Mortgage markets still look bleak

According to a leading industry group the mortgage market in the UK still looks bleak, with the lenders stating that it has become ’stuck in a rut’. Over the course of February it is claimed that the low levels of lending have continued. Officials have said that the level of lending for the month of February were nearly as low as they were for January, with around £9.5 billion of gross lending.

The Council of Mortgage Lenders released the figures, and they have stated that it is likely that this year will continue to be a challenging and difficult one when it comes to the mortgage and property sectors. Another survey has revealed how the cost of renting has shot up as a result of so many people being unable or unwilling to get a mortgage, which has resulted in a higher demand for rented property.

The Council of Mortgage Lenders has said that part of the problem stems from restrictions amongst lenders when it comes to granting mortgage finance. However, the group also said that there was a definite drop in consumer appetite for new borrowing, with many people too worried about their financial situations and their job security to risk taking on a huge mortgage.

One official also commented on the increase in rents and demand for rented property, stating: “The fierce competition among renters in many areas of the country has cut short the traditional lull we tend to see between December and February. The consistently constrained level of lending to home buyers has bolstered demand – and rents – in the private rental sector during what is typically a slower period. With the mortgage market even more sluggish since the start of 2011, this backlog of frustrated buyers has increased even further and rents have risen correspondingly.”

Tags: council of mortgage lenders, industry, job security, result, Mortgages, huge mortgage, official, drop

Consumers try to avoid High Street debt

In the current difficult climate there are many people that are looking for ways to cut back on their outgoings. For many this has meant cutting back on their spending and reducing their debt levels. His desperation to avoid debt was reflected in recent figures that showed there had been a drop in High Street store card borrowing and High Street finance for the month of November.

November is normally a busy time when it comes to spending on store cards and store finance, as many people are purchasing gifts for their loved ones for Christmas. Whilst in the past people may have signed up for store cards or taken out store finance to purchases these goods, a shift in attitude brought about by the challenging financial climate has resulted in fewer people spending on store cards or taking out store finance to make purchases.

Figures have shown that during the month of November last year the level of lending on store cards plummeted by 25 percent compared to the same period in the previous year. Just £202 was advanced on store cards during the month. Instore instalment finance levels also fell, with an 11 percent drop in the level of store finance compared to the same period a year earlier.

However, whilst store borrowing definitely took a big hit in the month of November there was an increase in the number of personal loans that were taken out by consumers. The figures were released by the Finance and Leasing Association, and showed that borrowing through personal loans increased by around 34 percent over the course of the month.

The report also showed that the largest source of advances was credit cards, which came as no surprise to most people. Whilst credit card lending for November remained was flat in November year in year it was still the source of £2.71 billion worth of lending.

Tags: drop, Unsecured debt, consumers, financial climate, card, christmas, period, shift

Repossessions fall in second quarter

Since the onset of the global credit crunch, and with interest rates having soared over 2006 and 2007, many homeowners have struggled to keep up with their mortgage repayments, which led to soaring repossession levels in the UK. The numbers of repossessions over the past couple of years have made for gloomy reading, prompting the government to take action such as slashing interest rates to an all time low.

However, a recent report has shown that in the second quarter of this year the number of repossessions in the UK has dropped by 9 percent, and industry officials have claimed that this is down to a combination of factors.

The rock bottom base interest rate of 0.5 percent is one of the factors that has been attributed to falling repossession numbers. Another factor that is claimed to have helped cut repossession numbers is the way in which cases are now handled by courts and lenders.

Between April and June of this year 13,610 homes were repossessed in the UK, and this compared to the 14,884 homes that were repossessed in the first quarter of the year between January and March.

However, compared to the second quarter of last year repossession levels are still up by around 23 percent. The Financial Services Authority has said that one of the main reasons behind the quarterly drop in repossessions is likely to be the changes that have been made in relation to how repossession orders can be granted by courts.

One official said that it was also down to the fact that people were becoming more confidence about approaching their lenders when they ran into financial difficulties. He said: “Borrowers that have been in arrears believe that their lender has been helpful and has treated them fairly. Those that face payment problems should therefore not be daunted by their arrears, but should take control of the situation by seeking help as soon as they can.”

