Mortgages Uncovered

YouGov have conducted a poll which shows that a massive 75% of first time buyers believe that banks should lend responsibly, even if that means some people will be refused loans.

The poll was carried out on behalf of the charity Shelter, which is trying to persuade the FSA to implement reforms which would result in stronger mortgage regulation.

Just under 80% of those questioned think that banks acted irresponsibly before the credit crunch; almost a third feel they shouldn’t be trusted to lend in a responsible manner in the future.
Shelter’s CE, Campbell Robb, said:

It’s high time the housing minister stopped bowing to the banking lobby and ignoring the advice of economic experts and consumers who have sent clear signals that mortgage lenders need to clean their act up.

We are set for some really tough times ahead as repossessions are already starting to rise and more and more people struggle under the combined pressures of VAT rises, increasing unemployment and sky high living costs. If we compound this by allowing irresponsible lending to make a return to the market, it will spell disaster for our fragile housing market and will undoubtedly result in many more people across the country needlessly losing their homes.

According to UK lenders, March saw an increase in the numbers of new mortgage deals.

Remortgages in March were 16% higher than those in February, and 17% higher than the number approved in March 2010.

The rise in demand for fixed-rate mortgages is being linked to increased living costs and the fear of an increase to the base rate.

Well over a third of all lending in the first quarter of 2011 was for remortgage lending, which represents an increase of 30% on the last quarter of 2010.

The numbers of new mortgages increased by almost a quarter in March when compared with the previous month, although this was 17% lower than the same time last year.

‘Freedom to Fix’ is the new tracker mortgage on offer from Northern Rock that allows customers to change to a fixed rate mortgage at any time during the repayment period. They can do so without the risk of incurring charges or repayment penalties.

At the moment, interest rates are at an all-time low of 0.5% and so starting on a variable interest rate mortgage makes a lot of sense. This option, however, would allow buyers to take advantage of the current low rates without being put off by the potential interest rates in the future.

The Northern Rock commercial director Andy Tate said:

“Due to the low interest rate environment, many borrowers remain attracted to tracker mortgages. However, our research tells us that many customers are mindful of the possibility of base rate rises in the not too distant future and so would like to keep their options open.

“Our Freedom to Fix mortgages offer customers the best of both worlds – a competitive interest rate now with the added security of being able to fix their rate at any point during the tracker period.”

The Halifax has announced that the average cost of a home has fallen yet again in April. The average drop of 1.4% takes prices to their lowest level since July 09.

The year so far has seen house prices continue to fall, with the Halifax warning of an increase in the rate of decrease:

In Q1, houses are reported to have lost 0.6% of their values, while the three month period from February to the end of April saw a 1.2% decrease.

This second figure shows that property prices were 3.7% higher in the same period in 2010.

The decline is being blamed on a lack of demand which is forcing prices down. The current economic climate is discouraging buyers from looking to purchase and making it more difficult to secure mortgages.

Prices have been up and down during the past year, and despite their most recent figures, Halifax is predicting stabilisation in house sales and their prices.

In contrast with the 1.4% drop published by Halifax, Nationwide have reported a decrease of just 0.2% for the same period…

Either way, we’re not out of the woods yet.

Approvals by main high-street banks saw an increase of the annual rate to almost 16 per cent last month, touching a 13-month high.

The average value of the loans, although below the levels seen last year, has also risen steadily over the last six months according to BBA.

The BBA also published statistics on lending to companies, with the figures showing that loans to certain industries remained at a poor quality. Loaning to the construction industry, for example, was down £500m last month, compared with an average drop of £200m over the past six months. With figures such as these being broadcast is there any hope for anyone?

Politicians described the figures as “absolutely pitiful”, saying it didn’t begin to address the true extent of the problem facing Britain’s homeowners yet almost 1,000 homeowners are being evicted every week. Housing Minister John Healey said: “We have put in place help for home owners struggling with their mortgage at every step of the way.”

But the problem is now so great that the Government is supposedly establishing a new team to fast track the cases of those most at risk of repossession. The idea is that under the new scheme families that are eligible can either sell their home and become tenants of it or get an equity loan.

It may seem a little ridiculous for a bank to quote their rivals’ mortgage rates to their own customers even if they are lower than their own, however, HSBC are doing exactly this. The first step has been taken with HSBC customers at the bank’s Market Hill branch within Cambridge as they are the first to be given the option of HSBC’s own mortgages or those of their competitors.

