The complexity around the interest rates used, terms, the Bank of England base rate and how this applies to your mortgage is not as complex as it may first appear.
Most mortgage lenders, building societies and banks will base the interest rate that they charge you on the Bank of England base rate, with an additional few per cent on top. This is why the BoE Base Rate is the first point to understand Read more
What does it all mean, fixed rates, variable rates, loan to value, Bank of England base rate. All complete new subjects to anyone new to the mortgage arena.
The Bank of England base rate is a rate that mortgage lenders, including banks and building societies may choose to use as their starting point for an applicable interest; they will then add their own interest on top and offer these to lenders. Read more
Over the last few years the rules in the mortgage industry have become extremely complex and convoluted and it has become quite difficult for homeowners to keep track of changes and the pace of change has been a daunting obstacle for any first time buyer to attempt to overcome. We hope first time buyers find this guide useful. Read more
What is the point of Northern Rock? Why is this company still around and, more to the point, when can the tax payer expect their money back from this failed group? This seems to be the general line of questioning and investigation when the public read any news about this particular bank these days. Read more
A recent survey, commissioned by an insurer, revealed that 75% of Ministers of Parliament (MPs) feel that people, with stable incomes and can afford repayments should be helped onto the property ladder. This financial assistance should be provided even when those individuals don’t have the 10-20% deposit required. Today, this assistance is here. Read more
Insiders from Leeds Building Society are urging potential borrowers who are considering taking out the lenders new fixed rate mortgage which doesn’t lock customers in to act fast. The new home loan offers customers the security of a fixed rate mortgage without locking them in to a deal. This allows protection from potential base rate increases whist still providing a degree of flexibility. Read more
The news has been full of reports suggesting that now is the time for borrowers to fix their mortgage deal. Although this may be great advice for some its not the best advice for everyone. The problem is the same for thousands up and down the country. Should they fix their mortgage deal now and protect themselves from future interest rate increases or risk it and stay on a variable rate which may end up being more cost effective in the future. One things for sure, lenders will push their fixed rate deals as they want to lock their customers into a deal so if reports from the industry warn of a rise then so be it. Read more
Despite the Bank of England’s Monetary Policy Committee’s decision to hold current interest rates at 0.5% borrowers are still looking for ways to protect themselves from future rate increases.
Over the past few months the cost of mortgages has continued to rise despite interest rates being at an all time low. This is mainly due to swap rates increasing since the end of last year which as a result means lenders have to pay more to borrow fund on the wholesale market to be able to lend to their customers. This increase in then passed onto borrowers in ever increasing rates of interest on their home loans. Read more
Maybe, not entirely though. The Council of Mortgage Lenders (CML) has recently reported that lending to homeowners has fallen by 29% in January 2011 compared to December 2010
The data highlights that only 28,500 loans were paid in January 2010, a drop of 12%, when compared against the same period last year. These loans are worth £4.2 billion, this is a drop of 26% by value compared to December.
So what went wrong. The “unusual combination of factors” quoted by the CML were not attributed to seasonal factors alone. The CML point to a further combination of factors; lack of confidence in the slow growing economy, a pending new government budget and rising inflation and tax measures.
“With the effects of last year’s government spending cuts beginning to bite, and rising inflation and tax measures putting pressure on household budgets, potential house-buyers are likely to have been discouraged,” the CML said.
“This, coupled with December’s extreme winter weather, and uncertainty over future interest rate rises, has led to a lack of movement in the mortgage market.”
These factors, when linked to December’s adverse weather and market uncertainty over interest rates, resulted in a low performance in the mortgage market. There was a significant rush, at the end of December, due to the stamp duty concession also attributing artificially inflated figures for that period.
Whether there is significance in these attributing factors, the fact remains that compared to the earlier decade, this represents a massive slump.
Thankfully, 10,500 new first time buyers stepped into the market in January and the average deposit is falling. This is just below 20% currently; this is a good drop for the first time in two years.
The CML noted that the market is likely to remain flat and remortgage activity is likely to continue to be buoyant (22,100 in this period). With take home pay and household budgets under strain, new tax measures predicted soon, inflation pressures, VAT increase and a weak sterling all indicate that 2011 won’t see much progress in this area.
Howard Archer of HIS Global Insight noted recently that “The very weak CML mortgage advances data for January indicates that the housing market started 2011 on the back foot and supports our belief that house prices are headed down further over the coming months,”.
He went on to comment that “Further bad news for the housing market is the now strong possibility that the Bank of England will start to raise interest rates within the next few months to counter above target and rising inflation,”. This as previously reported is looking more and more likely.
Overall, the weak message from the CML clearly shows that the housing market has started on the back foot in 2011 and without significant new ideas or better ways of lending, it’s looking more likely that housing prices will fall further down over the next few months.
We commented recently about the potential decision by the Bank of England (BoE) to keep interest rates at a record low. With the pound struggling, the recovery still fragile and a new budget expected to be delivered by the government; on Thursday the BoE’s Monetary Policy Committee has maintained the low rate of 0.5%. Keeping this status quo for the last two years has been bad news for some groups and good news for others, first time buyers are amongst the winners this time. Read more