Mortgages Uncovered

There has been an outcry from the MSP and SNP’s who have called Nationwide’s decision for preventing the Dunfermline customers from accessing the new lower rate of mortgage products on offer as a “disgrace”.

The Nationwide is set to offer its own customers mortgage rates of 2.5% after the end of their current mortgages; however, Dunfermline customers are restricted to the mortgage rate of 5.49% when the BofE base rate is only 0.5%.

During the takeover, Nationwide arranged this as part of their deal with the Dunfermline Building Society.

Fife MSP Tricia Marwick covers the area of Dunfermline in one of her constituencies and recently commented:

“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.”

In March house prices rose again, say the Nationwide.

The Nationwide building society claimed that house prices further increased by 0.9% in comparison to the previous month.

The annual rate of property price falls fell from February’s 17.6% to 15.7% in March, which brought the average cost of a UK home to £150,946.

Nationwide described the change as a “surprise bounce” and warned against concluding the market had turned.

Chief economist at Nationwide, Fionnuala Earley said;”While the rise in prices in March is welcome, it is far too soon to see this as evidence that the trough of the market has been reached. Cuts in interest rates and the Bank of England’s move to expand the amount of money in the system would take time to work through into the housing market before there was a sustained recovery in house prices.”

The survey from Nationwide found that UK house prices had dropped by 4.2% during the first 3 months of this year in comparison to the final quarter of 2008.

Ms Earley commented that “… the significant slowdown in falling prices year-on-year was distorted by the sharp decline in the market last year.”

The figures from the building society further show that the prices of flats have been particularly volatile in comparison with other types of properties.

Lending figures for mortgages have recently suggested that buyers are now coming back into to the housing market.

The amount of mortgages that were approved for purchasing homes have jumped up considerably by 19% during the month of February and is a definite sign that home buyers are eventually returning back to the housing market.

37,937 mortgages for home loans were approved in February which is the highest level that has been seen since last May say the Bank of England.

The new figure now suggests that double digit house prices and falling interest rates have become a temptation for bringing buyers back into the housing market.

Last week figures were released from the British Bankers’ Association which showed that the amount of mortgages that were approved for home purchasing through major banks had risen in a third month in a row in February.

Today’s BofE figures suggested that sales were picking up again.

UK economist at Capital Economics, Vicky Redwood said:

“February’s household borrowing figures suggest that housing market activity may finally have turned a corner. The rise in the number of mortgage approvals for new house purchase … might suggest that the pick-up in new buyer inquiries is feeding through into actual activity. With new buyer inquiries still rising, this is clearly quite promising.”

In March house prices rose again, say the Nationwide.

The Nationwide building society claimed that house prices further increased by 0.9% in comparison to the previous month.

The annual rate of property price falls fell from February’s 17.6% to 15.7% in March, which brought the average cost of a UK home to £150,946.

Nationwide described the change as a “surprise bounce” and warned against concluding the market had turned.

Chief economist at Nationwide, Fionnuala Earley said;

“While the rise in prices in March is welcome, it is far too soon to see this as evidence that the trough of the market has been reached. Cuts in interest rates and the Bank of England’s move to expand the amount of money in the system would take time to work through into the housing market before there was a sustained recovery in house prices.”

The survey from Nationwide found that UK house prices had dropped by 4.2% during the first 3 months of this year in comparison to the final quarter of 2008.

Ms Earley commented that

“… the significant slowdown in falling prices year-on-year was distorted by the sharp decline in the market last year.”

The figures from the building society further show that the prices of flats have been particularly volatile in comparison with other types of properties.

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 Council of Mortgage Lenders (CML) has released figures showing that over 22,000 people took out 100% mortgages last year and many of them could face negative equity this year if they aren’t already in negative equity.

Negative equity is when your house is worth less than the mortgage you have secured on it.  This means that if you wanted to sell your home, you’d then have to find a large sum of money to make up the shortfall so it’s not a comfortable scenario at all.

