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.

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.'

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.'

Buyers Hit Record Low

The effect of the credit crunch on the houseing market can be seen by new figures that show the number of new mortgage deals completed was down to just 64,000 in March, 44% lower than the same time last year.

This is the lowest level since this data has been collected - which started in 1993, during the then home buying slump.

But remortgages were only down from 109,000 in February 2007 to 98,000 in February 2008 according to Bank of England figures.

Despite a cut in interest rates, lenders have increased rates, increased deposits and reduced mortgage products available. According to MoneySupermarket, the average best fixed rate from main providers was 6.18%, while the average tracker rate was 6.29%, and just 32 mortgages offering 95% loan-to-value were left on the market.

Pay more for your mortgage

A report out yesterday from Mform showed that mortgage arrangement fees have almost doubled over the last year, to an average £5,000.

It looked at the average charges on the five most competitive 3-year fixed deals and compared costs from last March to yesterday's top 5. A year ago the average charges were £578 whereas by yesterday that had increased 96% to £1,132. Likewise, 2-year deal have seen average charges rise from £999 to £1,478.

First Time Buyers Hit Hard

Mortgage rates for first time buyers are at an 8 year high.

An average borrower with just a 5% deposit looking at a two-year fixed rate deals has seen mortgage offers jump from 6.55% to 6.64% last month, the dearest since June 2000.
Tracker rates also followed the trend, increasing from 5.96% to 6.04%, according to Bank of England figures.

Almost half of all mortgage products have been removed by the banks in recent months, with borrowers with small deposits watching the best deals being removed as lenders have sought to deter the 'riskiest' customers during the credit crunch.

Less Mortgages In February

The Council of Mortgage Lenders (CML) has reported that mortgages for new purchases hit a record low in Frburary when they dropped by almost a third over the last year. And this is expected to get worse because of the credit crunch and property prices falling.

The CML has reported just 49,000 loans completing in February, worth £7.5bn, 5.1% than the total amount advanced in January.

Remortgaging activity remained unchanged from January, making it's share of the total level jump to it's highest level in three years. And this part of the market is expected to stay high as borrowes fixed and discounted rate deals come to an end.

Less New Mortgages

Only 43,870 new mortgages worth £7bn were approved in February of this year, 33% fewer than February of 2007. This is down on the 6 month average of 47,402 (worth 7.4bn), according to the latest report from the British Bankers Association.

And following on from the removal of mortgage deals, 139 further mortgage deals were removed in just a 24 hour period.

Mortgage Deals Crash

Research has revealed that the number of mortgage deals on offer to customers has dropped from 15,599 last July to 5,785, according to Moneyfacts.

Lenders are removing deals and changing conditions daily. Conditions can change to raise minimum deposits or pay higher rates. This will have a huge impact on the hosuing market, with only 1 in 3 houses expected to sell, according to Henry Pryor, property expert from website Primemove.com.

He said that many will find their dream home, but will not be able to raise a mortgage for it and that sellers must be realistic with prices and expect to raise 10% - 15% less than last summer.

This drop is not just in the troubled sub-prime market. The 'prime' market has also dropped from 3,803 deals to 2,540 in the same time period.

Deals that have done include the 100% and 125% mortgages. Only Abbey now offers a 100% mortgage to the main market, with other lenders offering 100% deals that require further securities, e.g. parental involvement.