Posts tagged: interest rates
Bank of England Reports Mortgage Defaults on the Rise
The Bank of England warned this week that the number of homeowners defaulting on their mortgage payments has made an unexpected increase. Between January and March, lenders reported a surge in customers being unable to find the money to meet their monthly loan repayments. They told the Bank of England’s researchers that they fully expect this number to rise further over the next few months at least.
This rise is the first since the second quarter of 2009 and will inevitably increase again should interest rates increase; something which could be on the cards as early as May 2011. Nationwide, Britain’s biggest building society, announced their own fears yesterday about ‘the squeeze on borrowers’, a fear that is shared by many of its competitors.
The Bank of England surveyed a number of lenders with 11% reporting that mortgage defaults rose significantly during the first quarter of 2011. Many lenders had expected this number to remain flat given that the Bank’s base rate is still at a record low of 0.5%.
Research also shows there to be a significant drop in demand for mortgage products and a further drop is expected over the next 3 months. A poll conducted by Reuters found that the majority of lenders expect the Bank of England to hold off from raising interest rates until July 2011, but 45% also expect an increase to be announced and in effect before June. As inflation has risen, the pressure has been rising for an increase on the cost of borrowing.
As if that wasn’t enough, further data released this week has shown consumer confidence has failed to bounce back since its biggest drop since 1992. Consumers are no longer as willing to splash out on big ticket items either because they can no longer afford them or because they are choosing instead to save their money. Figures released by GfK NOP Social Research also showed that the hopes for a recovering economy over the next year increased two points since last month, but were still down 29 points since last year.
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Mortgages – be prepared
Plan for a mortgage as you would a holiday, with enthusiasm and precision.
Mortgage lending criteria over the last couple of years has tightened up and this may continue through 2011. We recommend to give yourself the very best chance of securing a mortgage in 2011. Start your preparations now.
1. Credit report/ score
When a mortgage application is placed the lender usually credit searches the applicant.
We recommend that you order a credit report prior to starting the mortgage process, why?
- to ensure that you have not been a victim of identity fraud.
- Find out what your credit score is: 0 low and 1000 high
If the score is low, it might be improved by,
I. Setting up Direct Debits for payments of credit cards/storecards or loans. One late payment can count against you. Show the mortgage lender you can manage your accounts.
II. Register on the Electoral Role at each address resided. Still living at home? make sure that from the age of 18 you are registered.
III. If you are in rented accommodation even just for six months, we recommend you ensure you register on the Electoral Role.
Click here to ask Carol a question or arrange a no-obligation consultation
2. Documents – be prepared
Some mortgage lenders have a time limit to get documentation to them to support an application. Having the following documentation to hand, aims to ensure a quick mortgage application process.
I. A current driving licence or passport for personal identity
II. A utility bill or bank statement not older than three months showing your current address and name.
III. Last three payslips/3 years accounts
IV. Latest P60
V. 3 months bank statements
3. Independent mortgage advice
If a mortgage lender credit searches / scores an application, a ‘footprint’ is left on your credit report and your score could potentially be lowered. If you are unsuccessful in obtaining a mortgage and you have to go through the process again, the new lender will see the previous activity. Talk to Your First Mortgage Company who can undertake a Feasibility Study on your behalf. This will let you know potentially, how much you could borrow, what type of interest rates are available and most importantly will help you gain an understanding of your purchasing and monthly payment budget.
There are no guarantees that you can obtain a mortgage but by good preparation, the feasibility of you being accepted is likely to be much greater. Good luck!
Click here to ask Carol a question or arrange a no-obligation consultation
The Financial Services Authority does not regulate some forms of mortgages. There may be a fee for mortgage advice. The precise amount will depend upon your circumstances, but we estimate that it will be £275. The overall cost for comparison is 4.6% APR.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP YOUR REPAYMENTS ON YOUR MORTGAGE
Please note that there may be variations for those living in Scotland and Northern Ireland.
Carol D Brown Cert CII(MP & ER)
Click here to Contact Carol
01635 550179
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Politicians have no idea about housing
Politicians have no idea about housing, so said the press yesterday morning. Why should they, it’s a market?
No one has really got any idea, so disparate is our market, and with Labour admitting they got it wrong and CLG carrying out a review of the private housing market it’s perhaps time for everyone to go back to encouraging people to move and to stop hand wringing.
