Archive for Mortgages
Mortgage Approvals Are Down In August Reports BBA
The number of mortgage approvals has fallen to a record low according to figures released by the British Bankers Association (BBA). Mortgage approvals have plunged 64 per cent since August last year.
The British Bankers’ Association (BBA) said mortgages approved for house purchases mortgage approvals declined to just 21,086 in August. This was the lowest level since the series started in 1997 and down from 58,564 in August 2007 when mortgage lending had already started to slow.
The BBA blamed the decline on falling property prices, economic pressures on households, and tighter lending criteria. It said mortgage lending reduced to £2.1 billion in August, which was less than half the average borrowing transacted in the previous six months.
Howard Archer, chief UK and European economist at Global Insight, described the latest set of lending figures as “dismal”.
“The BBA data graphically highlight that housing market activity continues to be throttled by stretched affordability and tight lending conditions.
“Widespread expectations that house prices will continue to fall markedly for some considerable time to come is also significantly limiting housing market activity, as is heightened concern over the economic outlook and job prospects.
“Furthermore, the current financial sector turmoil is likely to deepen the pressure on housing market activity through further tightening credit conditions and exerting upward pressure on interest rates.”
Rise Of The Fixed Rate Mortgage
Recent weeks have seen lenders increase their fixed rate offerings. This comes despite the Bank of England base rate remaining at 5%. Many of the fixed rate deals are now over 6% with the average 2 year fixed rate now standing at 6.75%.
Many experts are predicting that the Bank base rate will rise, resulting in prospective and current home purchasers rushing to secure a fixed mortgage deal. In March 54% of borrowers secured a fixed rate mortgage product, this increased to 59% in April.
In uncertain conditions, people are opting for the security of the fixed rate deal, hoping that this will see them through the credit crunch period. The forthcoming weeks and months could see this trend changing.
As fixed rated have increased, the variable ‘tracked’ rates are increasingly looking much more appealing. Presently tracker products are as much as half a percent lower than the fixed rates currently on offer. A tracker is a variable rate which moves in line with the Bank of England base rate.
What should you do? Do you pay a higher rate from the start to get the security of a fixed rate? Alternatively do you pay a lower rate at the start but with the knowledge that your rate could increase? It is a fine balancing act and one which an experienced adviser will be able to help you with.
What Needs To Be Taken Into Account
There are many things that need to be taken into account. Firstly there are the hard facts.
What is the actual difference in rate between the best fixed or the best variable rate? How much would the variable rate have to increase by, to be paying more than the fixed rate, and what is the likelihood of that happening?
Your adviser will look at your personal circumstances; could you afford a hike in your mortgage payment? Are you cautious in nature or are you happy to pay less now and face the consequences should rates rise? The size of your mortgage and the amount of your income are also factors to be considered.
Why are some People Still Opting for Fixed Rates?
Even if the initial payment is higher, many people like to know exactly how much they are paying for a set period of time. This can give you peace of mind and will stop you worrying every time the members of the Monetary Policy Committee in the Bank of England, meet have their monthly meeting.
If you are stretched financially, or if you are taking on a much larger loan, a fixed rate could be just what you need. Many people actually pay extra each month for the financial stability a fixed rate can bring.
Whatever your circumstances, a good advisor will be able to explain all of the options and will make sure that whatever rate you take, it is exactly the right one for you.
For further information and advice about fixed-rate products or on any other mortgage/ financial matter, telephone Express Mortgages & Loans on 01273 276 904.
Express Mortgages & Loans is an appointed representative of Cotswold Mortgage Service Ltd, which is authorised and regulated by The Financial Services Authority. Your home is at risk if you do not keep up the repayments of a mortgage or any other loan secured against it.
The Profile Of First-Time Buyer’s Borrowing Is Changing.
Following a review of its mortgage completion data so far this year, the Council of Mortgage lenders (CML) as stated that affordability indicators have eased for house purchase loans.
The April data, showed first-time buyers typically took-out loans for 3.3 times their income, down from 3.35 times income in March and the lowest level since November 2006. The average home mover loan was 2.96 times income, down from three times income in March 2008 and the lowest level since July 2006. The proportion of income typically spent on mortgage interest payments by first-time buyers also fell to 19.6 per cent, from a high of 20.7 per cent in December 2007.
However, this does not necessarily indicate that affordability improved in April for new mortgages. Rather it demonstrates how the profile of borrowers has changed as a result of the credit crunch. These figures also support the view that, the majority of first-time buyers in the UK have not been dissuaded from climbing on to the property ladder. Although some buyer’s perceptions of affordability may be unrealistic, competitive prices are still achievable and the recent cooling of prices has increased accessibility.
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Mortgage Lending Activity Is Improving
The British Bankers Association (BBA) has reported that mortgage gross lending increased 7 per cent in April 2008. Despite vibrant re-mortgaging activity in recent weeks, the number of home loans for house purchase is down 39 per cent on a year earlier, leaving gross lending down 6.3 per cent year-on-year.
The BBA is the leading UK banking and financial services trade association and represent its members, from 60 countries, on domestic and international issues.
David Dooks, statistics director at BBA said,
Pressures on household finances, stalling house prices and tightening of lending criteria in response to lower liquidity are all constraining demand for house purchase and equity withdrawal loans, which are both well down on levels last year.
In contrast, there is an active re-mortgaging market as people switch lenders to obtain better deals. With some £18 billion of new lending and nearly 150,000 loans approved in April, it is clear that, contrary to some reports the mainstream mortgage market has not ground to a halt.
A strong re-mortgaging market has given a much needed lift to a subdued sector, with the number of approvals increasing to 74,222, arise of 10.7 per cent from last year. In contrast 38,704 mortgages were issued for home loans in April 2008, showing a slight improvement on the previous month’s figure of 35,546. However approvals continued to be well down on the same period in 2007.
The BBA data reveals personal deposits also rose strongly in April with the banks receiving a record net inflow, partly reflecting stronger ISA deposits than in previous years, but also reflecting a response to the higher saving rates of return, currently available on high street accounts.
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