Some borrowers can still get good deals on mortgages

Industry professionals have stated that despite the chaos that seems to have hit the mortgage markets, and the reports of doom and gloom when it comes to getting a mortgage, there are still some affordable deals on offer to many consumers.

Officials from mform described the panic in relation to the mortgage market as ‘overdone’, and added that the difference in interest rates for those with a 90% loan to value ratio compared to those with a 50% loan to value ratio was nominal.

One official from the group stated: ‘Mortgage customers are undoubtedly facing challenging times but they are not as bleak as is being painted. People coming off two, three and five-year fixed rate deals this year will face higher monthly payments. ‘However they will have benefited from house price increases and that will have enabled them to build equity and to substantially improve their loan-to-value.’

However, this opinion is not mirrored by many other industry officials. Officials from Protiviti, the risk management group, have stated that things are already very bleak for mortgage customers and mortgage lenders, and the situation is expected to continue getting worse.

A massive 85% of mortgage brokers have expressed opinions that mortgage customers will face severe difficulties in securing finance as a result of the effects of the global credit crunch, which has seen far tighter credit conditions come into play.

One official from Protiviti stated: ‘Banks and building societies are not surprisingly reviewing their lending criteria and overhauling their risk management programmes in the light of the current market and economic situation with the aim of reducing their exposure to bad debt.’

PM meets with UK bank chiefs

The Prime Minister, Gordon Brown, met with bank chiefs on Tuesday morning in order to discuss a number of factors relating to the credit crunch, including the housing and mortgage sectors, and their effect on the economy.

The meeting held at Downing Street included chiefs from HSBC, Barclays, Lloyds TSB, Royal Bank of Scotland, and Nationwide. Officials from 10 Downing Street said that the meeting was nothing to do with crisis talks, but was a meeting that had been planned for some time.

Following the meeting the Prime Minister said that he would not be put off from making the right long term decisions for the UK even if they proved unpopular in the short term.

Amongst the things that were discussed at the meeting were how confidence could be restored in the housing and mortgage markets and the importance of lenders passing on the full base rate cuts to borrowers.

Mr Brown said: “I will not hesitate to take these long-term decisions. That’s what being in politics is about. Of course sometimes it is unpopular in the short term. Sometimes you might get no temporary advantage out of what might be the right long term thing to do.”

He added: “We’re taking all the measures that we can and we will not be diverted from this as a fundamental priority.” He also said: “we’ve got to show people who are worried about their homes and people who are worried about their mortgages and people who are worried about their jobs that we can ensure that the economy is safe for them over the next few months.”

David Cameron from the Conservative Party has said that Labour have wasted a great deal of money, stating: “What people are really interested in is what would you do for the future and what I’m saying very clearly is that spending needs to be properly controlled.”

Queen’s party cancelled over recession fears

With consumers struggling to pay their mortgages, many facing repossession, rising living costs and bills, and the country on the verge of recession the nation could be forgiven for thinking that the lavish celebrations that the Royal family had in mind for the Queen’s diamond wedding anniversary would be insensitive and unnecessary, stinging like a slap in the face for those who face losing their homes and cannot afford to make ends meet each month.

A recent report has indicated that the Queen and her household have recognised this, and as a result of predicted public feeling over the celebrations has decided to cancel the party arranged to mark the special occasion.

As would be expected, the event was set to be a very expensive and lavish one, but with the country facing recession and the public facing severe financial difficulties the Queen has decided that the party should be cancelled.

The report states that the party was to be funded by friends of the Queen and Prince Philip, and they said that they were disappointed that the event had been called off but understood the Queen’s reasoning.

One source close to the Royals said: ‘It is a great shame, but the Queen does not want to be seen to be doing something so elaborate at a time of such economic gloom. The Queen decided to cancel the party because of the very real prospect that the country is about to go through a major recession.’

The source added: ‘The Queen does not want to be seen to be accused of being extravagant when everyone else is worrying about their finances. There has been a lot of talk since December that everyone in Britain is tightening their belts. With that in mind, the Queen felt that it would be entirely inappropriate to throw a party on a day that wasn’t even her actual wedding anniversary.’

House prices fall for sixth consecutive month

According to a recent report house prices in the UK have fallen for the sixth consecutive month, which has resulted in house price growth stalling in the month of March.

Over the past year the average house price in England and Wales has increased by only0.4% which puts the average house price at just £174,100 according to figures from Hometrack.

The data goes on to show that nearly 30% of postcode areas in England and Wales saw a reduction in house prices over the course of March, with house prices falling by 0.2% over the course of the month.

A recent report shows that most house price indexes are showing reductions in house prices, with the global credit crunch and lack of affordability affecting the housing market.

Many lenders have had to raise their interest rates on mortgages, and many others have tightened their lending criteria to the point where many consumers are unable to get finance to purchase a property.

