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Home mortgage costs increase as euro crisis deepens

[ Posted November 25th, 2011 ]

Many homeowners and those with buy to let mortgages are now facing a very dangerous combo of increasing mortgage rates against lowered house prices as the eurozone debt crisis continues to make a deeper impact on the UK economy.  Many banks are increasing the price that they have attached to their home loans as they are forced to find ways to increase their funding costs in an effort to cover the riskier funds that are invested in the foreign market banks that are now losing their stability.

In fact, for some people the average three year mortgage deal has jumped up by as much as £1,200 over this week making a home loan that was once affordable suddenly one that is going to force them into foreclosure.    Experts fear that the problem is only going to get worse for those who have tracker mortgage rates as there is a very high potential that some banks will be forced to increase their standard variable rates by a large amount which will affect the four million homeowners that are currently on SVRs due to the low base rate.

The problem is that mortgage rates set on the base rate will not raise any higher than the Bank of England rate does because they will have to increase at the same increment, but a bank can alter its own SVR at any point and at any increment based on their own discretion which will leave a lot of homeowners that thought they were at a good rate out in the cold and struggling to make the new monthly payment fit into their budget.  In fact, the number of people on SVRs right now is at a high as most homeowners have rebuked a fixed mortgage in favor of keeping in line with the lower SVR and the logic that the base rate would not increase for at least another year if not more.

To make matters worse, most sellers are now being forced to slash their prices with figures from Rightmove the real estate agency revealing that every UK region saw its home prices fall over the month of October.  According to Rightmove, this is the first time that the UK has collectively seen all of its home values fall since 2008 making the average 3.1% drop monumental.

Mortgage rates may jump due to savings-lending link

[ Posted November 23rd, 2011 ]

The FSA’s continual push for lenders to offer larger amounts of mortgage lending sums to buyers by using retail saving deposits might have the reverse effect on the housing market affordability due to the fact that this change may actually increase mortgage rates making them unaffordable for buyers.  At the Sesame symposium this week Matthew Wyles the group distribution director for Nationwide stated that competition for the deposits may force lenders into increasing their mortgage rates otherwise they would have to see their margins dwindle which is not a choice for the banks right now.

Wyles continued to say that there is a link between mortgage rates and savings because they use the same metrics when it comes to margins and the retail savings are going to be a central thought of most lenders due to the fact that regulators are pushing for them to help fund the balance sheets.  Part of this is due to the fact that the banking system has not recovered completely after it crumbled and was forced to take funds from the government in order to stay afloat, so there simply is not a large enough profit margin there for banks themselves to take the hit.

He also added that savers will continue to stay strong with competition over the next few years which should help to keep savings rates at least the same and possibly maybe improve the rate a bit over the course of 2012.  However, in order for the savings rate to increase some there has to be finance from somewhere which will create high risk taking practices for the banks or for them to increase the average best mortgage rate that they are able to offer which may mean the end of rock bottom mortgages.

For those that have been waiting to see just how low the mortgage market would go this may mean that now is the time to act in order to secure a great low deal while they are still available.  Considering the fact that more than half of the UK mortgages at the moment are said to be secured on standard variables now may be the time for many homeowners to consider signing into a fixed mortgage deal before it is too late to get a low rate and an affordable monthly payment.

CML states mortgage lending shaky

[ Posted November 19th, 2011 ]

The Council of Mortgage Lenders (CML) has released a statement that the economic uncertainty in the UK will make it difficult to predict how the mortgage market will continue to function because while mortgage rates may stay low over the next year there will not be many people confident enough to take advantage of the rates.

Factors such as the eurozone debt, high unemployment, and the falling prices of homes will all combine to make most new home buyers wary of purchasing a new home and instead choosing to rent property.

At the moment, director general for the CML, Paul Smee, stated that the home loan market was stable even though there was a slight decline in the amount of people taking advantage of low fixed mortgages compared to September.  In fact, the amount of mortgages taken out during September in the UK was 48,200, but many of these were remortgages from savvy home owners that want to take advantage of low rates before they increase again.

During the month most first time home buyers had to meet deposit requirements of about 20% before they could secure a mortgage. The good news is that the number mortgages that were approved compared to those that were rejected were up by 3% when compared to lending figures from September of 2010.

