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Lending falls by 10% on year and year average for both fixed mortgages and variable

[ Posted April 28th, 2011 ]

Although the housing market has not yet been officially deemed stalled again, it is showing signs of returning to pre-recession levels with new figures released from the British Bankers’ Association that show year on year there has been a 10% drop in lending.  In March of this year mortgage lending by banks fell by 11% when compared to March of 2010 totalling up to only £7.7bn which is also lower than the last six month average of £7.9bn.  Also falling were mortgage approvals which also casts doubt into many people’s minds that are already frightened by the potential for an increase in mortgage rates.

Overall the mortgage approvals for March were slightly higher than the month before, but when compared to March of 2010 were still down overall by 10% as well.  Even those seeking remortgage approvals were out of luck last month as the number of approved remortgages fell by 7% in March compared to the previous month even though they were higher than in March of 2010.  These figures are not only for the residential market, but also affected those who hold a commercial mortgage.

Another piece of bad news for home owners is the fact that the BBA reported that the average house price has now fallen by about .5% when compared to 2010.  CEO for Crown Mortgage Management, Eric Stoclet, stated that approvals have fallen by about 11% based on year by year figures which will start to affect growth figures over the next couple of years.  Stoclet added that annual prices were static for awhile during the recovery from the recession, but now that mortgage rate approvals have started to quiet the price growth drops may drag the housing market back into a double dip recession.

Stoclet continued to emphasize that this will be a large problem over the next six months due to the expected rise in the bank interest rate and the increase of unemployment over the next two quarters of the year.  If both of these impacts are as harsh as predicted, mortgage lenders will continue to be tentative turning down previously qualified homeowners which will drive down the housing market even more and possibly hurting the banking industry again in the coming months.

Banks nervous that home repossessions will increase over the next few months

[ Posted April 26th, 2011 ]

The Council of Mortgage Lenders announced tentatively to home owners that they may not be able to keep the number of repossessions and arrears down when compared to last year’s figures.  Over the course of last year the CML stated that repossessions decreased down to 36,300 when compared to the 47,7000 repossessions of 2009.One of the reasons that many with fixed mortgages were not affected is due to the fact that the Government stepped in to help prevent evictions except for in worst case scenario situations.

This helped to keep the numbers down over the course of 2010, but now the CML believes that the amount of repossessions will increase again back up to approximately 40,000 which will match figures from the credit crisis during 2008.  The rise in repossessions is being blamed on the Government cuts, the weak economy, and the overall rising expenditures of living as a result of inflation.  The expected rise in the bank interest rate that will impact mortgage rates is also expected to hurt those with variable mortgages and increase the likelihood of forced repossessions of arrears as well.

In its annual report the CML stated that they are not sure that the repossessions and arrears will be avoided during the course of 2011 because all of these factors will have a large impact on borrowers’ finances.  Adding to the problem is that most of the Government programs that were quickly devised to help those drowning get back out of debt.  One of the largest programs that ended on April 21st is the Government’s Homeowner Mortgage Support Scheme that helped homeowners facing income loss reduce their monthly payments for two years.  However, with the end of this program now homeowners that are not recovered will have to make the higher payments leading to potential problems.

Outside of the fact that the CML expects to see more repossessions, they also expect to see an increase in those who get behind in mortgage payments by about 10,000.  The agency added thought that they will continue to work with those who have buy to let mortgage rates, home mortgages, and even commercial mortgage rates to help them work through troubling times and hopefully minimize the chances of repossession or mortgage arrears in the coming remaining quarters of the year.

March figures signal that it may be too early to panic and sign into fixed mortgages

[ Posted April 22nd, 2011 ]

Fixed mortgages saw their product purchases drop back down to 49.9% over the month of March following the February peak of 56% according to a new index survey conducted by John Charcol.  Also revealed in the survey is the fact that 17% of all mortgage applicants and clients choose to sign into a fixed rate mortgage during March of 2010 and this proportion has been steadily increasing as mortgage owners and new potential mortgage owners are all in fear of the supposed base rate hike which caused the amount of those seeking fixed rate mortgages to jump up to 32.3% in December and then farther up to 56% in February.

One of the reasons that fixed mortgages may have started to decline in popularity during last month according to Ray Boulger, the John Charcol senior technical manager, is due to the fact that many borrowers are leery of the high prices attached to them.  Although the base rate is still a threat to anyone seeking out a commercial mortgage, residential mortgage, or any other type of mortgage as the impending predictions have not yet come true some mortgage purchasers are beginning to think that the risk may be worth it.

