A report from the property website Rightmove shows a record 1,000,000 homes are currently for sale in England and Wales. The same report also shows that the average house price has dropped by £3,000 between May 11 and June 14 - a drop of 1.2%.
The report's figures are seen as a sign of panic selling to stave off massive losses; people selling and hoping to invest the cash for now and buy cheaper in the future and people selling to take advantage of cut priced new properties.
Monday 23 June 2008
Thursday 19 June 2008
Rates could have risen
As we said earlier this month, the Bank of England's decision to hold interest rates was not an easy one, with the minutes of the Bank's Monetary Policy Committee revealing that some of the nine committee members wanted an interest rate increase to stem rising inflation.
The minutes said 'if there were a serious threat to medium-term inflation expectations then a pre-emptive rise in rates would be appropriate. Delay would only increase the eventual costs of bringing inflation back to target.'
The minutes said 'if there were a serious threat to medium-term inflation expectations then a pre-emptive rise in rates would be appropriate. Delay would only increase the eventual costs of bringing inflation back to target.'
Thursday 12 June 2008
Lenders charge punishing fees
The number of lenders charging 'horrendous' mortgage arrangement fees and rocketed over the last year and a half according to a report by the comparison website MoneyExpert.com.
The report showed that in September 2006 fees of £750 or more were charged in just 22 fixed-rate mortgages. But since the 'credit crunch', this figure has shot up to 323, on the back of the number of available mortgage products tumbling. At the same time, average fees have increased from £517 in September '06 to £860 now.
And this average is small fry compared to some charges on the market. For example, Abbey's 5-year 7.04% fixed rate mortgage deal comes with charges of £2,499 and this must be paid upfront when the deposit is less than 15%.
Only fixed rate mortgages were looked at in the report, and only fixed rate charges. Some deals charge a percentage of the loan amount, so the actual rise could be far worse.
The report showed that in September 2006 fees of £750 or more were charged in just 22 fixed-rate mortgages. But since the 'credit crunch', this figure has shot up to 323, on the back of the number of available mortgage products tumbling. At the same time, average fees have increased from £517 in September '06 to £860 now.
And this average is small fry compared to some charges on the market. For example, Abbey's 5-year 7.04% fixed rate mortgage deal comes with charges of £2,499 and this must be paid upfront when the deposit is less than 15%.
Only fixed rate mortgages were looked at in the report, and only fixed rate charges. Some deals charge a percentage of the loan amount, so the actual rise could be far worse.
Wednesday 11 June 2008
Interest Rates To Rise???
The prospect of further rate cuts this year have gone and there are likely to be two or even three quarter percent rises in interest rates this year, the City is gambling.
Having made three interest rate cuts since December, the Bank of England's efforts have been hit by rising oil costs, putting inflation up. Investors are now gambling on the prospect of rather than interest rates dropping to 4.5%, the base rate might be increased to 5.5%, or higher.
Having made three interest rate cuts since December, the Bank of England's efforts have been hit by rising oil costs, putting inflation up. Investors are now gambling on the prospect of rather than interest rates dropping to 4.5%, the base rate might be increased to 5.5%, or higher.
Saturday 7 June 2008
Bradford & Bingley increase borrowing cost
Following the lead of the Abbey and Woolwich and then Nationwide, interest rates for mortgages have been increased by Bradford & Bingley.
They will increate rates on their standard residential, buy-to-let and self-certification mortgages by between 0.05% and 0.55%, even though the Bank of England this week kept the base interest rate at 5%.
They will increate rates on their standard residential, buy-to-let and self-certification mortgages by between 0.05% and 0.55%, even though the Bank of England this week kept the base interest rate at 5%.
Friday 6 June 2008
Interest Rates
As expected, the Bank of England decided to keep interest rates steady at 5% this month. With inflation around 3% well ahead of their 2% target and likely to approach 4% over the summer due to rising fuel and food prices, even falling house prices could not convince the Bank to cut interest rates.
