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Shop Around to Beat the Base Rate Rise

by Sarah Halloran

There was more bad news for homeowners and potential property purchasers alike when Santander announced an increase to its Standard Variable Rate (SVR) last week. That increase was, in percentage terms, quite significant with the rate changing up to 4.74%.

Santander claim that the rate change will add around £26 a month to a £100,000 mortgage but insisted that it had no further plans to increase the SVR again. The rise will affect all existing Santander customers along with those acquired from other providers with the exception of Alliance and Leicester. It’s thought that the move will see an increase in monthly payments for a ‘few hundred thousand customers’.

“For the last three years the amount it costs us to provide mortgages and the rates we offer our savings customers have been increasing, despite the base rate remaining static,” a Spokesperson for Santander said.

“Additionally, the cost of running a bank in the UK has increased dramatically through a combination of increased liquidity, capital and funding requirements,” the company added.

Santander have, however, been accused of profiteering by some who have deemed the increase unnecessary. It’s been suggested that this was a profitable area for the lender and they have merely increased their SVR in order to take further advantage.

Mark Harris of SPF Private Clients said that this was ‘profiteering, pure and simple’.

“The move puts its SVR towards the upper end of the scale when compared with other big lenders such as Halifax, Woolwich and Nationwide,” Mr Harris added.

Following the increase, advice has come from many quarters, urging those affected to shop around. For those in a variable rate mortgage with no penalties for settlement, such a move could bring monthly payments back to more affordable levels.

“Any homeowners worried about their mortgage payments should make sure they do their homework to make sure they get the best deal possible to suit their needs,” said Michael Ossei of financial comparison site uSwitch.

Mr Ossei also warned that further hikes in the SVR from other lenders were likely.

“This latest increase should serve as a warning that mortgage payments could go up at any time and with very little notice. If you are enjoying lower mortgage payments at the moment it may be worth overpaying, or putting aside the extra cash you’re saving while rates are so low. And although it may be another year or more before the base rate rises, the only way for mortgage rates to go in the long term is up,” he concluded.

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Lenders Succumb to Mortage Rate Rise

by Alison Feemantle

Some of the UK’s biggest lenders have announced fixed rate mortgage rate rises this week as they finally succumb to the pressures that funding costs provide. At least ten lenders will have announced their increases by the time April comes to an end making it ever harder to obtain home loans for new purchasers.

The Bank of England has also announced that an average two year fixed interest mortgage backed by a 25% deposit has risen from 2.9% last September to 3.45% in March. However, that September 2011 figure marked an all-time recorded low after this type of funding peaked at 6.35% in 2008.

The Council of Mortgage Lenders (CML) indicate that this latest batch of rises backs up their claims that rates would have to increase because funding costs meant that the current low levels were unsupportable.

“Funding costs have been experiencing upward pressure for lenders, who have been operating at low margins,” said Sue Anderson of the CML.

“So at some point lenders will take the decision to raise rates for good balance sheet management,” she added.

The market seems to be experiencing a typical ‘reverse domino’ effect with lenders reacting to rises from their competitors and increasing their own rates accordingly.

“Lenders seem to have increased their rates in two stages this week, some at the beginning and the others catching up later in the week,” said Trinity Financials’ Aaron Strutt.

Among those increasing their rates this month are Abbey, Halifax, Santander, Lloyds TSB Britannia, HSBC, and Cheltenham & Gloucester.

“When you take into consideration that some lenders have raised their rates at least twice in the past month, they all add up,” Aaron Strutt added.

The figures also come at a time when certain organisations were pointing to a market dampening and the impact of greater restrictions on lending criteria. At the beginning of March, the Bank of England warned borrowers to expect more difficulty in obtaining finance and that seems to be the case.

The National Association of Estate Agents (NAEA) are also concerned at the moves which they believe will stunt a market which had showed signs of improvement during the stamp duty holiday.

“The recent move by some major lenders to severely limit the availability of interest-only mortgages is no doubt dampening the levels of supply in the market,” said Wendy Evans-Scott of the NAEA.

There have also been rises in the variable rate offered by some lenders and it is widely expected that more will follow the lead of their rivals in the weeks to come.

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Halifax Declares Rise in January House Prices

by Alison Feemantle

Earlier this month, the Nationwide revealed figures that claimed a small drop in house prices for January 2012 in comparison with the previous month. Overall, the society suggested that average prices had fallen by 0.9% over the period but those findings are at odds with the latest set of figures produced by the Halifax.

