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!
Thursday, 29 May 2008
House prices dive
The Nationwide Building Society has reported that house prices have fallen 2.5% during May, which is the biggest fall ever reported by the Building Society since it started creating reports back in January 1991.
This takes the run of months in which house prices have dropped up to 7 months, the longest continuous run of house price falls since 1992. This leaves house prices down 4.4% on what they were this time last year, the biggest annual fall also since 1992.
This brings the price of an average house in Britain to £173,583 - a fall of almost £5000 over the month and £8000 over the year. But even with these falls house prices are still up 5% over the last 2 years and 10% over the last 3 years.
Howard Archer, chief UK economist at Global Insight, said: 'The plunge in house prices in May is a real shock, and will fuel concern that we are now headed for a sharp correction.
'The downward pressure on house prices coming from stretched buyer affordability and tight lending conditions is increasingly biting. It now looks more likely than not that house prices will suffer double-digit falls both this year and in 2009.
'Clearly, a sharp housing-market correction would add to the already serious risks to economic growth, particularly through weighing down on consumer spending.'
This takes the run of months in which house prices have dropped up to 7 months, the longest continuous run of house price falls since 1992. This leaves house prices down 4.4% on what they were this time last year, the biggest annual fall also since 1992.
This brings the price of an average house in Britain to £173,583 - a fall of almost £5000 over the month and £8000 over the year. But even with these falls house prices are still up 5% over the last 2 years and 10% over the last 3 years.
Howard Archer, chief UK economist at Global Insight, said: 'The plunge in house prices in May is a real shock, and will fuel concern that we are now headed for a sharp correction.
'The downward pressure on house prices coming from stretched buyer affordability and tight lending conditions is increasingly biting. It now looks more likely than not that house prices will suffer double-digit falls both this year and in 2009.
'Clearly, a sharp housing-market correction would add to the already serious risks to economic growth, particularly through weighing down on consumer spending.'
Monday, 26 May 2008
More house price falls
A report revealed today that house prices in England and Wales have fallen for the 8th month in a row. The report from Hometrack showed an average fall of 0.5% over May, following a fall of 0.6% in April. Looking at a year on year basis, the annual house price growth rate fell from 0.9% to a drop of 1.9% - the lowest level recorded since Novermber 2005, when a drop of 2.5% was recorded.
Richard Donnell, Hometrack's director of research said: 'What we referred to last month as the 'buyer's strike' continues with a 6.7% drop in the number of buyers registering with agents over May.'
'It is too early to say whether the level of monthly falls will now start to moderate as this will require an improvement in demand and sales agreed which are both linked to overall buyer confidence.'
'The current trends in the survey indicate that pricing looks set to remain under downward pressure over the coming months.'
The report also reveals an increase in the time taken to sell a house. This is now 9.8 weeks, up by 3 weeks over the last year. This follows a repositioning last week by the Council of Mortgage Lenders, who changed their forecast of a 1% growth in property prices to a 7% fall combined with a 35% decrease in property sales this year.
Richard Donnell, Hometrack's director of research said: 'What we referred to last month as the 'buyer's strike' continues with a 6.7% drop in the number of buyers registering with agents over May.'
'It is too early to say whether the level of monthly falls will now start to moderate as this will require an improvement in demand and sales agreed which are both linked to overall buyer confidence.'
'The current trends in the survey indicate that pricing looks set to remain under downward pressure over the coming months.'
The report also reveals an increase in the time taken to sell a house. This is now 9.8 weeks, up by 3 weeks over the last year. This follows a repositioning last week by the Council of Mortgage Lenders, who changed their forecast of a 1% growth in property prices to a 7% fall combined with a 35% decrease in property sales this year.
Wednesday, 21 May 2008
Mortgage Crunch Easing
Observers are hoping that the first signs of the end of the mortgage crunch may have arrived with positive news from lenders regards mortgages. Nationwide Building Society has cut its fixed rate mortgage products by up to 0.3% whilst Abbey has cut up to 0.17% off its fixed rates and 0.05% of tracker mortgages in its ranges.
And after pulling out of mortgages for new customers at the beginning of last month, HSBC-owned First Direct will again start plying for new trade by offering mortgages to new customers.
First Direct stopped accepting new applications after it said it had received 5 times the normal number of applications, but it has now cleared the backlog and is ready to take more new applications, for those with at least a 20% deposit.
But many lenders are still only offering top rates to those able to put down a 20%, or even a 25%, deposit on their purchase.
Louise Cuming, from price comparison site Moneysupermarket.com, said: 'This is welcome news in an otherwise hostile market place. First Direct's original stance - made at the start of April - was reflective of a cautious attitude towards the market as a whole. The reversal of the decision demonstrates a growing confidence in the market.
'The news that First Direct is reopening its doors comes hot on the heels of Abbey and Nationwide cutting mortgage rates last week and HSBC extending its rate matcher offer. The clouds over the mortgage market are starting to clear, much to the relief of borrowers across the country.'
And after pulling out of mortgages for new customers at the beginning of last month, HSBC-owned First Direct will again start plying for new trade by offering mortgages to new customers.
First Direct stopped accepting new applications after it said it had received 5 times the normal number of applications, but it has now cleared the backlog and is ready to take more new applications, for those with at least a 20% deposit.
But many lenders are still only offering top rates to those able to put down a 20%, or even a 25%, deposit on their purchase.
Louise Cuming, from price comparison site Moneysupermarket.com, said: 'This is welcome news in an otherwise hostile market place. First Direct's original stance - made at the start of April - was reflective of a cautious attitude towards the market as a whole. The reversal of the decision demonstrates a growing confidence in the market.