Ray Boulger continued to explain that the small decrease in the March consumer price index helped to take some of the pressure off of the Bank of England to increase their base rate and with the economic growth continuing to progress at a slow rate there may be more signs that tracker mortgages are not such a large risk.  He added that one of the influential factors in the base rate decision will be the estimates of the first quarter GDP and whether or not they reveal any growth or if the numbers continue to negative.

If the GDP still shows a negative number signalling that the economy has not recovered as much as some analysts believe, then the base rate may sit at .5% for a bit longer keeping the mortgage rates at bay as well.  In fact, some mortgage lenders are even dropping their fixed mortgages down a bit in order to encourage mortgage holders to continue to come in and switch to the more expensive but safer route.  Boulger mentioned however that in this one case the housing market may be running ahead of itself getting into a panic before warranted.

Top lenders are slashing mortgage rates

[ Posted April 20th, 2011 ]

Two of the largest mortgage banking lenders are dropping their interest rates and mortgage rates in an attempt to get homebuyers back into their doors as the competition for qualified mortgage applicants.  As the home buying season starts up again in April the Skipton Building Society started off the season by taking off .5% of their points on the interest for both five and three year fixed rate mortgages.  The society also decided to drop their tracker mortgages as well.

The decrease means that some homeowners will see a decrease in mortgage rates on mortgages that are valued to be worth at least £200,000.  While monthly the change will only result in about a £50 saving on repayments based on the above mentioned average mortgage price, yearly this will result in a £626 savings on interest.

Not to be outdone, Barclays also has announced that they will reduce their mortgage rates on their fixed mortgages and on their Woolwich tracker mortgages by a total sum of .32 points.  Other leading mortgage lenders who are tossing their hats into the ring as well include Halifax and Northern Rock where rates have been dropped on their three and two year fixed buy to let mortgage rates by as much as .4 points depending on the value of the mortgage and the qualifications of the applicants.

The news that so many large mortgage lenders have decided to drop their rates means that the other high street lenders will likely soon lower their rates or offer special incentive deals in an attempt to get home-buyers to take a second look at them as well.  Experts in the mortgage industry claim that the high end lenders decided to drop their rates as a response to the negative film coating the mortgage industry due to the expected rise in the Bank of England interest rates.

The large jump in the base interest rate is predicted to jump by .5% as early as next month although other experts believe that the jump may not actually occur until next year due to the fact that inflation has not been as strong as most people predicted.  Senior technical manager from John Charcol the mortgage broker, Ray Boulger, stated that there is a reasonable chance that fixed mortgages will drop down under 4% which is something that has not been present in the market for at least six months.

Risk of high interest rates hurting the residential and commercial mortgage market

[ Posted April 15th, 2011 ]

The continual risk of interest rates rising is hurting both the residential and commercial mortgage market as many are afraid to sign into a new mortgage due to the threat that it soon may balloon outside of their budget.  It seems that no sooner had the Mortgage Backed Securities industry adjusted to its credit losses that it was hit with the potential for the a large hike in the interest rates which was an equally damaging blow for banks that depend on mortgages to help keep their numbers balanced.

An example of the realized threat can be found by looking at an unhedged Fannie Mae mortgage backed security which when based on a 30 year fixed rate would typically have a 3.5% pass through chance and cost the average loss of about 9% in price over the following months in terms of market value of the investment.

However, before the crisis hit this same MBS would only carry .25% risk in losses which makes the risk s of lending even more noticeable and dangerous to banking investments throughout the country even in terms of fixed mortgages. The would only get riskier when borrowers are unable to refinance their mortgages and are left hanging in the lurch with variable mortgages that they are forced to default on.

In order to counter this risk, most MBS investors are expected to start asking for larger yields on their investments in order to make up for the threat of the higher interest rate which will mean that mortgage rates will jump once again leading more new homeowners to be left out in the cold in terms of the affordability of owning their own home.  As the scenario loops back around, this will mean less mortgages for the banks to invest in as a result causing the mortgage rates to once again heighten leading to one large loop that is likely to end in a housing depression where everybody gets hurt.

Unfortunately, as the average mortgage holder cannot manage to the new terms with the cost of living increasing, inflation on the rise, and wages staying steady and the banks cannot afford not to increase rates an easy solution to the eventual housing collapse once again does not seem to be in sight.

Despite the threat of high mortgage rates, mortgage applications increase in March

[ Posted April 13th, 2011 ]

Although the threat of higher interest rates and thus higher mortgage rates continues to linger over the mortgage industry March saw an increase in the amount of people applying for mortgages.  Overall in March mortgage applications jumped up by 11.6% when compared to February and when compared to the year on year change seen since March of 2010 was up by almost a full 20%.  While this can be seen as good news, most likely the surge is the result of consumers attempting to beat the anticipated increase in interest rates which will negatively impact the housing market.

