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31-Aug-2010
Posted By Andrew
The British Chambers of Commerce (BCC) has added its voice to the chorus urging the Bank of England to keep interest rates down. The call from the business organisation to keep base rate on hold at 0.5% comes in the wake of faster-than-expected economic growth in the second quarter of 2010. The BCC itself has revised its growth forecast to 1.7%, up from 1.3%. In normal times, higher growth would indicate that a rise in rates was on its way, to hold back inflation. But of course these aren’t normal times.
Revised growth figures suggest that Britain’s economy has bounced back more strongly than expected. For mortgage borrowers, not to mention anyone with a job, this has to be good news. Yet BCC’s chief economist David Kern shares the fears of many that the boost may be short lived. The government’s austerity measures are bound to have an impact on future growth and employment. It’s anxiety about the economic road ahead which is making the financial world cautious, not least about lending on property, with analysts unsure about prospects for house prices.
But with interest rates still at record lows, it’s still well worth looking at remortgaging options. Fixed-rate deals in particular have gained in popularity recently as borrowers have sought to lock themselves into an affordable rate. And for those unsure about moving in the current climate, remortgaging can be a cost effective way of improving your home – perhaps with an extension or new kitchen. In terms of value, according to lenders such as the Halifax, a loft conversion is the improvement which can add the most value when you do come to sell.
23-Aug-2010
Posted By Andrew
First time buyers face challenges in today’s mortgage market. But according to the Halifax, there are plus points as well. In particular, a combination of lower interest rates and falling house prices means that mortgages are far more affordable than they were a few years ago. Many have also been able to take advantage of the exemption from stamp duty.
According to the Halifax, average repayments have nearly halved over the past three years. The typical first time buyer now spends only 28% of their income on monthly mortgage payments – as against 50% at the height of the boom in June 2007.
Of course, that’s not the whole story. The big task facing first time buyers is to save a large enough deposit to satisfy today’s cautious lenders. The Halifax calculates that first time buyers put down more than £30,000 on average (an amount equivalent to some 22% of their home’s value). So it’s hardly surprising that help from parents, the so-called ‘Bank of Mum and Dad’, has been such a talking point recently. However, there are some attractive, higher-loan-to-value deals available.
And although the numbers remain well below those seen before the credit crunch, the first six months of 2010 saw 28% more people gaining a foothold on the housing ladder than in the same period last year.
20-Aug-2010
Posted By Adam
Mortgage lending continued to rise last month – but experts say that the outlook for the market is “subdued”. According to the Council of Mortgage Lenders (CML), which represents institutions responsible for 94% of residential mortgage lending in the UK, the total value of new loans stood at £13.6 billion in July. The figure, which includes remortgages, is up 5% on June – but down 3% compared with a year ago.
Industry insiders point to a number of factors affecting the market. The second half of 2009 saw increased activity as house purchasers hurried to take advantage of the first stamp duty holiday. Now, apart from the usual summer lull, conditions have become more challenging. According to the latest Bank of England survey, lenders expect the cost of funding mortgages to rise.
Lenders are showing caution, while some have tightened their criteria, making things trickier for the self-employed or first time buyers, for example. In that environment, an experienced broker with knowledge of the market can be invaluable in finding the right deal.
As CML chief economist Paul Samter points out, there is still good news for borrowers. Low interest rates continue to make mortgage borrowing affordable by historical standards, with competitive fixed-rate deals attracting particular interest. “The vast majority of households continue to pay their mortgages in full every month, and many have benefited from the record low interest rates,” Mr Samter commented.
18-Aug-2010
Posted By Abigail
Inflation remains stubbornly above target, according to latest official statistics. And that’s bound to lead to speculation about interest rate rises.
The Consumer Prices Index (CPI) fell by just 0.1 percent in July, leaving the annual rate at 3.1% – well above the government’s 2 % target. Bank of England governor Mervyn King has admitted to surprise. The governor has long argued that inflation will drift down as temporary factors, such as fuel price increases, drop out of the picture. Now, according to the Bank, the planned VAT rise will help keep inflation above 2% throughout next year.
Minutes from this month’s meeting of the Bank’s Monetary Policy Committee show rate-setters again divided. One member, Dr Andrew Sentance, again voted for a small increase in interest rates.
