At the close of last year, many mortgage experts were predicting that mortgage rates would start to steadily increase and as the fourth quarter progressed most of the larger banking and lending institutes had already started to slowly increase their rates. This made many analysts concerned that first time home buyers would continue to get shut out of the mortgage market and that the housing market in general would stall again as customers found that they had no other offers on the table.

However, just this week a few of the major lenders have actually reduced their rates, breathing some fresh air into the mortgage industry. Co-Operative made headlines this week by slashing their fixed mortgages by as much as sixty base points, offering those who have not yet remortgaged a shot at getting some great rates before they actually do increase.

First time buyers can also benefit from the high LTV’s that many thought would disappear as it offers them a chance to get onto the market without a large deposit. In some cases, there are even some high LTV’s that do not have any fees attached to them making a home purchase seem a bit more practical.

Included in the discount are fixed mortgages that feature a twenty base reduction with an 85% LTV. The new rates for these are 3.79% or 3.99% depending on whether the loan applicant can afford to pay the £999 product fee or not.  Head of mortgages James Hillon for Co-Operative Bank stated that in the wake of the eurozone crisis there are many lenders that were quick to increase their mortgage rates, but their banking institute is committed to going against the wave and instead helping to build the housing market back up.

Hillon added that outside of lowering their mortgage rates, they also have many different LTV’s available to help all types of home owners get back into the market.  Some of the offers do not even have fees with slightly larger rates instead, to help those who cannot afford the upfront costs of securing a mortgage.

Most of the three year fixed rates offered by Co-Operative have dropped from ten to fifty base points with one 90% LTV coming in at 3.89% which, for the current state of the mortgage market, is a reasonable deal.  Nationwide also announced similar deals this week that have made consumers evaluating their options.

At a time when most experts are concerned about mortgage rates increasing LV, the equity specialist, has announced a move that has shocked many people. The firm announced this week that they would drop their lifetime mortgage rate for customers that are under the age of eighty that are interested in signing up for a long term mortgage.

Given the current state of the mortgage market, and the shaky ground that it is now teetering on as a result of the Eurozone debt crisis and inflation, signing into a long term mortgage is a good way to find financial security.

LV announced its best mortgage rates for those that are interested in flexible and lifetime mortgages at the start of the week.  A standard rate change from the company includes a drop down to 6.49% from 6.59% for a lifetime mortgage for someone that is between the ages of sixty to eighty.

Those that are interested in a standard flexible lifetime mortgage will find that the rate from LV has dropped from a high of 6.79% down to 6.69% with qualifying credit for the mortgage agreement. Vanessa Owen, the head of equity release for LV, stated that the company feels that when this offer is combined with the equity specialists already low rates then their products will become a strong choice for clients and advisers who are searching for good deals.

Lifetime mortgage products are usually sought out by those who have reached retirement age and want to fix their monthly bills so that their spending is controlled on a regular basis. Although this type of mortgage does not allow for market changes that could produce lower mortgage rates down the line, it does offer a sense of security against future market shifts that could adversely affect a pensioner on a fixed budget.

LV also announced in November the launch of a new product called the Pension Income Plus Annuit,y that allows customers who have a high income upfront to purchase a home with lower income in the future, accounting for such as those who receive large upfront annuities.

This allows for careful budgeting to make sure that a home mortgage remains affordable even as they continue to age and slowly find that their income is not as high as it used to be back when they originally secured the mortgage.

House prices are expected to continue to fall throughout 2012 as a result of the poor economic state and the fact that the eurozone crisis will place tighter restrictions on banks as they choose who to lend to.  Many different estate agency groups are already predicting that there will be declines across the housing market next year, with Knight Frank estimating that overall house prices will fall by about 5%.

Hamptons International, however, is a bit more optimistic predicting a 2% fall. As mortgage rates continue to increase this will also hurt the housing market as less people will be heading to their lenders for remortgages, which was the backbone of the mortgage lending activity this year.

Property experts are expecting the overall demand from homebuyers to also fall during the coming year which will decrease the amount of housing transactions that are completed. Nigel Bedford from largemortgageloans.com stated that the underlining message to be heard about the property market this year, and the state of the average mortgage rate is that the uncertainty that is effecting the economy in the UK, and globally, is going to be reflected in an uncertain housing market as more people are concerned about acquiring any more debt.

Outside of the average home owner, mortgage brokers are also worried about how the sovereign debt crisis from the eurozone is going to affect financing for those who are interested in acquiring a commercial mortgage, or those who are concerned about buy to let investments.

Overall, the higher costs of wholesale lending known as the Libor, is expected to continue to increase which will cause rates in turn to also continue to increase.  As most budgets are already quite tight, the jump in mortgage rates could cause problems for homeowners that did not switch to a fixed deal while the rates were down.