Tags: recent report, situation, reading, control, mortgages defaults, drop

Improvement seen in consumer confidence levels

Over the past year consumer confidence in the UK has plummeted, with soaring inflation, rising living costs, rocketing petrol and food costs, and the effects of the global credit crunch on the housing and financial markets all impacting upon confidence levels and leading to the ongoing economic downturn. However, officials have suggested that there has been an increase in consumer confidence levels for the second month in a row. Read more

Tags: consumer confidence, drop, confidence levels, money, VAT reduction

Energy prices continue to put strain on finances

Over recent months being in charge of the household finances has become an unenviable task, as most households have found that their budgets have been overstretched, making it very difficult to make ends meet. A number of factors have contributed to these financial difficulties, such as rising borrowing costs, tighter credit conditions, soaring petrol prices, rocketing food prices, and increasing bills. And, as has been the case quite often over the past few years, it is energy bills that are causing major problems when it comes to most household budgets. Read more

Tags: drop, cost, suppliers blaming increases, energy prices, price, energy hikes, Energy crisis, petrol

Slowing of consumer spending is “worrying”

Despite the economy growing by 0.6 per cent in the last quarter of 2007, consumer spending slowed dramatically, according to new figures.

Findings from the Office for National Statistics (ONS) showed that increases in household expenditure fell to 0.2 per cent, a drop from the 0.9 per cent previously seen in the last quarter and the weakest growth since 2006.

Speaking to theherald.co.uk, Howard Archer, chief UK economist at consultancy Global Insight, said that the breakdown of the ONS’ data was worrying.

“The faltering in consumer spending, business investment and exports in the fourth quarter increases concerns that UK growth will slow markedly in 2008 and increases pressure on the Bank of England to cut interest rates again sooner rather than later,” he said.

According to the figures, business investment and exports also faltered at the end of last year, declining by 0.5 per cent and 1.2 per cent respectively.

Meanwhile, Tim Besley, member of the Bank of England’s Monetary Policy Committee, told the Daily Mail that a reduction in the rate of consumer spending was worrying.

Tags: drop, UK growth, Global Insight, chief UK economist, Office for National Statistics

Another drop in Northern Rock shares

Following the turmoil and chaos that took hold in September of this year, high street lender Northern Rock has seen its share prices plummet yet again, this time falling to their lowest level yet.

According to recent reports shares in Northern Rock, which were worth £12 back in February of this year, fell to under £1 per share on Tuesday. This comes in the light of concerns over whether the bank will be bought out, as although there have been a number of potential purchasers there has been no firm offer as yet.

The serious woes faced by Northern Rock began in September, after it became widely known that the lender had approached the Bank of England for an emergency loan of billions of pounds. Once this became public knowledge, savers flocked to the bank to withdraw their savings amidst worries that the bank was about to fold, and over the space of several days over £2 billion was withdrawn from the bank.

Share prices also plummeted, and Northern Rock gained a reputation as one of the highest profile victims of the credit crunch and the turmoil that has swept across the financial sector.

One bank official stated: ‘Based on the information it has so far, the board of Northern Rock believes that the range of values for the existing equity implied by the proposals is materially below the market price at the close of business on Friday.’

Chairman Bryan Sanderson added: ‘The value to shareholders from any proposals… remains highly uncertain and will be dependent, among other things, on when and if there is an improvement in market conditions including access to liquidity and the value created, if any, from the run-off of the assets and liabilities remaining in the company following any disposal of all or part of its business.’

Tom Smith
25th November 2007

Tags: prices, northern, rock, shares, drop, bank, fall

Mortgage borrowers advised to plan ahead

People considering taking out a mortgage are advised to allow plenty of time for the application process, said John Charcol.

The industry experts have said that there are some attractive fixed rates on offer but that their popularity means that lenders are struggling with applications and so it is advisable to apply in good time.

“Swap rates, the rates that fixed rate mortgages are priced on, have moved favourably in the last few weeks, and two-year Swaps are now at 5.74 per cent.

“The drop reflects the City’s revised view that Bank Rate will be cut soon, especially with inflation now at 1.8%, which is most likely to be in the first quarter of 2008,” the firm commented.