Ultimately various Governments have failingly addressed the supply side of the market, and they’ve periodically tried to encourage the demand side with the resulting boom and busts. So sensitive are homeowners as voters that it wouldn’t be that prescient to suggest that interest rates are watched more for their effect on the housing market than they are for Industry or anything else.
If it is that important why is there so little attention given to keeping the wheels oiled. It’s been an immutable law that as Stamp Duty has gone up so the volume of sales has gone down. The plethora of amateur (and apart from the Land Registry that’s all they are) commentators can say what they like about whatever sector but volumes continue to fall and we’re about to get another cynical rise that’s going to lead to a further contraction.
Is it really that much of a leap of faith for the Coalition to accept that the best way they can free us the supply side of the property market is to put Stamp Duty where it should be, at 1%? There’s little doubt prices would come down in the short term but those voters they help move and get on the ladder would, I’m sure, be eternally grateful.
Ed Mead is a regular contributor to The Big Property List blog. An Estate Agent for over 30 years, he has been writing and commentating on the market for over half of that as the Sunday Times Property Expert and The Agent Provocateur for the Telegraph. He sits on the Board of The Property Ombudsman Ltd, has a regular LBC slot, and is happy to say it as it is.
Other places you can find him online are the Douglas & Gordon blog and Twitter
Ed Mead: Sellers need a notional interest rate rise to smack them across the face
Today was a corker. Daily Express headlines saying that the property market is set to surge this year, sadly they were narrow mindedly talking about prices only, and on the same day the FT were talking about prices set to fall.
I’m guessing that overall we know who to believe even if we want to believe The Daily Express.
But it sums up the issues puzzling any buyer or seller. It seems buyers mostly want to get on with it and most sellers exist in a world of inertia, needing a notional interest rate rise to smack them across the face and get them moving.
What I can tell you is that a couple of weeks in to the new year and it’s beginning to look a touch better here in London. A strange confluence of events, namely mortgage rates bottoming out, dollar pegged buyers from India Russia China and the US here in strength, Eurozone buyers worried about the future of their currency and looking for a safe home for their money, and the fact that Stamp Duty Land Tax (SDLT) is going to 5% for transactions over £1m (not that uncommon in Central London), means that perhaps a market that never really kicks off until the end of Jan might just be perking up a bit earlier.
More soon.
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Ed Mead is a regular contributor to The Big Property List blog. An Estate Agent for over 30 years, he has been writing and commentating on the market for over half of that as the Sunday Times Property Expert and The Agent Provocateur for the Telegraph. He sits on the Board of The Property Ombudsman Ltd, has a regular LBC slot, and is happy to say it as it is.
Other places you can find Ed online are:
Douglas & Gordon blog
Ed Mead on Twitter
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1 in 4 Brits fear base rate rises
A QUARTER of British homeowners are worried about Bank of England base rates going up, after an 18 month period of 0.5 per cent rates, according to research from Moneysupermarket.com
The Bank of England’s Monetary Policy Committee is expected to hold base rate at 0.5 per cent at their monthly meeting in just over a week’s time, marking more than 18 months of no change.
At their September meeting, eight members of the Committee voted to keep the base rate at 0.5 per cent, but Andrew Sentance voted against, preferring an increase in Bank Rate of 25 basis points.
Interest rates will have to start rising at some point and the research found that one in four people are worried about the impact this would have on their finances.
Here’s an infographic with some key figures:
As you can see – with the argument is taken to its conclusion i.e. if base rates were to return to pre-credit-crunch levels, average monthly payments could rocket by up to £563 (based on someone with a £150000 interest-only mortgage on a 2.5 per cent SVR and a base rate increase of 4.5 per cent.)
However, 52 per cent of 1192 people polled said they would welcome base rate rises to give their savings a boost.
Kevin Mountford, head of banking at moneysupermarket.com said: “Low interest rates have been fantastic for a large proportion of UK homeowners and subsequently many people have become used to more disposable income each month.
“However, a Base Rate rise will push up mortgage rates forcing many families to reign in their spending – potentially causing financial problems for many.
“As the poll shows, homeowners are clearly worried about the negative effects of a Base Rate rise. Whilst it is expected that the Base Rate will creep up slowly, consumers need to understand the effect this will have on their finances and plan accordingly.”
Mark Hooson is a personal finance writer for Moneysupermarket.com, specialising in savings, credit and debt.
