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Mon 16th Jun, 2008
Posted in Consumer Credit, Personal loans, Debt Consolidation, UK Finance, interest rates, mortgages, Consumer debt, Inflation, Homeowners, House buying, Financial products, Property, Financial news, Housing news, Borrowing, Personal debt, Secured loans, Debt management at 1:21 pm by admin
There are mounting fears that the Bank of England is losing its grip on the economy. A combination of rising food costs, fuel hikes and other price rises are stoking inflation which should mean raising interest rates for the Bank.
However as a result of the global credit crunch, banks are starting to hoard money instead of lending which is putting downward pressure on house prices and pushing the monetary policy committee (MPC) towards actually cutting the base rate. Even in this atmosphere of falling house prices, would-be buyers are finding it hard to secure a home loan to make a purchase they can now afford.
The credit squeeze has created much uncertainty in the economy and the nine MPC members seem very reluctant to actually cut interest rates. The members are facing a dilemma in that domestic inflation is heading in one direction while at the same time the international money market is actually going in the opposite direction.
When the Consumer Prices Index went up by 2.1% - which is above the government target of 2% - it would, under any other circumstances, signal an increase in interest rates in order to bring about higher borrowing costs. The interest rate at 5% is still an expansionary rate which will only fuel higher inflation, putting inflation up again to a more neutral level will hopefully neither dampen nor stoke the economy.
However the credit crunch is pulling for interest rates to come down. Uncertainty in the banking sector has prompted banks to cut lending to other institutions and instead hoard cash. Customers are reporting difficulty in securing personal loans, especially for debt consolidation, as lenders are either unable to access the funds, or simply unwilling.
Bank of England governor Mervyn King has warned the MPC that the credit crunch could get even worse in the coming year unless interest rates are cut.
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Thu 5th Jun, 2008
Posted in Bad Credit, Consumer Credit, Personal loans, Homeowner Loans, UK Finance, interest rates, mortgages, Consumer debt, Inflation, Homeowners, House buying, First time buyers, Spending, Unsecured loans, Financial news, Housing news, Borrowing, Personal debt, Secured loans, Rental property, Debt management at 12:02 pm by admin
More and more existing home owners are find it harder to sell their homes as fears of recession keep people from moving. But in an ironic twist, first time buyers are unable to take advantage of the new low house prices because of a lack of affordable home loans on the market.
The growing concern over the state of the economy is making many people more unwilling to overstretch themselves by buying a new home now. New figures published by the Halifax have shown that house prices fell by their sharpest rate in more than fifteen years in May.
Many buyers were hoping for a fall in borrowing costs when the Bank of England dropped the base rate to 5%. However, lenders have been unable to pass on the cut as the Libor rate remains high and liquidity low. Loans of all types have been affected.
The Bank of England is due to announce its latest interest rate today and is widely tipped to leave the rate at 5%. Consumers may feel this is a blow, but with the Government worried about inflation, the Bank is unlikely to cut the rate again yet.
Halifax’s chief economist, Martin Ellis, said: “The decline in prices is caused by the difficulties created for potential house purchasers by the rapid rise in house prices in the last few years, a squeeze on spending power and the reduction in credit availability,”
Halifax warn that house prices could continue to drop next year. This is potentially good news for those waiting to afford their first home, but may still not be enough to counteract the credit crunch.
Britons have seen their wages rise 4% in the past year, a stark contrast to the 9% rise in fuel prices seen and the 7% increase in food costs.
Sadly for many, property rental prices have also been increasing as more buy-to-let investors pull out of the market, leaving a diminishing pool of properties available for rent.
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Wed 2nd Apr, 2008
Posted in Consumer Credit, UK Finance, mortgages, Remortgaging, Inflation, Homeowners, Financial products, Property, Housing news, Borrowing, Secured loans at 1:12 pm by admin
Imagine this scenario, you have come into a little money maybe from a big bonus at work or that rich old aunt of your has passed away and left you with all her money. Now you have the opportunity to pay back your entire mortgage. Well should you do it? The answer is yes and I’m now going to tell why. The answer may be a little complicated but take my word for it.
Right now inflation is low, so debt is pretty much remaining at the same proportion of your income over time. You see if there was high inflation then you could rely on inflationary increases in your income but that’s not going to happen any time soon. Also the government has removed the tax incentive to hang onto your debt in the form of mortgage tax relief.
So lets break it down. Imagine you have a 25 year home loan at £100,000 and interest rates are at 6 percent. Overpaying on that mortgage by say £100 a month could save you as much as £27,000 and cut the life of your loan by as much as six years. That mean you can take that tropical cruise you have always wanted much earlier with plenty of money to finance it.
A word of caution however, some lenders out there charge what is known as an Early Redemption Penalty. These charges can continue for several years after you have paid back the mortgage. In a situation like this it may not be so wise to pay back your mortgage early. Sometimes you just can’t beat the banks.