Despite this fact, many mortgage lenders are worried about their ability to offer low mortgage rates in the future due to the fact that the cost of loans is starting to increase because interbank loaning now costs more.  The eurozone crisis knocked out banks’ confidence in lending to other banks making the housing market a bit harder to predict over the next few months according to Smee, because lack of loan confidence will hurt bank’s offerings to the public.

Smee went on to say that both remortgage loans and home values saw a drop over the past few months, but the market when looked at from a broader point of view is starting to look a bit more stable.  However, he added that with so much domestic and global instability at the moment it is hard to predict just how long this trend will last.

At any rate, during the third quarter of 2011 the number of home loans approved did increase by 16% when compared to the second quarter which is good news for the overall housing market.

Northern Rock pushes their fixed mortgage products

[ Posted November 4th, 2011 ]

It is estimated that about 200,000 consumers are approaching the end of their fixed mortgages within the end of the next six months, making it important that they take a look at the different options that are out there on the market.  Out of those that will see their deals end, 80% are going to leave behind an interest rate that was set at 4% or higher, making the lower mortgage rates extremely attractive to those who are shopping for a better deal this time around.

With this fact in mind, Northern Rock is now launching a campaign to convince its customers that fixed rate products still the best choice even with such low trackers on the market. Fixed mortgages are practically at rock bottom now with many new deals still popping up on a daily basis making the deals look even better to most consumers.

Northern Rock is offering a full range of different two year term products that are all set at below 4% for those with the appropriate equity and credit history, most of which set to save the average consumer about £100 every month in their mortgage payments, making them something worth checking out.

Northern Rock has highlighted the fact that at the close of January of 2012 the average fixed rate for those who have at least 30% equity in their home is going to sit at 4.68%, but those who switch to a two year product now offered by the banking lender will be able secure the best mortgage rates that settle in around 2.67%.

For a consumer that enjoys this switch it would mean the monthly payment due would be reduced by £145, allowing them to save a total of £3,480 over the two year term all together. Those who only have 20% equity would also benefit from taking a look at what Northern Rock has to offer as they could secure a fixed rate set as low as 2.47% which when compared to the January 2012 figure of 5.09% would mean a monthly savings of about £120.

For these customers, their total savings over a two year termed mortgage would be £2,880 which is a large chunk of change simply for choosing a mortgage product that is a better fit for their needs, based on the low mortgage rates available from Northern Rock.

Bank of England admits they almost increased mortgage rates

[ Posted November 2nd, 2011 ]

Charles Bean stated this week that back in May, when the Monetary Policy Committee was being urged to raise the interest rate, they almost did before the market became depressed again.  For the past year or so, since the Bank of England dropped the base rate down to the historically low 0.5%, there has been a great deal of speculation over when it would jump up leaving many unsure if fixed mortgages or trackers were their best bet.

However, now it turns out that the speculation was not a waste nor were the warnings as the increase almost occurred. In a speech given to the CML (Council of Mortgage Lenders), Bean stated that as early in the year as May, about a third of the MPC were ready to vote yes to increasing the bank rate and restoring it from its low emergency level.

According to Bean, he did not support the vote to increase the rate, but he did take note of all the arguments that were made in the favor of raising the rate and the arguments for how this could cause another housing depression as it would force mortgage rates up and lead to a threat of foreclosure for many.

Bean explained that as the economic outlook continued to diminish throughout the month and the following months the MC was forced to continue to keep its bank rate low at the programme costs of £75bn in an effort to prevent deflation of prices in Britain.  He continued to say that without action and with inflation well under way it was important to keep some slack within the MPC otherwise the markets could simply fall apart.

This would have most likely included the housing market as most people with variable mortgages are concerned about their ability to continue to pay their tariffs if the interest rate were to increase mortgage rates. The comments made by Bean help to cement the thought that the base rate is going to continue to be held low with more problems on the way within the economy.

This is good news for those attempting to get the most out of the housing market while the economy is still depressed as the outlook remains low creating a buyer’s haven for those with the credit and the savings to actually capitalize on the available low priced mortgage products.

 
 
 
 
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