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Mortgage rates still rising

[ Posted April 7th, 2012 ]

As most banks continue to face the harsh lending conditions of the current lending environment, due to a combination of factors including the continual eurozone debt crisis, mortgage rates are continuing to increase.

Most banks are aiming to lower the amount that they make available for lending this year which is hurting those that want a to purchase a new home and turning the UK into more of a renter’s market than a buyer’s market with most analysts predicting that the buy to let market will make up the majority of lending this year.

This week Co-op joined the group of lenders that have had to announce higher SVRs, increasing their average term by about 0.5% up to the standard rate of 4.74% as of May 1st. Over the month of March Bank of Ireland, Halifax, Yorkshire, and Clydesdale Banks have all also announced new mortgage rates, making it harder for the average home owner to find a lower deal on their SVR at any large high street lender.

Chelsea Building Society also announced an increase of 20 base points to all of their fixed mortgages deals and Nationwide Building Society raised the cost of both tracker and fixed mortgage deals. John Charcol mortgage broker Ray Boulger stated that there has been a steady trend of major and smaller lenders increasing their mortgage rates over the last month or so,  with many doing so because they want to lend less.

He explained that most lenders are saying that the wholesale funds increasing rates are the reason why they are being forced to increase SVRs, but over the last few weeks this is not so much the case as they have stayed steady. Therefore, the reason for the increase is simply to decrease the amount of lending they conduct with consumers.

Largemortgageloans.com broker Nigel Bedford said the same as he pointed out that the interbank lending rate and the two year rate swaps that are used to create a mortgage package have actually decreased slightly therefore it cannot be blamed on the high cost of lending funds. Despite this fact, most brokers are expecting that mortgage rates will continue to increase over the next few months making it vital that those who want a good deal get in on the market now.

Housing market outlook for 2012

[ Posted December 21st, 2011 ]

With 2012 fast approaching, many experts in the housing market are now taking a look at what will happen over the course of next year . Earlier analysis was not positive, and now with the eurozone debt crisis and the reality of inflation setting in the market outlook is starting to look even more negative.

Overall, most analysts are now not expecting the Bank of England to increase its base rate, but the added pressure of the above mentioned elements will likely cause mortgage rates to continue to rise putting many homeowners in a perilous situation.

Homeowners and first time buyers shy away from talking about the mortgage market anymore because the prices of the average home can be depressing. In fact, Knight Frank revealed estimates that the average UK home price had increased by about 1.3%, but when you factor inflation into the equation, in reality property values have fallen by about 5% overall.

Therefore, even though 2011 offered some of the best mortgage rates that have been seen this decade; the overall values of property kept many people from actually rejoicing in the relief that the temporary decline brought with it.

Experts are now predicting that 2012 will not be any better, with predictions that house prices are going to decrease by another 5% during the first two quarters of the year and then remain flat and static for the last two quarters.

Depending on if the economic recession returns, and the non-resolution of the eurozone crisis, the housing market is could possibly be under the threat of falling by up to 10% over the course of 2012, which is not great news for those looking to get into the property game because even with a reasonable mortgage rate any investment will be lost by the close of the year.

Analysts and brokers are also warning that tightened budgets for most households, the poor labour market with threats of increased redundancy, and overall uncertainty about the future will continue to cause house prices to decrease as many potential buyers will decide that now is not the time to invest in a mortgage.

In addition, depending on wholesale funding, many banks may not even be able to continue to lend to home buyers at a reasonable rate or even at all, causing the housing market to break down teven more.

Mortgage Rates Finally Start To Increase

[ Posted October 22nd, 2011 ]

For the last year or so the major news within the lending market has been the fact that mortgage rates have continued to fall despite many experts warning that they had hit rock bottom.  In fact, every time that it seemed the rates could not go any lower another bank would announce lowered rates causing a new level to be reached as competitors followed suit hoping to win customers over to their banking and lending systems.

However, for the first time since the recession, rates are actually starting to increase marking perhaps the end of the buying market. The best mortgage rates bottomed out at fewer than two percent for those with excellent credit and the ability to pay a large LTV, which was remarkable and something that had not been seen in decades.

However, those who did not take advantage of the low rates to refinance or purchase a new home may regret their decision to wait as this week many lenders including Accord Mortgages, Woolwich, Northern Rock, and Santander announced rate increases.  According to lenders, now that the major banking institutes have increases their mortgage rates it is only a matter of time until everyone else does as well.

Over the course of next week ING Direct and Barclays Wealth are also expected to increase their rates and the smaller lenders are expected to match the rate hikes as well.  First to be affected will most likely be the fixed mortgages as these were the very best deals on the market, and as lenders start to tighten their rate offers it is most likely that these will disappear first followed by the tracker mortgages which will also be affected if the interest rate hikes.  Therefore, those who have not yet taken advantage of the decrease in mortgage rates may want to act now.

Once the Bank of England increases the base rate almost all of the available fixed mortgage packages are expected to leap up suddenly in price, and those with variable mortgages will feel a crunch when the time comes to pay their monthly mortgage as just a .5% increase could add anywhere from fifty to one hundred pounds more onto a monthly payment depending on the size of the mortgage.  Therefore, those that have been watching the industry may want to make a move now to avoid paying more down the line.