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Thu 7th Feb, 2008
Posted in Bad Credit, Consumer Credit, Homeowner Loans, Banking, UK Finance, interest rates, mortgages, Inflation, Homeowners, House buying, Property, Financial news, Borrowing, Secured loans, Debt management at 2:21 pm by admin
The sub-prime mortgage crises might lead to banks trying increasingly drastic behaviour in an attempt to recoup some of their losses, including a hike in mortgage repayments.
Economists are warning that banks and building societies are going to have to raise rates as a result of the current global credit crunch.
This is primarily a result of banks’ reluctance to bring down the rates they charge when lending between themselves. This has caused the cost of financing mortgages by banks to dramatically increase and if the reluctance of banks to bring down rates for inter-bank lending persists we could see these costs coming through the system and hitting borrowers.
Despite all this, banks are also at war in an attempt to attract new customers and recent adverts by some banks are claiming to be cutting the cost of fixed rate home loans.
Banks right now are extremely exposed to bad loan debt in the US and as long as this crisis persists the more likely the chance that eventually this will start to filter through to customers.
It is possible that if the credit crunch persists for much longer, mortgage and loan rates could start to go up. Banks are increasingly turning towards savers as a way of freeing up credit and even though the Bank of England put interest rate rises on hold, some banks are increasing fixed term savings rates.
If banks continue to have difficulty funding mortgages we could well see mortgage rates going up in the near future.
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Posted in Consumer Credit, Homeowner Loans, Banking, UK Finance, interest rates, mortgages, Consumer debt, Inflation, Homeowners, Property, Financial news, Borrowing, Debt management at 2:17 pm by admin
While the Bank of England decided the leave rates at 5.75% during their last meeting, further warnings of global economic turmoil are increasing speculation among financial experts that interest rates may well start to come down soon.
There is a growing consensus amongst economists that interest rates have now peaked. This prediction was further strengthened with a comment the BoE recently released.
One of the biggest reasons the rate rises have had such a large impact is that bank to bank lending is at its highest level in almost a decade. The amount of bank to bank lending depends on the rate banks charge each other for lending which now stands at 6.88%.
This financial turbulence is beginning to be felt by households also result out for the last quarter show that house price inflation was down to 1.6%. The cost of borrowing has gone up considerably in recent months, putting many of us off looking for a new home. Anyone struggling with their home loan repayments should be relieved to hear news that interest rates are not going up again.
Despite the high interest rates, inflation is expected to persist in all areas of the economy. The poor weather last summer meant that harvests were down, which explains the price increase for many goods in your local super market. With fuel costs also at their highest ever rates, it’s no wonder that households are having to borrow money to make ends meet.
While inflation in the housing sector has come down in recent months, house prices are not expected to start falling because of a general shortage of housing across the country and strong employment figures.
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Fri 18th Jan, 2008
Posted in Consumer Credit, Homeowner Loans, UK Finance, interest rates, mortgages, Remortgaging, Inflation, Homeowners, House buying, First time buyers, Property, Financial news, Housing news, Borrowing, Secured loans, Negative equity at 1:47 pm by admin
This is probably a burning question for most of us out there since our house is not only a roof over our head but also the largest investment we will probably ever make.
Up until 8 months ago it appeared as if the house price boom would never end with over a decade of record breaking growth in house prices.
However more recent figures coming out in the past two months paint a gloomier picture. If you are a mortgage holder then this could be a cause of great concern as you may end up owing more on your home loan than the value of your house: i.e., negative equity.
Meanwhile the US has seen a decade of growth starting to turn and house prices in many areas of the US are falling as the global credit crunch takes its first victims. Right now in the US there is a record number of mortgage defaults and this is going to start having an effect on us here in the UK as the cost of borrowing goes up.
The Royal Institution of Chartered Surveyors (Rics) has said that nearly half of its surveyors saw price falls in December, the worst figures since late 1992.
Interest rate rises and a tightening of lending criteria are thought to be the main causes of the market drop, with lenders reporting a drop in loan approvals.
The Halifax and Nationwide also reported seeing a weakening of the property market, and recent Government data from
“The housing market is clearly feeling the pinch from the credit crunch and the round of interest rate hikes in 2007,” said Rics spokesman Ian Perry.
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Thu 3rd Jan, 2008
Posted in Consumer Credit, Personal loans, Homeowner Loans, UK Finance, interest rates, mortgages, Remortgaging, Inflation, Homeowners, House buying, First time buyers, Property, Financial news, Housing news, Borrowing, Secured loans at 3:15 pm by admin
The outlook for house prices is uncertain after a summer in which we saw a further rise in interest rates as well as global turmoil in the credit markets.
Mortgage lending throughout the summer remained strong and with the five interest rate hikes over the past 12 months we have seen house price inflation return to more sustainable levels. Whilst December’s rate drop has provided relief for inter-bank lending, it has had little or no impact on householder costs or on house prices. Recent remortgages of home loans will still see borrowers facing higher charges than when they first set up their loans.
The prospects of higher interest rates as well as the introduction of Home Information Packs at the beginning of August meant that July saw a rush of property owners moving to sell their houses before the HIPs were introduced as well as many people switching mortgages to minimise the impact of further interest rate rises.
