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.

Interest rates in the UK are currently at the exceptionally low rate of 0.5%, and yet analysts are now warning that these interest rates are set to rise as high as 5%, or potentially, even higher.

These could see new home-buyers spending more than half of their take-home pay on mortgage repayments.

For existing mortgages and remortgage deals, the rise in interest rates would also see a significant increase in the amount to be repaid.

This doesn’t bode well for those who are already struggling, although the Bank Rate is not expected to change before 2013.

The last quarter of 2010 saw 7,900 reposessions, while this figure had risen to 9,100 for the first quarter of 2011.

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.