'The news that First Direct is reopening its doors comes hot on the heels of Abbey and Nationwide cutting mortgage rates last week and HSBC extending its rate matcher offer. The clouds over the mortgage market are starting to clear, much to the relief of borrowers across the country.'
Monday, 19 May 2008
House sales could collapse by 40%
The latest survey from RICS (Royal Institution of Chartered Surveyors) has revealed that house sales could collapse by 40% this year.
The impact of this would hit the economy, as firms providing services to movers struggle for sales - such as carpet retailers, white goods, DIY stores etc. RICS warned the number of house sales could plunge by around 400,000 to approximately 600,000 with the second half of the year bein a 'difficult period for the housing market'.
Whilst a collapse of the housig market might be seen as good news for first time buyers trying to get onto the property ladder, these people are also struggling to get loans as the number of available different mortgage products has dropped by around 56% over the last 6 months to just 16,000.
The impact of this would hit the economy, as firms providing services to movers struggle for sales - such as carpet retailers, white goods, DIY stores etc. RICS warned the number of house sales could plunge by around 400,000 to approximately 600,000 with the second half of the year bein a 'difficult period for the housing market'.
Whilst a collapse of the housig market might be seen as good news for first time buyers trying to get onto the property ladder, these people are also struggling to get loans as the number of available different mortgage products has dropped by around 56% over the last 6 months to just 16,000.
Wednesday, 14 May 2008
House prices could tumble 10%
A government blunder has revealed that 'at best' property prices are expected to fall between 5 and 10% this year.
Caroline Flint accidentally revealed a briefing note on her way to this week's Cabinet meeting. It was headed 'Caroline Flint - speaking notes' and contained a summary of what the minister told Mr Brown, Mr Darling and other Cabinet colleagues.
A sticker on the document said 'Papers for Cabinet meeting 13 May 2008'. The briefing said leading house price indicators were predicting reductions for the first time in recent years and warned : 'We can't know how bad it will get. Given present trends, they will clearly show sizeable falls in prices later this year - at best down 5%-10% year on year.'
Caroline Flint accidentally revealed a briefing note on her way to this week's Cabinet meeting. It was headed 'Caroline Flint - speaking notes' and contained a summary of what the minister told Mr Brown, Mr Darling and other Cabinet colleagues.
A sticker on the document said 'Papers for Cabinet meeting 13 May 2008'. The briefing said leading house price indicators were predicting reductions for the first time in recent years and warned : 'We can't know how bad it will get. Given present trends, they will clearly show sizeable falls in prices later this year - at best down 5%-10% year on year.'
Surge in inflation
A massive surge in inflation has been reported from 2.5% to 3% caused by rising gas & electricity bills and food prices and Budget tax increases on alcohol and tobacco. Although only just released, the Bank of England's monetary policy committee did have access to this data when it met last week and decided to hold interest rates. The committee's aim to to keep inflation around 2% and never allow it to creep above 3%. City economists had been expecting a report of 2.6%.
The result of this is that another rate cut is highly unlikely. Back in October when inflation crept to 2.1% analysts thought it unlikely that there would be any further base cuts before spring.
When they next meet, the monetary policy committee will have to work out how to balance rising inflation against the reports from RICS yesterday of a record low in house sales.
Savers who are watching their savings dwindle in the face of increasing inflation will be hoping that the next rate announcement will be for a rate rise, but there is no guarantee that a rise in interest rates would have any effec on high street prices.
The result of this is that another rate cut is highly unlikely. Back in October when inflation crept to 2.1% analysts thought it unlikely that there would be any further base cuts before spring.
When they next meet, the monetary policy committee will have to work out how to balance rising inflation against the reports from RICS yesterday of a record low in house sales.
Savers who are watching their savings dwindle in the face of increasing inflation will be hoping that the next rate announcement will be for a rate rise, but there is no guarantee that a rise in interest rates would have any effec on high street prices.
Tuesday, 13 May 2008
Lowest House Sale Rate on Record
Estate agents are reporting they are selling less homes than at any point since current records began, back in 1978, according to a report from the Royal Institution of Chartered Surveyors (RICS).
House prices are also showing the biggest falls since RICS started recording them, 30 years ago, making the current crisis worse than the property crash of the '90s, at least on paper.
82% of the 282 estate agents that took part in the RICS poll recorded falling house prices over the last 3 months. Between February and April they sold on average just 18.3 properties, with one reporting sales down by 60%. Even Scotish House Prices recorded a drop last month, meaning that all regions of Britain are now experiencing price falls. The worst hit area is the East Midlands, having suffered 16 straight months of decline.
It has also been noted that the number of buyers registering an interest to buy with estate agents is also down and has been sliding for 2 years. Estate agents blame mortgage difficulties, saying that buyers looking for "perfectly normal loans" are being rejected.
House prices are also showing the biggest falls since RICS started recording them, 30 years ago, making the current crisis worse than the property crash of the '90s, at least on paper.
82% of the 282 estate agents that took part in the RICS poll recorded falling house prices over the last 3 months. Between February and April they sold on average just 18.3 properties, with one reporting sales down by 60%. Even Scotish House Prices recorded a drop last month, meaning that all regions of Britain are now experiencing price falls. The worst hit area is the East Midlands, having suffered 16 straight months of decline.
It has also been noted that the number of buyers registering an interest to buy with estate agents is also down and has been sliding for 2 years. Estate agents blame mortgage difficulties, saying that buyers looking for "perfectly normal loans" are being rejected.
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