Two year fixed mortgages are now the way to go

[ Posted October 17th, 2011 ]

Although there have been rumors about the base rate increasing next year, the signs are not yet apparent as the mortgage market took another hit this week with Leeds Building Society announcing new fixed mortgages set at under 2% which is now making it just as affordable to get a fixed mortgage as a tracker mortgage.  This news is making variable loans look much less attractive for those that can afford the deposit as the safe route is now on par with taking the riskier route in the name of savings.

The Leeds mortgage rates are available to those that are able to pay a loan to value of 75% and a booking fee that is set at £1,999.  Up until now most mortgage brokers have told borrowers not to take out a short two year term mortgage because interest rates are now most likely going to stay down for two years.  Therefore, those that are thinking about taking out short term loans have instead been advised to take advantage of the low tracker mortgages instead to optimize the current market conditions.

Over the last few weeks the price differences have all but disappeared putting two year fixed mortgages right on par with some of the best tracker mortgage loans with some lenders even offering better deals on their fixed products than on their tracker deals. This is mostly due to the fact that as the mortgage rates continue to drop there are simply not enough buyers and too many banks competing for the same group of potential clients forcing them to pull out all of the stops in order to attract attention to their opportunities.  Of course, buyers still have to have a large deposit in most cases for either the fixed or tracker rates which has prevented many from taking advantage of the great deals.

Right now Accord Mortgages is offering a tracker mortgage for a two year term set at 1.99% also that comes with an equal £1,995 booking fee.  The cheapest fee for a tracker mortgage on the market right now comes from Skipton Building Society which offers a two year tracker set at 1.98% but in order to get it buyers must be able to afford a loan to value of 60% which is out of reach for many new first time home buyers and only preferable for those with equity given the current economic situation.

Fears over Greek debt and Eurozone crisis may affect mortgage rates

[ Posted October 7th, 2011 ]

This week may be the end of the best mortgage rates that the lending market has seen in years due to the fact that the looking Eurozone debt crisis is likely going to affect the way that banks conduct their lending.  It is too early yet to tell how the Greek debt and sister countries debt will affect the major banks, but as banks seek to protect themselves they will likely seize or slow down their interbank lending practices which is going to affect the average mortgage rates.

One of the primary reasons that fixed mortgages have been able to drop as low as they have is due to the fact that banks have enjoyed low swap rates due to the low Bank of England interest rate.  Lenders have taken advantage of the low swap rates to help reduce their fixed rate lending terms for loan seekers and have been using this to their advantage to help attract new customers.  However, while the competitive rates have helped out those seeking a mortgage, with the lending credit getting tight away again rates are going to jump up forcing banks to once again put strong credit regulations into place.

Variable trackers have not been as affected by the Eurozone crisis as the fixed mortgages due to the fact that they are funded through monies that come from other lenders usually or through savings deposits at a rate that is decided by Libor.  Therefore, those that have trackers are most likely in a better situation over the next few months as the three month Libor has sat at .93% for the past three months which is a slight increase over the past few months prior to it.

Those seeking out a mortgage or considering a remortgage to get better rates than what they are fixed into now will want to make a move to do so soon, because over the next month or two the eurozone crisis could cause mortgage rates to skyrocket with both trackers and fixed mortgages eventually affected.  Even more concerning is the fact that over the next few months it is very possible that lending restrictions will also tighten up making it harder than it already is for new homeowners to get their feet into the property market.

Eurozone debt causes mortgage rates to increase

[ Posted October 7th, 2011 ]

Although homeowners have been enjoying low mortgage rates for the past year or so with each month bringing the rates down lower than most experts predicted, the eurozone debt crisis may change the mortgage outlook for those with tracker mortgages due to the fact that concern about sovereign debt is leaving many banks to reduce the amount of swap lending they partake in.  Swap lending practices are one of the major reasons that mortgage rates have stayed down low, so if the banks stop interbank lending there is a good chance that rates are going to jump back up.

Ray Boulger from John Charcol the mortgage broker stated that there has already been a large rise in variable mortgage rates in many areas which sends the clear message that the sovereign debt situation from the eurozone is going to affect most people’s mortgages eventually.  He added that homeowners who think that the eurozone disaster is not going to affect them have better think again.  Some tracker mortgages from affected lenders have already bounced up by as high as 1.5% and analysts are worried that they may soon jump up even higher.

Boulger continued to explain that Barclays Wealth has already been forced to increase their lifetime trackers with LTV loans of 75% affected by an increase of .5%.  He also added that the bank base rate for Barclays has jumped up to .5%, however the most affected are those with LTVs of 85% from the bank as they have seen their mortgage rates jump up to 1.5% with a bank rate sitting at 4.49%.  The bad news for others is that if Barclays has already been forced to increase their bank rates there is a good chance that other major lenders will have to do the same in the coming future.

At the moment those affected the most are going to be those that need to get mortgage loans of £500,000 or higher, but it is hard to tell at the moment just which banks are going to be affected by the Greek debt and how this will alter lending between banks which means that mortgage rates will soon jump up due to the fact that funds are going to be reduced.  This could also potentially cause another credit crisis which could be crippling given the fact the economy has not yet recovered from 2007.