Many looking to buy or remortgage their homes are bound to take the view that higher-than-expected inflation could lead to a rise in rates before long. It’s that perception which has been fuelling the popularity of fixed-rate deals recently, as borrowers seek certainty about future payments.
However, many economists believe that the Bank’s base rate will stay at its historic low for many months to come. Surveys, and the Bank’s own forecasts, show signs of slowing growth – as budget measures take effect and spending cuts bite. With earnings growth low and plenty of spare capacity in the economy, there will be downward pressure on prices. One group of forecasters, Ernst & Young’s ITEM club, has even suggested it could be years before rates need to rise.
Likewise, business groups continue to argue against a rise in interest rates. British Chambers of Commerce chief economist David Kern has said that any premature rate rise could trigger a damaging economic setback.
16-Aug-2010
Posted By Adam
Mortgage lending has grown significantly in recent months, with fixed-rate deals gaining in popularity, according to the Council of Mortgage Lenders (CML).
Latest figures from the body show that there were 52,000 loans for house purchase in June, worth a total of £7.6 billion. That’s 23% more, in terms of value, than in May – and an increase of 27% on June last year. Remortgaging also increased modestly, but remains significantly down when compared with a year ago.
Fixed-rate mortgages are once again attracting attention, with borrowers taking advantage of falling interest rates. 48% of new borrowers took out a fixed-rate deal in June, the largest proportion so far this year. The perception that interest rates might rise in the not too distant future is also thought to have been a factor in the increase.
There were also positive signs for the buy-to-let market in latest quarterly figures. The market remains “very subdued” according to the CML, but there was an increase in April-June of 15% on the same period last year, with a total of 24,900 loans for buy-to-let properties. Of the £2.4 billion advanced, £1 billion was in remortgages.
However, CML economist Paul Samter gave a cautious assessment of the mortgage market as a whole. He pointed out that the government’s austerity measures had yet to bite, and forecast “muted” house-purchase activity. “Both consumer demand and lending capacity remain distinctly difficult to call,” he admitted.
13-Aug-2010
Posted By Adam
Home repossessions have continued to fall, according to latest figures. The Council of Mortgage Lenders (CML) reports that the number of homes taken into possession fell by 4.1% in the second three months of this year – the third quarterly fall in a row. The decrease has caused the CML to cut its forecast for repossessions in 2010 from 53,000 to 39,000.
The body also noted a fall in the numbers of those in significant mortgage arrears.
The better-than-expected picture is being put down to a combination of factors, including interest rates at historic lows, the constructive approach of some lenders, and the package of government measures designed to help those in difficulties.
However, CML director Michael Coogan cautioned against complacency. Along with debt charities, he warned that cutbacks and the withdrawal of government schemes could undermine the positive trend. Stalling economic growth and job losses might also have a negative impact on the figures.
Meanwhile, prospects for continued low interest rates have received a boost. The quarterly inflation report from the Bank of England suggests that (thanks in part to sluggish growth) inflation will be below its 2% target in two years’ time – even if the Bank’s base rate stays at its current 0.5%.
11-Aug-2010
Posted By Adam
Recent pronouncements from the FSA, along with current debates about interest rates, are causing many homeowners to look at their remortgage options.
The economic outlook is murky, with the Bank of England today expected to lower its forecast for growth, while signalling that inflation will rise on the back of the planned VAT increase. That makes the future direction of rates uncertain.
Many who are paying their lender’s standard variable rate will consider signing up to a new deal in advance of any rise in rates. Borrowers looking for peace of mind may well decide on a fixed-rate deal, or perhaps a capped deal – i.e. one with an interest rate which fluctuates below a ceiling set in advance. With Bank of England base rates still at 0.5% there are some highly competitive deals available.
One group who will need to think carefully about their mortgages are borrowers currently on an interest-only deal. Many of us seized the chance of a temporary arrangement when household budgets were under heavy pressure during the recession. The FSA has signalled its concerns about interest-only – particularly homeowners being left with no means of paying off their mortgage loans at the end of the term. Some lenders are now discouraging interest-only deals. Again, record low rates should make the option of remortgaging more palatable.