John Charcol mortgage broker Ray Boulger stated that he thinks that the lending costs for banks will continue to increase over the year until some type of resolution is found for the eurozone debt crisis. Until this point is reached he stated that banks will be forced to reduce the amount of new loans they make over the course of 2012 and will have to attach higher lending rates to those that they do complete, hurting both the average consumer and the housing market.

Even though many people are noticing that the mortgage rates are starting to increase as a result of the Euro zone crisis and other factors, there are still some great deals out there for those that can afford a deposit on a home.

Therefore, even though the same flat rate deals may no longer be on the market now is still a great time to take advantage of a deal that can help make owning a home cheaper in the long run. However, now is the time to act as prices will only continue to increase as time continues to pass.

One of the newest deals to hit the market this week is from Leeds Building Society which just announced new deals for those in search of fixed mortgages that are tied to a three year term.  As part of their new deal the lender announced that it will take off its £800 closing fee and offer consumers a free valuation of a home that is worth up to £335 for any lender that is taking out a loan.

The building society will also offer those that work with it free legal services for all remortgages, making it an attractive time to stop in and see what they can do for you. Homebuyers will be pleased to see that the three year fixed mortgages come attached with rates as low as 3.04% and increase upwards to 3.99% depending on the LTV that an interested consumer is able to afford, along with their credit worthiness.

Sales and marketing director for the Building Society, Kim Rebecchi, stated that they are happy to start 2012 off on the right foot with deals for those who want to buy a home or help for those who want to refinance their home at a better rate. Rebecchi also said that the products that have their fees reduced or removed are great choices for both those in the market to remortgage and for those who want to purchase a home for the first time.

At the beginning of the month Leeds Building Society also announced a new shared ownership deal for first time home buyers that need help getting out there on the property market which can be an excellent option for those struggling to meet the high demands of a standard LTV in today’s housing market.

This week, the Financial Services Authority took an opposite stance to the one made earlier in the year in which they said that they would require intermediaries to find out why any mortgage application was rejected. The FSA first stated at the start of the year that if one of the low rate mortgage rate applications was rejected intermediaries would be required to find out why the application was not approved, but a new 168 page guide that came out today said that this is not a requirement anymore.

The guide is focused on financial crime which has been on the rise this year with end of the year surveys showing that mortgage fraud is on the rise along with the fall in mortgage rates. The watchdog organisation stated that that it is not possible for lenders to publish this information to all intermediaries because in some instances they may question the good will of the intermediary and need to withhold this type of information.

Therefore, it is not possible to mandate that all mortgage rejections be explained fully to the intermediaries that are acting on a mortgage applicant’s behalf. In regards to the explanation of why fixed mortgages may be rejected, the FSA stated that they realise that finding out the reason for mortgage rejection may be a good tool in preventing fraud, but there are many problems that intermediaries can get into by using this small piece of good practice.

Therefore, the organisation decided that it is in everyone’s best interests simply to remove the stipulation from the law. The FSA did add that they do still believe that intermediaries and lenders should work together to change the way that they share information but a mandate in this case is the not the best way to proceed.

Mortgage approvals have actually increased this year compared to last year’s year end average, due partially to the sharp decrease that mortgage rates took over the past year and the banks’ competitive pricing plans. However, as the market becomes unstable again the rates are beginning to inch back up and it is expected that the next year may return to previous harsher standards for those seeking out a first time home mortgage or other type of mortgage approval.

The average rate for fixed mortgages set on a long term basis dropped by about 4% this week; weighing in at about 3.98% on average this week.  Home owners that are looking for the security of a fixed mortgage long term due to the uncertain economic situation in the EU would do well to take advantage of the rate as mortgage rates in general have been increasing this week and slowly over the last month as it seems that the housing market may have reached its final low.

This is good news for those willing to sign into a long term mortgage and good news for the Housing Secretary who has been asking banks to consider offering more long term fixed mortgages in response to the economic uncertainty that has kept many first time home buyers from purchasing a home.  However, despite this fact, evidence still proves that most home owners do not like the idea of making such a long term commitment when the housing market is so unstable that standard variables look like the best option to most home owners who are contemplating how to get the lowest rate on their mortgage.

In fact, outside of two weeks over the course of this year the average mortgage rates have sat below five percent making this a great year for taking out a low interest mortgage.  A combination of factors have kept mortgages low including the economic recession, the low home buying ratios, the low Bank of England base rate, and the fact that banks have had to heavily compete for the small amount of mortgages that they actually gave out this year.  In fact, this year will possibly be the worst in terms of home sales in the past twenty years.

Yields fell farther this month and week as most investors are choosing to move their money into different treasuries amidst fears that the economy is going to fall into a double dip recession, the uncertainty of the stock market, and the debt crisis in the Eurozone.  Low unemployment rates, increased redundancies, and the high deposits needed in order to secure a mortgage have also kept many first time home buyers from buying a home which has in turn turned the housing market in the UK into a rental market making it harder for banks to lure consumers into a long term mortgage.