However warnings have been sounded about the future of house prices. We may be in for a difficult New Year as the impact of 5 rate rises begins to take its toll on the demand for new mortgages as more and more of us find it increasingly difficult to afford them.
Other European countries which have experienced a boom in house prices in recent years such as Spain in Ireland have both began to show signs of slowing down and there are signs that the UK housing market may also follow in that path.
It is impossible to tell how the housing market will go. The Bank of England reported that the figure for new mortgages for people moving house in July was similar to the monthly average for the past six months, standing at 115,000. Only looking at this figure might imply that there is no slowdown, however many other economic indicators tell a different story.
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Thu 8th Nov, 2007
Posted in Consumer Credit, UK Finance, interest rates, mortgages, Remortgaging, Inflation, Homeowners, House buying, First time buyers, Property, Financial news, Housing news, Borrowing at 1:57 pm by admin
First time buyers paid £162,055 in May, 2007, while the average price paid by former homeowners who are moving up averaged £235,095.
UK house price inflation for first time buyers is unchanged, at 11.2 in May, 2007. The price holding from the increase of 1.3 per cent between April and for first time buyers .
The inflation rate for homeowners moving up fell from 11.3 per cent in April to 10.8 per cent, a 0.6 per cent increase, compared with an increase of 1.1 per cent over this period last year.
The adjusted average house price in May 2007 was £211,056, up from £209,454 in April 2007. UK annual house price inflation in May 2007 was 10.9 per cent, down from 11.3 per cent in April 2007.
The annual numbers in London were 14.5 per cent in May, up from 14.0 per cent in April.
England, Scotland, and Wales saw decreases in inflation in May 2007. The inflation rate in England fell from 10.0 per cent in April to 9.8 in May; the inflation rate in Scotland fell from 17.8 per cent to 15.5; in Wales the rate fell from 9.0 per cent to 8.9 per cent .
Adjusted average house prices in May were £218,225 in England, £163,852 in Wales, £157,974 in Scotland and £229,519 in Northern Ireland.
The English region with the highest average house price in May remains London at £324,084. The lowest average price was in the North East at £146,023.
This still forces first time homebuyers to take out home loans that are four or five times their annual income.
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Fri 31st Aug, 2007
Posted in Consumer Credit, Homeowner Loans, Banking, UK Finance, interest rates, mortgages, Consumer debt, Inflation, Homeowners, House buying, Financial products, First time buyers, Property, Financial news, Housing news, Borrowing, Debt management at 1:19 pm by admin
The international community is watching as the UK balances on the brink of a mortgage crisis in the coming years. Mortgage payment arrears are increasing sharply as 18 million homeowners struggle under the burden of the fifth interest rate increase in less than a year.
This is compounded by the high-risk mortgage products the banks have been offering, and the fact that banks are offering home loans at five and six times people’s annual income.
The Council of Mortgage Lenders (CML) Michael Coogan said: “The record number of borrowers who are now paying stamp duty makes a difficult situation even worse, despite the financial windfall to the Treasury. This needs to be addressed urgently.”
First-time buyer income reached its highest level ever in May at 3.37 times the first-time buyer’s income. This is up from 3.33 times in April. Mortgage interest payments have hit 19.1 percent, their highest level since 1992.
CML expects 18,000 repossessions in 2007, one thousand more than 2006. Almost 77,000 home loan repayments are missed every month in the UK, according to MoneyExpert.com website,
The world is watching the housing boom with interest. While it has make the UK one of the world’s investment hotspots, and is turning it into a global community, it is creating a problem for residents.
The average property price in the UK has trebled to breach the 200,000 pound level, since Labour Party came into power in 1997.
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Posted in Consumer Credit, Homeowner Loans, UK Finance, interest rates, Consumer debt, Inflation, Homeowners, House buying, Financial products, First time buyers, Spending, Property, Financial news, Housing news, Borrowing, Personal debt, Debt management at 1:14 pm by admin
According to two of the country’s largest home loan lenders, house prices will only rise by six percent this year. Halifax and Nationwide have announced that they expect the house price growth to slow between now and the end of December.
Because of the recent interest rate rises lenders are starting to see the effects that it is having on customers and are predicting the house price growth to slowly come to a halt especially if the Bank of England continues to rise the interest rates. Although the house price growth was still going strong in the early months of this year, the hikes in interest rates have made some effect, as there are now signs that the housing market is slowing. The slow growth in the housing market is expected to continue with the house price inflation easing up over the second half of this year.
If the house prices at the end of 2007 are just six percent higher than they started at in the beginning of the year, then this year will see one of the smallest increase in house prices since 1995. It will also be the below the long-term average of an eight percent growth a year. Nationwide is predicting the house price growth to fall from eleven percent to around five to eight percent. The house price growth is believed to have slowed due to the interest rate increases as well as the rising food prices and the lack of earnings growth, which in effect has caused many first-time buyers to find it almost impossible to find a foothold on the property ladder.
Debt charities are bracing themselves for another wave of enquiries from consumers at the end of the quarter when more fixed rate mortgages come to an end. This year has already seen a surge in the number of people defaulting on loans and other credit agreements due to an inability to meet repayments.
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