Unsurprisingly, the majority of new borrowers that applied in mortgages over the course of March chose fixed mortgages with almost 80% of all new applicants choosing to take fixed rate deals; which is about the same ratio that was seen in February.  This overwhelming sentiment proves that more consumers are now thinking about the long term ramifications of their borrowing and that the short term gains of a variable mortgage is no longer in anyone’s best interest except for perhaps the banking industry.  Although when compared to the potential for default, even the banks are likely to prefer to see individuals taking the fixed rate mortgages.

The average loan amount requested in mortgage applications for March also increased slightly by about 3%, compared to the previous month; coming in at £127,500 on average over the £123,500 seen in February.  On the other side the average mortgage application LV dropped down about 2% compared to the previous month sitting at just under 70% and the average deposit stayed about the same at a little under £50,000 for fixed mortgages and tracker mortgages alike.

On the other side of the coin, remortgage applications fell by about 2% during March although the numbers are still a full 32% higher when compared to March of 2010 offering hope that the housing market has still improved quite a bit since the credit crisis.  Those seeking remortgages also choose fixed mortgages over the variable rate counterparts with the average loan size for remortgages dropping by about 7% down to approximately £132,000 instead of the £142,000 that was requested during February.  Overall, the age of the average mortgage applicant during March was 37.

Rise in interest rates may lead to a sharp incline in mortgage rates

[ Posted April 8th, 2011 ]

With many people worried that the Bank of England will soon raise its interest rates many people are worried about what will happen to mortgage rates which are already a bit unsteady in a shaky marketplace that has been rocked time and time again since the recession.  It seems that with every bit of news that may indicate that property is starting to stabilize there is another report about the property market that undermines any small amount of growth such as the recent news about falling house prices and a poor overall uptake in many urban communities.

It is not only those with home mortgages that should be concerned however as a rise in the interest rates may also mean a rise in all types of different mortgages such as a rise in commercial mortgage rates as well which could once again cause development to stall.  During the last few years, development of new office space and businesses all but came to an abrupt stop; which contributed to the high unemployment rate and hurt many independent contractors and those within the construction fields.  Therefore, there is much more potential harm in store outside of within the home housing market if the interest rates hike again.

If interest rates do increase it is a safe bet that the best mortgage rates are going to see dismal compared to what people are used to now and those with variable mortgage contracts will be hurting the most as their monthly payments will drastically increase.  This is one reason why so many people have been taking advantage of the opportunity to remortgage their homes in exchange for fixed mortgages in an attempt to get out of a potential mess before the bottom drops out of the housing market once again.

Although most analysts are predicting that it will be six months until the mortgage rates once again increase, the housing market is heavily entwined with the economy and if the threat of a double dip recession continues to hang in the air than no safe assumption can be made about the next sudden drop in property worth and mortgage value.  For this reason, the expected increase in interest rates may be more deadly to the ordinary home owner than the Government is letting on as it continues to tackle its own debt via budget cuts and public service cuts.

As house prices continue to slow signs are arising that the crisis may be over

[ Posted April 6th, 2011 ]

Although they are only small signs, there are a few notes that have led some analysts to predict that house prices may finally be slowing down in their decrease which will hopefully remain the same even if mortgage rates jump up in the next six months.  Two surveys from property market analysts show that the crash of house prices is finally starting to bottom out and ease up meaning that eventually prices may start to rise again having hit rock bottom with no direction left to go.

One of the surveys conducted by Daft.ie reported that asking prices for the year were down by about three percent during the first quarter of 2011 compared to the first quarter of 2009 which is still a small decline when compared to the way that prices have fallen since the property crash started in 2007.  While most people would not consider smaller drops to be a positive sign, for those who are hoping to make a good sale of their home while the mortgage rate is still down this could be good news.

Those with fixed mortgages will be more likely to appreciate this news since it means that they will not have to worry about the increase in mortgage rates but can benefit from the fact that finally their homes will stop falling in value.  Another survey conducted by MyHome.ie that looked at the Dublin area also found that while prices dropped in the area over 2009 when compared to previous years it was still the lowest fall seen annually since 2007.  Since the property crash began the national average home price has dropped by a total of 43% with the average home price standing still somewhat at 210,000 euro.

At the moment the average time to complete a property sale stands at nine months which is the same as it was in 2008-2009 which is encouraging news for property investors.  Within the main cities of the UK home prices only fell by a little under three percent as well making it their smallest reported decline as of yet as well which may help boost the confidence in the commercial development market and bring many developers back into the market to secure a commercial mortgage.

 
 
 
 
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