The first step of the trial is to be extended to a further 19 branches over the course of the next few weeks and should the trial prove successful it is to go national in November 2009.

It is clear why HSBC have decided to do this. Whilst it is Britain’s sixth biggest lender, over two thirds of borrowers will choose to get their mortgage via independent mortgage advisers due to them getting the best deals across the market.

HSBC have linked up with mortgage brokers John Charcol to bring a service that charge each customer £150 for the privilege – a clever move. Should a customer decide to go with an HSBC mortgage, then the bank stand to make its normal profits from the sale. Should a customer arrange their mortgage with a “Mortgage Matcher” consultant, who will be a John Charcol employee then the bank will earn a referral fee plus their customer’s advisory fee.

Some people have a different view of the move that HSBC have decided to make and London mortgage adviser Peter O’Donovan said: “…hopefully HSBC’s customers will see that seeking advice from advisers to compare the whole market is common sense, as the lowest rate is not always best advice.”

Within the Times newspapers recently, the paper has talked about an particular instance which saw a customer of Northern Rock turned down when he tried to take back his mortgage overpayment by withdrawing from what is called his ‘flexible’ mortgage.

There are many people who have these flexible mortgages with Northern Rock and have also been told that they may overpay but based on understanding that they may later withdraw their money back if they wished to do so by making a telephone call to the bank.

Apparently, a reader of the Sunday Times overpaid £1 million on their £3 million mortgage account and then tried to withdraw back £25,000 only to be surprised when met by a series of questions regarding his outgoings before he was referred to an underwriter.

Now it is official that Northern Rock customers may no longer have the option to withdraw overpayments.

An independent mortgage broker, Ian Gray told The Times Newspapers;

“This is yet another example of lenders tightening criteria for borrowers unexpectedly. Many people took out those flexible deals with the promise that it was a place to park cash and they could get it next day with a phone call. There are now serious questions about whether they can get their money.”

The least of the risky mortgages within the United States are beginning to show a clear and sharp jump towards “serious delinquencies” says a recent report released last week which now raises fresh concerns for the health of the economy in the United States.

Credit quality has been shown in the report across all loan categories and spells a continued decline during the fourth quarter of last year which means that the riskiest of subprime mortgages are showing, as originally anticipated are at their highest levels of serious delinquencies which is defined as those that are loans that have arrears of 60 days or more.

The largest percentage jump had been in prime mortgages which is the lowest risk of loan category.
Controller of currency John Dugan commented “while there is an increase from a low level, the trend is a matter of concern and prime mortgages account for nearly two-thirds of all mortgages.”

The re-default rates were showing as consistently lower that has resulted from lower monthly payments. After further modifications had decreased the monthly payments by over 10% there were only around 23% of the loans that had became seriously delinquent 6 months after.

John Bowman, the acting director for OTS said; “The trend toward lowering payments to make home mortgages more affordable is moving in the right direction,” said John Bowman, OTS acting director.

The SNP has branded the Nationwide’s decision to prevent Dunfermline customers accessing new lower rate mortgages offered by the Nationwide a “disgrace”.

Where the Nationwide is to offer it’s customers rates of 2.5% at the end of their current mortgage term, Dunfermline customers will be restricted to a rate of 5.49% – at a time when the base-rate is currently 0.5%.

This arrangement was part of the Nationwide’s deal when it bought the Dunfermline.

Central Fife MSP Tricia Marwick, whose constituency includes many Dunfermline workers and mortgage holders said:

“This is an outrageous move by the Nationwide.

“Mortgage holders with the Dunfermline will be very angry. When mortgage deals come to an end they should have access to the best deal in what is now one society.

“Their building society has been sold off behind closed doors and now they are expected to pay a premium for the privilege. This raises more questions over the terms on which the Treasury sold Dunfermline.

“Retaining the Dunfermline brand is important, but that should not mean Dunfermline savers and borrowers suffer.

“Scots will bear the cost of any job losses at Dunfermline HQ – they should not have to pay these additional costs as well.”

SNP Westminster Treasury spokesperson Stewart Hosie MP added:

“The Dunfermline deal has been sold by the government as the best deal for customers and workers, but that is already unravelling.

“While I welcome the fact that Nationwide customers will benefit from this new rate, why should Dunfermline customers be treated differently.

“It is clear Nationwide have taken on the mortgages only to rip customers off.

“Nationwide have taken over the best parts of the Dunfermline business, and is even being guaranteed taxpayers money to pay for the takeover – the least we should expect is an even handed approach.”