Some homeowners will judge that staying on a lender’s SVR remains a reasonable option for now. Many may find they could save on their monthly outgoings – even while borrowing more in some cases. It’s worth talking to a reputable broker, such as Go Remortgage, before making your decision.
Remortgaging can enable borrowers to bring other debts, such as store card or credit card debts, under one umbrella. Meanwhile, homeowners cautious about moving in the current climate will find that adding an extra room to their property, with an extension or loft conversion, can be a great alternative to forking out for removal expenses.
10-Aug-2010
Posted By Adam
“Safe as houses,” runs the old saying, and bricks and mortar have certainly been a good investment for many homeowners over the years. That’s confirmed by new research from the Halifax showing that, taken as a whole, the UK housing stock is worth more than double what it was 10 years ago.
According to Halifax housing economist Martin Ellis, there has been a “substantial increase in the value in housing assets, with all regions recording average annual increases of 7%-12%.” The total rise in value is estimated at £2000 billion in cash terms.
One feature has been the narrowing of the North-South divide, with larger increases in regions such as the North West, and Yorkshire and the Humber, than in the South East. Nevertheless, it’s Northern Ireland which has lead the way, with a rise of almost 200% in the ten years to 2009 – from an estimated £31 billion to £92 billion in total.
After years of gains, the period between mid 2007 and early 2009 saw falls in prices. The result is that the total value of private housing stock is now 8% lower than at peak. However, prices rose again significantly in the second half of 2009.
Experts are divided on the future direction of property prices. Some fear that cuts in government spending, and limited availability of mortgage funds, could curb price increases. But respected think tank the Centre for Economics and Business Research reckons that prices will nonetheless rise by 4% this year, and continue to increase until 2014. That’s because of fundamentals, such as lower mortgage interest rates and the scarcity of new property.
The availability of deals at record low rates means that homeowners who have watched their own properties gain in value over the years may have a golden opportunity to remortgage – in order to extend their homes or consolidate other debts, for example.
10-Aug-2010
Posted By Adam
It can be quick and convenient. But credit card borrowing has also become more expensive – in spite of a Bank of England base rate of 0.5%. That’s the picture which emerges from new research by moneysupermarket.com, showing that average interest rates on credit card purchases have risen to 17.32% in July, up from 16.4% in January.
There is comfort for borrowers in the news that so-called 0% deals are being extended, with borrowers benefiting from a longer interest-free period. Yet interest rates which come into force at the end of the period have risen in many cases.
Timing your repayments, then, can be crucial. Experts recommend that borrowers set up a direct debit to make sure that they pay off the minimum amount from credit card balances each month.
But they also point out that those who simply pay off the minimum can find themselves paying down their debts for decades. One financial site warns that on the basis of a not-untypical rate of 17.9% a relatively modest debt of £3000 could take 40 years to clear on a minimum-payment basis.
Downward pressure on interest rates has made mortgage borrowing more affordable than previously, with popular fixed-rate deals attracting record low rates according to Bank of England figures. So it could be worth looking at remortgaging as a route to funding larger purchases, while those faced with high monthly debt repayments may also benefit from lower outgoings.
10-Aug-2010
Posted By Adam
Not the return of an item of headwear or fashion accessory – but a mortgage with a maximum interest rate.
With uncertainty remaining about the direction of rates, the capped mortgage could come to the rescue of borrowers in a quandary. Several lenders have launched capped deals in recent weeks, or will do shortly.
A cap combines elements of both fixed and variable rate deals. Your interest rate can fluctuate, as with a tracker or standard variable rate, but should rates rise steeply the cap comes into force, giving you the protection of a fixed rate. So in theory you can enjoy the benefits if rates stay low (as some economists are predicting) but enjoy a measure of security should continuing inflation finally force the Bank’s hand.
In theory? Well much depends on the competitiveness of the initial rate, as with any mortgage. And timing is key. How long does your capped deal last? If the cap never comes into play, but then expires just before a rise in rates, you could lose rather than gain.
Caps were popular in the past, when interest rates were less stable than they have been for the last eighteen months – and some looking to buy or remortgage their homes may once again feel they are getting ahead of the game with a cap.
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