Renting more expensive than mortgage repayments

In years gone by many people have rented homes rather than buying because the monthly cost of renting has been considerably lower than the cost of paying off a mortgage each month. However, recent figures have shown that this has gone into reverse, and after a very turbulent few years in the property market it has actually become cheaper each month to pay a mortgage than to pay rent.

According to the figures it costs around £709 per month to rent the average three bedroom property whereas the same property would cost £608 per month in mortgage repayments. This makes it around £100 cheaper on average to make mortgage repayments than to pay rent on a home. On the other hand just a couple of years ago it would have cost £1060 for the same property to pay a mortgage each month and just £761 to pay rent each month.

There have been many changes in the property and mortgage markets that have led to this change. This includes the base rate remaining at a record low of just 0.5 percent for over two years, which has kept mortgage repayments lower. The lack of availability of mortgages for first time buyers, driven by restrictions from lenders and demands for higher deposits, has led to soaring demand for rented homes, and this in turn has resulted in rental costs rising.

One industry expert said: “Such a marked decline in mortgage costs has improved affordability for those able to enter the market as well as helping to ease the pressure on existing home owners’ disposable income. Although the current trade-off between buying and renting is expected to narrow when interest rates start to rise again, the long-term benefits associated with investing in bricks and mortar are likely to ensure that buying will continue to be viewed favourably by many.”

Tags: record, existing home, reverse, availability, month, lack, disposable income, GBP

Mortgage market could suffer over next quarter

Over the past couple of years things in the mortgage market have been tough, and availability of mortgages has become very restrained as a result of the global credit crisis and the recession. This has left many people unable to get their hands on a mortgage loan, and has had a serious impact on the property market.

The Bank of England has now issued a warning stating that there could be fresh restrictions in the mortgage market over the next few months, blaming the tightening of wholesale funding for the expected squeeze on mortgages. This will create additional difficulties for those that are looking to get a mortgage, and will reverse the recent trend of increased availability of mortgages.

The data comes from the Bank of England’s Credit Conditions Survey, and a number of economists have also agreed that the availability and affordability of mortgages could fall over the next few months as banks struggle with tightened wholesale funding.

Over the past quarter the availability of mortgages has actually increase after a couple of years of serious difficulties, but this is something that is set to go into reverse according to the Bank of England. Figures have also shown that over the past quarter demand for mortgages has fallen even though mortgage availability has been increasing.

Dougald Middleton, head of capital and debt advisory at Ernst and Young, said: “While the survey shows that costs of borrowing have eased over the last quarter, we think credit conditions have turned over the last three or four weeks.”

The good news from the Bank of England report was that the rate at which mortgage borrowers and businesses were defaulting on loan took an unexpected fall, which will come as good news for banks.

Tags: finance, Mortgage loan, demand, mortgage, market, bank of england, availability, Impact

Economic recovery depends partly on continued lending

The deputy governor of the Bank of England, Paul Tucker, has recently spoken out about the future of the UK’s economy, and has stated that in his opinion the future of the economy partly depends on continued credit being extended by lenders. Read more

Tags: economic recovery, availability, credit, News, course

Two thirds of potential buyers giving up on homeownership dreams

It has been reported that around two thirds of would be buyers that were hoping to get their foot onto the first rung of the property ladder have now decided to give up on their dream for now because of the difficult financial climate and the lack of mortgage availability. Read more

Tags: base interest rate, homeowners, availability, difficult financial climate, it's little wonder

Home loans are not going to become more readily available yet

Industry experts have recently confirmed what most people have already worked out for themselves – that the availability of home loans in the UK is not likely to increase anytime soon. Read more

Tags: official, mortgage deals, market, availability, council of mortgage lenders

Are sellers becoming more realistic about house prices?

There are indications that many homeowners that are looking to sell their homes are becoming more realistic about the value of their homes, which has been reflected in a stark drop in property asking prices in the London area. Property prices have been falling for some months now, but some of the asking prices on properties indicated that many were refusing to acknowledge that their properties were falling in value. Read more

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Interest rate cuts may not affect credit availability, says expert

The Bank of England’s interest rate cuts are unlikely to have an effect on the declining availability of credit, says economic research consultancy Capital Economics.

Lenders reported that during the first quarter of 2008 they had reduced the availability of secured credit to households, and expect to reduce it further over the next three months.

This means that borrowers will be faced with putting down bigger deposits for mortgages than before, as well as paying higher mortgage rates.

Similarly, household unsecured credit availability has also dropped over the last three months with predictions that it will also continue to decline in the future.

Vicky Redwood, UK economist at Capital Economics, said that yesterday’s interest cuts would not make “a huge amount of difference” since lenders had failed to pass on previous cuts in interest rates to borrowers.

Borrowers will nevertheless benefit in the short-term from the cuts and lending rates should eventually drop, however Ms Redwood noted that “things are likely to get a little worse before they get a little better”.

Tags: availability, Super jumbo mortgage, credit availability, bank, rate, Household