High rate taxpayers attracted to offset mortgages

[ Posted July 12th, 2011 ]

Low interest rates, rising inflation, and tougher competition among lenders has made many high rate taxpayers take advantage of offset mortgages.  This week those holding their breathes about the potential increase in mortgage rates got a gentle reprieve as the Bank of England held the base rate at its current .5% mark for another week although the CPI or consumer prices index  is running steady at 4.5%.  This has made it hard for those who fall into the bracket of wealthy to see any real tangible returns on their savings accounts.

Therefore, it is only logical that instead of placing their funds into savings accounts now those who fit into the higher tax brackets are instead taking a closer look at the changing mortgage rate and deciding instead to place their cash on their mortgage to reduce the interest.  Director of the mortgage firm Private Finance and broker Melanie Bien stated that as it is unlikely that interest rates will actually increase before the year ends most savings accounts are going to continue to offer low returns making it more beneficial for borrowers to put their savings to work on their mortgage.

The way an offset mortgage works is simple as the borrower can deduct the savings out of the loan amount and then the homeowner benefits since they now only have to pay interest on the much smaller balance that has been reduced.  Thus, if you had a linked savings account that was worth £50,000 on a mortgage worth £450,000 then the interest and mortgage rates would only be attached to £400,000 making it a beneficial plan in the long run.  The only trouble of course with this method is that it only works for those who have a great deal of excess cash to work with.

Those that earn over £150,000 and are currently paying the top rate for income tax are usually those that can benefit the most from offset mortgages because they will be able to earn some type of break on the mortgage without any tax liability.  This is due to the fact that if they place it in a poorly earning savings account instead they will still be liable for income tax making the amount they get overall much lower than when compared to what they would save on their mortgage interest.

46% of home buyers are not able to answer simple questions about their mortgage rate

[ Posted May 2nd, 2011 ]

A new survey from Zillow reports that 46% of all home buyers are not really prepared to take out a mortgage because they are not aware of very simple mortgage facts which may change the type of mortgage rate that they can get.  In fact, the fact that they do not have the knowledge they want may even mean that they are not getting the best deals for themselves compared to what they actually would qualify for.

The mortgage marketplace survey was conducted by the Zillow real estate hub and found that almost half of the time respondents were not able to get the basic questions correct. Making matters worse, 44% of those who were out there looking for the best mortgage rates admitted that they did not know much about the mortgage process or even about general mortgage facts.  When asked if their adjustable mortgages would reset after a five year period most answered yes, but in reality the interest rate will adjust to the rate after the fifth year even if the rates have declined making it possible for a real change to occur.

Another question that was included in the Zillow survey pertained to lender fees.  34% of those in the study wrongly believed that lenders all charged the same amount for appraisals and credit reports due to uniform law, but the truth is that these fees are not regulated and are up to each individual lending agent.

Therefore, when you approach securing a mortgage rate it is in your best interest to shop around for the best rate and the best package fees when it comes to additional charges that you must pay as part of the application and processing portion of the mortgage interview. Director of Zillow mortgage, Erin Lantz, commented that most people would not be quick to jump out of a plane in midflight if they did not know how to correctly use a parachute.

But every year buyers are quick to secure the largest loans of their lives without even taking the time to make sure they understand how mortgages work and find out the differences between fixed mortgages and variable mortgages and what stipulations are attached to both.  This in itself can attribute to the increase in foreclosures due to the fact that more homes are lost due to poor lending decisions.

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.

Mortgage Reduction Hitting New Highs

[ Posted October 1st, 2010 ]

In the three months from April through June of this year mortgage holders have reportedly reduced their overall debt level by roughly £6.2 billion, the largest influx of funds ever recorded by lending institutions in recent history. This trend is expected to continue into the coming quarters as well even though mortgage rates are anticipated to continue a relatively low trend going into the winter months.

Many are attributing the recent trend for existing home owners reducing the number of remortgages being sought and first-time buyers seeking to defer home purchasing to the rising costs earlier this year and various economic instability factors. Many other experts, however, feel that it is not simply these factors that are playing a major role in determining both the current situation and future of the property market but instead the fact that lending institutions are leaning more towards restrictive measures that will make obtaining a mortgage in the first place all but impossible for those without perfect credit scores and large amounts of disposable funds at the ready for personal use.

In addition to higher lending restrictions being put in place on consumers credit agencies have also reportedly been looking into adjusting credit score calculations given the growing number of consumers who are shifting more towards debt repayment rather than increasing spending. When coupled with the fact that interest only mortgages – a necessity for many new home owners to be able to afford a home purchase in the first years of entering into the real estate market – this creates a financial vortex that prevents many individuals from being able to both develop financial stability and establish themselves as desirable consumers to real estate lenders.

One thing is generally agreed upon by experts across the UK, though – the housing market is not looking at developing in any measurable positive way in the coming months and consumers should not expect to see any major positive trend in the coming quarter or two going into 2011.

 
 
 
 
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