If inflation rises above 3%, Bank Governor Mervyn King has to write a second letter to Alistair Darling to explain why it is so high. King has said he expects to write a number of such letters this year following the first letter in the Bank's history when inflation hit 3.1% last year.
The British Chambers of Commerce urged the MPC to consider the whole economic outlook and not just inflation. 'We understand the critical need for the MPC to maintain credibility, but it cannot disregard the worsening threats to growth,' said the BCC's David Kern.
The European Central Bank also left interest rates at 4% as it concentrated on its own inflation battle.
If inflation rises above 3%, Bank Governor Mervyn King has to write a second letter to Alistair Darling to explain why it is so high. King has said he expects to write a number of such letters this year following the first letter in the Bank's history when inflation hit 3.1% last year.
The British Chambers of Commerce urged the MPC to consider the whole economic outlook and not just inflation. 'We understand the critical need for the MPC to maintain credibility, but it cannot disregard the worsening threats to growth,' said the BCC's David Kern.
The European Central Bank also left interest rates at 4% as it concentrated on its own inflation battle.
Halifax House Prices Down
The Halifax has reported that the price of an average home dropped by 2.4% or £4,600 in May - down to £184,111. It compares very badly to the 10.6% rise in house prices experienced in the year ending last May. This means that the average home has lost £15,000 in value since the market peaked last August - down 8% since prices peaked at £199,600.
Comparing the index's average monthly prices shows an average house is worth £12,525 less than the May 2007 value of £196,636 - a drop of 6.4%.
Economist Howard Archer, of analysts Global Insight, predicted prices would fall by 12% in both 2008 and 2009, revising an earlier forecast of 7% this year and 9% next year.
Archer said: 'The latest data on the housing market are undeniably alarming. Clearly, the downward pressure on house prices coming from stretched buyer affordability and tight lending conditions is now biting hard.
'Elevated affordability pressures on potential house buyers stem from high house prices and modest real disposable income growth, while ongoing tight credit conditions are leading to significantly fewer and more expensive mortgages being available.
'Furthermore, potential house buyers now have to provide higher deposit levels, which is a particularly major problem for first-time buyers.'
Comparing the index's average monthly prices shows an average house is worth £12,525 less than the May 2007 value of £196,636 - a drop of 6.4%.
Economist Howard Archer, of analysts Global Insight, predicted prices would fall by 12% in both 2008 and 2009, revising an earlier forecast of 7% this year and 9% next year.
Archer said: 'The latest data on the housing market are undeniably alarming. Clearly, the downward pressure on house prices coming from stretched buyer affordability and tight lending conditions is now biting hard.
'Elevated affordability pressures on potential house buyers stem from high house prices and modest real disposable income growth, while ongoing tight credit conditions are leading to significantly fewer and more expensive mortgages being available.
'Furthermore, potential house buyers now have to provide higher deposit levels, which is a particularly major problem for first-time buyers.'
Tuesday 3 June 2008
Nationwide increase mortgage costs
The Nationwide has followed the lead of Abbey and Woolwich by increasing the cost of its fixed rate mortgages. Its top two-year fixed rate for homebuyers has jumped by over quarter of a percent from 5.95% to 6.25%, with a £599 arrangement fee - leaving it just 0.24% below its 6.49% base mortgage rate. Whilst the fee-free two-year fixed rate has also risen by 0.3% to 6.65%, and the best two-year fixed rate for remortgagers is now 6.45%, with a £599 fee.
Nationwide said that a significant rise in money market swap rates over the past few weeks had led it to reverse cuts made to its mortgage rates in May.
Nationwide said that a significant rise in money market swap rates over the past few weeks had led it to reverse cuts made to its mortgage rates in May.
New low for new mortgages
Official Bank of England figures have shown a record low in the number of new mortgages approved for the second month in a row for April 2008. With only 58,000 mortgages for homebuyers being approved in April, that was less than half the 107,000 recorded in April 2007. These monthly figures are the lowest since records began in 1993 and are a worrying drop on the previous 12 months' peak of 115,000 in May 2007.
Simon Rubinsohn, Rics chief economist said: 'The latest weak data on mortgage approvals highlights the continuing problems facing borrowers trying to secure finance to purchase property.
