames poor lending practices to the major banking meltdown and the number of foreclosures that have occurred over the past few years.

In a separate report by the Bank of England referenced in the FSA announcement, it was stated that around 18% of borrowers consistently missed their monthly repayments or struggled with other bills due to the fact that their mortgages were not affordable.

CreXus revamps its commercial mortgage portfolio

[ Posted March 22nd, 2011 ]

Barclay’s Bank is looking to get rid of some of its commercial mortgage assets with an announcement this week that they will sell £360 million worth of their commercial development assets that will also include many commercial mortgage loans as well.  In all, a total of thirty commercial assets will be sold off.  Those that are sold will still be available to owners on the same terms as they are secured by the REIT (real estate investment trust) CreXus investment Corp.  CreXus is hoping that the acquisition of the development assets will help to widen their approach into the property market.

Chief executive and president for CreXus, Kevin Riordan, stated that the move will help show that CreXus is ready to jump into the property market and is able to take advantage of the many opportunities that there are for growth in terms of what is out there in the commercial mortgage market and what is out there when it comes to commercial real estate finance.  The fact that there was a buyer for the large amount of commercial properties signifies that there is hope for the real estate market after all even though many the market has been stagnant for quite some time.

There are many different properties included in the sale including some buy to let mortgage rates, hotels, retail spaces, offices, and other types of commercial properties which Riordan stated should help the company to add more diversification to its current portfolio along with some quality properties.  CreXus is not the only company to look at purchasing commercial properties in an effort to charging up their portfolio as O Twelve Estates also decided to sell off the Solar House site to make room for more promising portfolio additions showing that development within the property market may be looking up.

Mortgage rates fall as a result of Japanese earthquake

[ Posted March 17th, 2011 ]

In the wake of the natural disaster that devistated Japan and the turmoil that continues to occur in the Middle East mortgage rates dropped sharply as many investors are nervous about their money choosing to invest in bonds including many bonds that fund mortgages as these are considered a safer form of investment.  This is good news for those who are searching for a home as the prices are down for the first time in a few months making it a ripe time to try to get a foot up on the property ladder.

The drop in mortgage rates is also good news for those in a variable mortgage who have been considering changing their mortgage in an effort to take care of the security of fixed mortgages before the bottom drops out on the inflation rate which is expected to cause mortgage rates to sharply increase in the next six months.  In fact, the situation is predicted to be quite dire for those who are stuck in variable mortgages so with the current stance of the market now is the time to take advantage of the change before the world economy stabilizes again.

At the same time, interestingly enough the demand for loans also dropped as homeowners were reluctant to consider moving and buyers have been holding out unsure if a large investment is a good idea in the current economic climate.  In fact, applications for refinancing were up by about 1% while the requests for new purchase loans fell by four percent over last week which is a total decrease of almost 16% when compared to this time last year. The difference can be seen in those seeking out fixed mortgages as approximately 66% of all mortgage applications were for refinancing.

The silver lining for those who still have variable mortgages without the option to refinance is that many economists now believe that mortgage rates will take longer to rise pushing back the deadline by another few months as a result of the unpredicted earthquake and tsunami in Japan.  Now it is projected that mortgage rates will not increase until the last quarter of 2012 instead of the last quarter of 2011.

The amount of mortgage applications increases

[ Posted March 11th, 2011 ]

Last week the amount of mortgage applications filled at banks improved by 15% which is a heartening figure after months of worry over the credit crisis has kept both businesses from seeking commercial mortgage approval as well as residential applications from getting filed.  One explanation for the possible increase in applicants is the fact that the labour market is looking up briefly, even if analysts predict that it will soon take a dive again.  While unemployment looms in the future, during this brief respite people seem interested in mortgages again if the numbers are to be trusted.

Outside of applications for new mortgages, the about of people applying for refinancing loans perhaps in the attempt to get locked into fixed mortgages before the climate changes again also increased by a large 17% when compared to on a week to week basis and is the highest rate of those looking for new loan terms since the second week of January.  Still, despite the positive glow of these figures that help make the housing market look a little bit more sable when unadjusted the purchase index is still down by about 14% when compared to a year on year average for the same week.

Still, considering that the amount of applications period for mortgage rate approvals sits at their highest since May of last year; it’s still not too bad of a feat for a market that is constantly referred to as dragging.  Michael Fratantoni from the Mortgage Bankers Association stated that the job market and the mortgage market usually accurately reflect each other since the job market needs to be improving if there is to be any hope for the housing market to recover as well.  He added that lower interest rates have helped many who have been waiting for the chance to get a new refinanced mortgage at an acceptable rate.

Nationwide finding slight hope in property market conditions

[ Posted March 2nd, 2011 ]

New figures from the Nationwide building society suggest that the housing market decline in prices may finally be coming to a halt, or at least proceeding to fall at a slower rate, as the prices gently rose by .3% over the course of February.  This is good news for those who are seeking a commercial mortgage or those who are seeking a regular mortgage since both property markets have been hit hard over the last few years.  Although Nationwide is still defining the market barely holding its head above the water, the good news is that with prices finally starting to flatten they have at least stopped dropping.

Chief economist for Nationwide Robert Gardner stated that the fact that the housing prices have gently shown signs of improvement should not be too much of a surprise given the fact that housing markets tend to align with the larger economic prospects that are on the horizon.  Gardner added that with low interest rates that are making buy to let mortgage rates look a bit more desirable and the demand for homes starting to level off it is not a surprise that the housing market is showing signs of recovery finally, even if they are small.

However, the picture is not as rosy according to many commentators and economists who believe that housing prices are going to fall even more this year down by as much as ten percent combated by a sharp rise in mortgage rates. Gardner debated this point of view however by stating that while there will be a low level of final housing sales and the restricted mortgage approvals the price of houses will actually start to rise due to the restricted amount of buyers allowing the market to be a bit more competitive.

He explained this theory further by stating that lenders rationing their mortgage funding is beneficial in the long run.  He calculated that on an average salary if a person saved about 15% of their take home income then it would be eight years before they could make the required deposit on a home which would mean that the amount of buyers would be low.  However, in order for prices to stay down sellers will also have to remain low with many holding on until the prices look better.

 
 
 
 
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