While the old saying denotes that the castle of an Englishman is their home, the UK has a problem with house price inflation because house prices have risen exponentially year over year up until the recession making the housing market prime for those who made their purchases at the right time but horrible for those who were not able to secure the best mortgage rates. As the housing prices continued to increase people got used to spending and borrowing well beyond their means, a behavior that single handedly caught up with Britain causing a recession in all definitions of the word.

Most people are quick to blame the recession and the banks for the poor housing market that exists now, but most people do not take into account the fact that the UK had the second to largest LTV ratio of any developed country before the credit crunch and ensuing financial crisis occurred.  It should have come as little surprise that first time buyers with 125% mortgages found themselves with negative equity when house prices crashed, but it should come as a surprise that we considered this unsafe form of lending to occur.

Now, the nation is faced with thousands of people rushing to get fixed mortgages to avoid rising mortgage rates again and thousands of other people homeless that lost their homes during the recession.  The even worse news is that as house prices start to edge back up it is expected that many more people will lose their homes due to increased inability to pay for their monthly mortgages.  In other words, a great deal of those who lost equity has already lost their homes, and those who were able to hold on are still at risk of losing their room.

Over the past forty years four housing bubbles have burst in the UK which have all led to economic problems but it seems that the housing market and the general lending society still has not learned its lesson.  Now experts are predicting that the next generation will be composed almost solely of renters which will change the socio-economic nature of the county and the housing market once again.  It seems that our addiction with house prices and mortgage rates will catch up as only the super wealthy will actually be able to afford homes, which used to simply be a rite of passage.

Bank of England Chief Economist Spencer Dale is worried that families are not preparing correctly for the increase in the Bank base rate that will cause home mortgage rates to rise along with it due to the fact that if the last few years have taught us anything, it is that borrowers tend to prefer to ignore debt then deal with it head on.  His advice is that now is the time to prepare for the expected increases so that monthly mortgage payments do not suddenly jump and leave many families short-changed when it comes time to figure out the budget.

At the moment there is a sharp divide in opinion over when interest rates will start to increase with some believing that this event will occur by the time autumn roles around and others expecting that it will still be in farther in the future.  What is known is that at the moment inflation has been rising at a rate of about 5.2% annually according to the RPI (retail prices index) and financial markets are expecting to see at least a .25% increase this year with another 1% occurring every year forward until the economy begins to stabilize again.

This will make a major impact on those with track mortgages, but there are some who have fixed mortgages who will be protected from the impact which has led many to switch in advance.  Despite this fact, there are some standard variable rates that will not increase given the fact they are already more than 5%.  With this thought in mind, the best advice is for homeowners to do some research and make the appropriate actions so that they protect themselves and their homes for what the future may bring.

Lenders are advising that responsible homeowners should contact their mortgage broker to find out what is available to them so that an application can be placed for the best type of loan which is likely to take a few weeks to process making the need to start work paramount.  This is a concern for those with a commercial mortgage or those who have buy to let mortgages as well since these rates will be impacted as well once the base rate changes and immediate action is needed in order to protect one’s assets fully.

Homeowners are once again getting nervous over the threat of an interest rate increase that will likely increase mortgage rates and put pressure on family budgets that are already squeezed to their breaking point only compounded by the fact that there is a high potential for benefit cuts and tax hikes.  chief economist for the Bank of England, Spencer Dale, stated that he believes that it would be better to increase the base rate immediately so that the adjustment could be properly dealt with instead of looming over mortgage owners heads and to help protect the fragile economy.

However, his vote is outnumbered by other MPC members, which is good news for those who are worried about what will happen to their mortgages if they do not have the time to apply for fixed mortgages. Dale believes that inflation has the potential to hurt the economy if something is not done correctly to correct the problem.  At the moment, homebuyers are also in the middle of the debate as they do not know exactly when interest rates will actually be increased by the Bank and thus are struck worried about an unknown hike at an unknown date.

In most cases homeowners are reluctant to make the switch from tracker mortgages to fixed mortgages before until they have to due to the fact that there is almost a three percent difference between the two loan types. Therefore, many are playing a dangerous game by guessing that they will be ok to hold onto their tracker mortgages a little longer and one that may turn against them sharply if the rates hike before they have a chance to do something about the situation.  The fact that mortgage rates are likely to increase slowly is another reason that many borrowers are inclined to wait to see what happens.

Those who do decide to change their mortgages may want to take a good look at five year fixed rates for the best deals over time, but in order to secure this type of mortgage that will lock you into a good deal you also need to have a deposit on hand that is at least 25% of your LTV which is something that not many people can afford at the moment. Plus, those who just purchased their homes in the last five years will not even have the equity to be applicable for these deals.

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.