The CML and press coverage have offered the following advice:

1 – If you can, just continue living in your home.  Most people have a 25 year mortgage or so and eventually prices will rise again

2 – If you do need to leave, consider renting your home out, providing the rent will cover the mortgage interest repayments.

3 – If you need to remortgage, be sure to shop around and find a good mortgage advisor to help you find the best deal for you

On Monday the Halifax, Britain’s largest money-lender, will be launching a new series of products and will also be cutting its rates and fees.

Tracker rates will apparently be cut by up to 30 points.

Halifax will contact brokers later today with more details.

It isn’t just the UK that has been hit hard by the ructions across the Atlantic because of America’s sub-prime mortgage crisis. Banks in Turkey have lost up to $50 billion since January as a direct result of foreign investors retreating from the region.

Granted that there are also home-grown economic tensions within Turkey that have also had an effect on this outcome, but it is frightening at just how much the outflow of foreign investors can result in such a sudden and steep decline in profitability for Turkish banks. These aren’t just any old investors of course, but ones who bought into banking stocks over the last decade and who are now selling those stocks like they are going out of fashion – which, in a sense, they are. The fluctuation in the world markets because of the US Sub-prime crisis has led to this en-masse selling, which is in turn creating a dramatic decline in banking stocks – a situation not helped by the banks’ consecutively high dividend issues which also drive away foreign investment.

Further exacerbating the plight of Turkey’s banks, Ahmet İyimaya, the head of the Justice Commission, has presented a draft bill to the Turkish Parliament for proposed caps to credit card interest rates, which has caused another plummet to bank stocks within the last week.

A consortium of banking interests has presented its concerns to the Turkish Parliament, but little progress has yet been made to sort out the problems they face.

You probably won’t be all that comforted to learn that the Emerald Isle (that’s Ireland, not a place somewhere over a rainbow) has been hit as dramatically as everywhere else in terms of credit and mortgages. In April last, growth in residential mortgage lending rates was seen to have fallen to the lowest level in 16 years, according to Irelands Central Bank.

Although April has always been a poor month for mortgages lending due to its coinciding with the Easter Holidays, Easter fell earlier in March this year and so the figures should be taken as being particularly grim.

Residential mortgage lending saw to the lowest annual rate of growth seen since May 1992.

In terms of hard cash the figures seem astounding with €143.4 billion in outstanding residential mortgages. Outstanding debts on credit cards saw a year on year increase of 7.2% in April, although at least this was down from the 8.6% in March.

However, the Bank of Ireland is assuring the population that the housing market is going to start ‘balancing out’. In its quarterly Irish Property Review, the bank claimed that the average price of a house had fallen back in line with levels as they were in 2006 – around €281,600. The report also claims that Ireland will see a rise to 37% in terms of house affordability in 2008 as the average income rises by 4.9%.

But don’t break out the party hats and streamers just yet. The same report indicated that average rents had seen a 22% increase in the three years running up to March 2008.

It seems that Sydney, Australia, is not just the home of stunning architecture like the famous Opera House, it is also the number one city in Australia for stress over mortgages, and no amount of beach barbeques seem to be able to shift it.

Silly stereotyping aside, new research by the ratings agency Fitch has shown that out of 947,000 residential mortgages across the country, arrears are rising – although still not that high if you ask me being as they’re only 1.88%).

Anyway, the suggestion is that there is a steadily widening gap between the well off and not-so-well-off as stress levels caused by mortgages climb. Apparently it’s western Australia that has the has the lowest percentile of arrears but at the same time the region is also facing the fastest deterioration.

Ben McCarthy, managing director of Fitch has been quoted as saying: “Nine of the top 10 worst performing postcodes in the country are actually in New South Wales, and eight of those nine are actually in south-western and western Sydney.”

Hmm… I wonder how these figures compare with similar problems in ‘old’ South Wales here in the UK…?