'Lenders are continuing to tighten up on the conditions accompanying new loans making it hard for first-time buyers to take advantage of the modest fall in house prices seen over the part few months.
'This highlights very clearly the real problem facing not just the property market but also the wider economy.
'A collapse in transactions of this magnitude has major implications both for consumer spending and a wide range of ancilliary industries. Although a supportive response from the Bank of England is improbable in the near term, the persistence of such a trend could force the hand the authorities as autumn approaches.'
Simon Rubinsohn, Rics chief economist said: 'The latest weak data on mortgage approvals highlights the continuing problems facing borrowers trying to secure finance to purchase property.
'Lenders are continuing to tighten up on the conditions accompanying new loans making it hard for first-time buyers to take advantage of the modest fall in house prices seen over the part few months.
'This highlights very clearly the real problem facing not just the property market but also the wider economy.
'A collapse in transactions of this magnitude has major implications both for consumer spending and a wide range of ancilliary industries. Although a supportive response from the Bank of England is improbable in the near term, the persistence of such a trend could force the hand the authorities as autumn approaches.'
Monday 2 June 2008
Interest Rates Up.
In the light of a difficult decision for the Bank of England, two of the country's main lenders have already preempted what might happen.
The Abbey and Woolwich have both raised the costs of their new fixed rate mortgages, with other lenders now expected to follow this move.
Abbey has increased the price of all its fixed-rate products by between 0.15% and 0.56%. Abbey cut its fixed rates just two weeks ago.
Woolwich increased its two-year fixed-rate deal from 5.49% to 6.19% while its ten-year fixed rate product went from 5.59% to 5.77%.
Both banks are blaming last week's increase in swap rates - the level at which banks lend to each other - for the increase. They also say they want to control business volumes in a volatile market.
The Abbey and Woolwich have both raised the costs of their new fixed rate mortgages, with other lenders now expected to follow this move.
Abbey has increased the price of all its fixed-rate products by between 0.15% and 0.56%. Abbey cut its fixed rates just two weeks ago.
Woolwich increased its two-year fixed-rate deal from 5.49% to 6.19% while its ten-year fixed rate product went from 5.59% to 5.77%.
Both banks are blaming last week's increase in swap rates - the level at which banks lend to each other - for the increase. They also say they want to control business volumes in a volatile market.
Hobson's Choice For Bank
The Bank of England's monetry committee will have a difficult meeting this week when it meets to decide what will happen with interest rates this month, and the experts are divided as to what might happen.
On one side, the plunge in the housing market is calling for interest rates to be cut to ease the burden on mortgage payers and get some movement back into the property market.
On the other side, the rising cost of fuel and food is putting inflation up, well over the Bank's target of 2% to it's limit of 3%, with this month's figures yet to be released. This is seen as an indicator to increase interest rates, good news for those with savings.
Normally the rising inflation would automatically trigger an interest rate rise, but inflation is rising due to the increase in the cost of essentials, which would not be controlled by interest rises.
Whichever way the Bank of England reacts it will no doubt be seen to be doing the wrong thing. Either it will be punishing hard pressed people who have borrowed too much; it will be not looking after the economy and allowing inflation to spiral; or it will be sitting on the fence dithering!
Watch this space on Thursday!
On one side, the plunge in the housing market is calling for interest rates to be cut to ease the burden on mortgage payers and get some movement back into the property market.
On the other side, the rising cost of fuel and food is putting inflation up, well over the Bank's target of 2% to it's limit of 3%, with this month's figures yet to be released. This is seen as an indicator to increase interest rates, good news for those with savings.
Normally the rising inflation would automatically trigger an interest rate rise, but inflation is rising due to the increase in the cost of essentials, which would not be controlled by interest rises.
Whichever way the Bank of England reacts it will no doubt be seen to be doing the wrong thing. Either it will be punishing hard pressed people who have borrowed too much; it will be not looking after the economy and allowing inflation to spiral; or it will be sitting on the fence dithering!
Watch this space on Thursday!
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