Furthermore, it said that applicants should talk to a broker about how long the application process might take in order to be able to figure in any delays.

It said that variable rate mortgages can be “withdrawn at a moment’s notice” but that the same was not so true of fixed rates.

Abbey was found to have the best offer, with a two year fixed rate of 5.58 per cent with a fee under £1,000. Meanwhile Brittania is “leading the way” for five year fixed rate offers with a rate of 5.39 per cent.

Tags: drop, variable rate mortgages, leading the way, Swaps, Mortgage loan, first quarter, Bank Rate

Bank charge test case may be dropped

According to a recent report the Office of Fair Trading is considering dropping the test case over bank charges, which was planned for next year.

The test case was designed to make a final determination over bank charges following months of controversy and rows between banks and consumers. The battle started after campaigners and regulators branded the charges, applied for exceeding overdraft limits, bounding cheques, and returned direct debits, unlawful and unfair.

Officials from the Office of Fair Trading have confirmed that there is a chance that the test case will be dropped, but this will only happen if it is in the best interests of the consumer.

Officials stated that they may consider dropping the test case if banks decide to cut their charges to a level that makes them fair to consumers. Lloyds TSB has already cut its charges, but many experts state that it has not cut them enough.

One OFT official stated: “If we do our own financial analysis, and they come in with a number that is lower than our analysis would suggest is an unfair charge, there is no need for the court case to go forward. We will be looking out for what is the best outcome for the consumer.”

However, the banks are arguing that their bank charges have nothing to do with the OFT, and that officials have no power over their bank charges. The OFT is due to review charges to come up with a figure that it believes is fair.

If the test case does go ahead, many experts think that free banking could come to an end in the UK and that banks will start charging monthly fees for having a current account to recoup losses from bank charges.

Tom Smith
16th October 2007

Tags: fair, oft, charges, fees, trading, claim

House Tipping Point On The Way

Figures from HM Revenue and Customs have indicated that the number of properties sold in England, Wales and Northern Ireland was at its highest point since the late eighties.

During 2006-7 the number of properties being exchanged was 1,859,000. The number of sales was up by 11% compared with then figure for the previous twelve months. House prices went up by the same percentage and are growing at more than their average rate over the long term.

The number of homes sold at the last peak in 1988 was 2,148,000 for England and Wales. In 1989 sales of property slumped by 25% and the house price boom that had run for six years fizzled out after the Bank’s base rate was pushed up and mortgage rates followed suit.

That crash in house prices in 1989 came as a shock to most of the nation who had seen house prices only going upwards for the previous thirty years. The Nationwide BS House Price Index showed that average house prices in the UK had gone up every year from 1955. But 1989 changed all that and house prices fell by 11% and it was 1998 before house prices reached the same levels as 1989.

The early nineties became the period of negative equity for many people, with many houses worth less than the mortgages owed on them. Unemployment went up and the recession bit. With homeowners finding it difficult to make their mortgage repayments, many fell into arrears and there was a rise in repossessions. Mortgage lenders had a glut of properties under their ownership and off they went at auction at bargain prices. Between 1991 and 1998 over 400,000 homes were repossessed and a million people were left without a home.

A lot of the sequence of events that led up to the 1989 house-price crash are being repeated in the current situation. The parallels are undeniable: house prices are out of reach of first-time buyers; house prices seems to be going upwards for ever; interest rates are on the increase; and mortgage rates are on the rise too. Also, the ratio of house prices to incomes is now at its record level, and customer debt is an ever-growing problem in this country. The noises coming out of the Bank of England suggest strongly that interest rate rises have not finished yet – there’s almost been a promise that there will be another quarter point rise in July. And, most strikingly of all, repossessions have started to rise again.

Property prices on average are still on the up and have been for eleven years, but it sure looks unsustainable. Many experts are still saying that they do not believe there will be a house price crash, but more of a gentle deflation. There is so much talk of the possibility, however, that it’s hard to see people continuing to fork out large sums for houses and the repayments at such high levels, when a downturn may indeed be just around the corner. The tipping point must be in sight. It’s just a question of how steep the drop is going to be on the other side.

Tom Smith
17th July 2007

Tags: equity, fall, increase, bank, boom, england, negative, bust, Mortgages