From December 2011 to January 2012 the Halifax suggest that the average cost of a home in Great Britain actually rose by 0.6% to £160,907. The reasons behind these findings lay with low interest rates although they still represent a fall of 1.6% compared with the same period in 2011.

These statistics will be a positive sign for economists who had predicted a gloomy opening to the year. Martin Ellis of the Halifax welcomed the findings while warning that any future figures would be subject to the economy’s ability to withstand all the various problems that it currently faces.

“Low rates have contributed to mortgage payments falling to their lowest level as a proportion of disposable earnings for a new borrower for 14 years. A recent improvement in employment trends may also have supported demand,” Mr Ellis said.

“Prospects for house prices over the coming months will, to a large extent, depend on events in the eurozone and the repercussions of developments there for the UK economy. If the UK can avoid a prolonged recession, we expect broad stability in house prices in 2012,” he added.

Welcome though the figures may be, they still contradict not only the Nationwide’s findings, but additional statistics released by the LSL/Acadametrics house price index which suggest a fall of 0.2% from December 2011 to January 2012 with an annual rate of decline of 1.4%.

LSL Property services who supplied the figures also suggested that the fall was sharper than expected.

“Prices edged down in January, dropping further than the normal seasonal slowdown we expect to see in the first month of the year,” said David Brown, Commercial Director at LSL.

“This means prices are now falling at 1.4% on an annual basis – the fastest rate of decline since September 2011. This has been driven by growing concerns among property buyers about the state of the global economy – especially the extent to which the eurozone crisis will slow the market.”

Confusing though these figures may be, the Halifax are sticking by an overall prediction that will see prices drop considerably for the whole of 2012. This forecast was backed up by Howard Archer, Chief Economist at IHS Global Insight.

“We are sticking to our view that house prices are likely to fall by around 5pc in 2012,” he said. The latest Halifax data, along our belief that the economy will likely just avoid recession, suggests that house prices are unlikely to fall sharply,” Mr Archer concluded.

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No Interest Rate Rise Until 2014

by Sarah Halloran

If you’re looking for a mortgage now or considering starting the search in the near future, there’s a bit of good news to come out of the City.  The Bank of England has said that it is not likely to change its monetary policy stance soon leading experts to suggest that interest rates will not rise until at least 2014.

The chances of a rise in interest rates in 2011 started to ebb away following the steady flow of depressing news regarding the British economy and worsening prospects across Europe.

Members present at the July Monetary Policy Committee meeting voted 7-2 to keep rates held at 0.5%.  The minutes of the meeting also add that members admitted that inflation would go above their prediction of a peak of 5%.

This news comes just one day after Woolwich revealed its cheapest mortgage products for over 15 years – they have reduced the rates on a third of all their tracker and fixed mortgages.

Vicky Redwood, of analysts Capital Economics said  “Our long-held view is that interest rates will remain on hold. We are not expecting interest rates to rise now until 2014 at the earliest.”

Economic forecasting company Ernst & Young’s ITEM Club also reported that they expect no change to the base rate until at least 2014.  The base rate right now is historically low and was first introduced back in March 2009 and it could be here for at least another 12 months.

Other financial analysts have said the Bank of England is “stuck between a rock and a hard place” with both growth deteriorating faster than first predicted, and inflation pressures increasing.

The Good News for Mortgage Seekers

Lenders are really starting to push there products onto the market right now and there’s a lot of fierce competition out there – great news if you looking for a mortgage right now.  Being able to fix your mortgage for 5 years at rates below 4% is a pretty good offer.  Mortgage rates are being pushed down by predictions that the base rate is unlikely to rise anytime soon and also swap rates affecting fixed rate mortgage products have also fallen.  Many lenders have their half year targets to hit and whilst funding might remain tight, the Council of Mortgage Lenders has reported that there may actually be more funding available than first expected.

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Bank of England Reports Mortgage Defaults on the Rise

by Sarah Halloran

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

by Carol Brown

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

by Ed Mead

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

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Ed Mead: Sellers need a notional interest rate rise to smack them across the face

by Ed Mead

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.Should you fix your mortgage rate now?

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

by admin

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:

base rate rises infographic

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.

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Gross mortgage lending rose in July 2010

by admin

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.”

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