Gross mortgage lending rose in July 2010
The Council of Mortgage Lenders has today announced that Gross mortgage lending in the UK rose by 5% in July 2010 compared with June. This is still down 3% year on year but is on par with the CML’s revised forecast for the year.
In today’s market commentary, CML economist Paul Samter commented:
“It is difficult to see anything other than a slow market for the rest of this year as underlying activity remains subdued. The rest of 2010 is likely to see rather lower lending and transaction numbers compared to the same period last year.
“But for most home owners, the situation is not that bleak. The vast majority of households continue to pay their mortgages in full every month, and many have benefited from the record low interest rates. This looks set to continue for some time yet. While there are a range of risks to the outlook, low rates will further help most stay on top of their finances.”
Bank of England maintains Bank Rate at 0.5%
The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion.
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The question on everyone’s lips – is now a good time to buy?
Following the emergency budget last week, many homeowners and landlords are picking through the new factors that have been thrown in to the to-buy-or-not-to-buy conundrum.
A few reassuring points remain:
- The new Government have some measures in place to tackle the wider fiscal issues over time.
- The public sector has scope to cut costs without dramatically pushing up unemployment which should keep demand healthy.
- Prices will be stable or only grow slowly for a fair while yet, allowing incomes and house prices to get that bit more comfortable in their relationship and give people time to clear other debt.
- We are still a nation of aspirant homeowners and property should remain a viable investment; and certainly the only one you can live in!
What about first time buyers?
Many people believe that house prices are unlikely to reduce further, so now could be a good time to take that step on to the first rung of home ownership. The biggest barrier facing first time buyers is getting an affordable mortgage and a big enough deposit.
For us, that’s where the regional building society can help. Knowledge of the local area and manually underwritten mortgages makes Saffron able to help first time buyers in our community. And that extra guidance and support from your mortgage lender makes a real difference when taking out your first mortgage.
What will happen to interest rates?
This is a question which we ask ourselves regularly. It’s a difficult one to call – and though there have been some murmurs that, considering the rise in inflation, the Bank of England ought to lift base rate off the floor, they’ve not moved yet, and when it does, it’s unlikely to be dramatic.
Saffron is prepared for base rate to remain at 0.5% throughout 2010 and we don’t anticipate it rising by more than a percent or so in 2011. It’s quite a conservative projection, but we have to play it safe and reforecast regularly as the climate changes.
Ultimately, though, this is all based on conjecture and opinion. To help you make up your own minds, here are a few facts:
- For the first time since the Thatcher days the percentage of people owning a home in the UK has declined.
- This recession was worse than the previous 2 – GDP fell for 6 consecutive quarters by 6% peak to trough, where as in 1980/81 and 1991/92 it fell 3.8% and 2.5% respectively.
- Industry faired better this time around, keeping more people in work – with unemployment peaking at 5% versus 1980/81 at 10.3% and 1991/92 at 9.9%.
- House price falls were bigger and quicker this time around with a range of 7 – 33%, against ranges of 0 – 12% in1980/81 and 0 – 15% in 1991/92.
- Low interest rates are helping keep repossessions low being at a peak of 6% pre this recession against 15% in both the 80’s and 90’s.
This article was written for thebigpropertylist.co.uk by Michelle Monck DipM ACIM, Head of Marketing at Saffron Building Society.
Saffron Building society is a regional building society that has been providing savings accounts and mortgages to communities in the East of England for over 160 years. They offer a range of fixed rate mortgages and tracker mortgages. They have over 120,000 members and are the ‘most followed’ Building Society on Twitter! Visit their website at www.saffronbs.co.uk or follow them @SaffronBS
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House price rise has stalled says RICs
The latest RICS (Royal Institute of Chartered Surveyors) house price survey shows that house prices have stalled as increased supply has put pressure on prices.
As prices rose in 2009 many commentators suggested this was a false dawn created by a lack of supply in the market – those commentators will see this as the first stage in their projections playing out.
Overall market activity is still relatively slow as buyers are concerned with the prospect of tax increases, interest rate rises and the low avasilability of competitive mortgage products.
RICS spokesperson Jeremy Leaf said: ‘Most market indicators are still positive and consistent with further house price increases. However the magnitude of the gains going forward is likely to continue to ease reflecting the fact that new supply coming onto the market is starting to outstrip fresh demand.’
Bank of England Maintains Bank Rate at 0.5%
The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion.