According to industry officials the number of prospective buyers registering with estate agents as well as the number of homeowners putting their properties up for sale slid in March compared to February.

There was an 8% increase in the number of sales agreed in March, but this was compared to a 20% rise in the number of sales agreed in February.

One Hometrack official said: ‘Some bounce-back in market activity was inevitable after what has been a prolonged period of weak market activity. However the growth in demand over the last two months is only a third of the level seen in previous years so the spring market is likely to be a non event this year. Continued uncertainty in the financial markets, affordability pressures and weak buyer confidence are all likely to suppress levels of market activity in the months ahead with pricing levels remaining under pressure.’

Tories try to get HIPs voted out

The Conservative Party is reportedly trying to force a vote in the Commons to try and oust the controversial Home Information Packs that were brought in by the Labour government last year.

Whilst government officials have tried to claim that the packs are invaluable to home sellers and purchasers to make the process smoother and more effective, estate agents and even many consumers have said that they are costly, ineffective, and a waste of time.

According to recent date, more than 50% of HIPs are costing over the target price of £350, with many coming in at £500 or more. These packs are supposed to be produced within four or five working days, but only one in eight is being produced within this timescale.

Over 50% are taking around twelve days to produce whilst just over 30% are taking in excess of fifteen days. These HIPs are now a legal requirement on all residential properties being marketed for sale in England and Wales.

A spokesman for the Tory Party said: ‘Everyone involved, be it experts or consumers, recognises that HIPs have failed in every aspect.’

However, an official from the Communities and Local Government Department said: ‘The average cost of a HIP is between £300 and £350 which, apart from the energy performance certificate, is already part of the buying and selling process. The most authoritative analysis of HIPs found 72% of consumers were satisfied with them.’

A recent survey showed that only one in six potential buyers was getting to see the HIP before putting in an offer.

In response to this data the shadow housing minister said: ‘These results reveal what we and the industry have known all along, Hips are a complete waste of time. It is proving to be a very costly and bureaucratic joke. The Hip hasn’t made the process quicker or more certain, it has simply made it more expensive and choked in paperwork. It is the time this Government scrapped Hips once and for all.’

£5000 drop in house prices for March

According to a recent report there was a drop of £5000 on the average house price in the UK in March. Last month saw house prices take the biggest monthly fall since the housing market crash in the 1990s, with a fall of 2.5%.

In September of 1993 house prices fell by 3% in the space of one month, and according to Halifax figures this is the biggest tumble since that time.

Officials state that the average home in the UK is only worth just over 1% more than it was this time last year. Figures show that the average house price in February was £196,465 in February, but has now dropped to £191,556.

Many industry experts have predicted that house prices are set to plummet over the next couple of years, with some expecting them to tumble by up to 20% over this time period.

The Halifax has stated that at present house price inflation has hit its slowest pace in twelve years. One official from the bank said: ‘This fall is continuing the pattern whereby the market is readjusting. Sellers are having to adjust the price they ask for their properties.’

Halifax figures showed that there were regional variations in house price movement, and the West Midlands took one of the biggest hits, with a 5% drop, whereas the East Midlands actually saw a 2.2% rise.

One economist stated: ‘It is important not to put too much emphasis on one piece of data, and it should also be borne in mind that house prices were still only down 1% quarter-on-quarter in the first quarter of 2008, according to the Halifax. Nevertheless, the overall impression is that house prices were buckling markedly under the substantial pressure emanating from increased affordability constraints and markedly tighter lending conditions even before the latest escalation of the credit crunch.’

Two year mortgage range withdrawn by Co-operative

Over recent months an increasing number of mortgage providers have been withdrawing various mortgage deals from the shelves, tightening up on lending criteria, and closing the doors to new customers.

This has resulted from the effects of the global credit crunch, which has made it very difficult for mortgage lenders to get the finance that they need to fund their mortgage lending operations, and as such many have had to downscale radically.

The Co-operative Bank has recently announced that it is withdrawing its range of tow year mortgages on a temporary basis. Officials from the bank state that their mortgages are all funded through consumer deposits, so it is not lack of finance that is forcing the temporary withdrawal of these products.

The withdrawal of the two year mortgage range has been put down to impossible levels of consumer demand fuelled by competitive rates of interest and also by the fact that many other lenders have closed their doors to new customers.

The Head of Mortgages at the bank stated: “We have recently provided a range of very competitive mortgage deals, which have included a number of “best buy” two-year mortgages.

This has led to unprecedented levels of customer interest and demand, which has been fuelled further by the recent actions of other lenders to reprice and withdraw their products.”

He added: “We pride ourselves on our ability to create long-term customer relationships and will not compromise our market leading levels of customer service, by simply chasing business volume at any cost. We have as a result, therefore, decided to withdraw our two-year mortgage range on a temporary basis from close of business on Thursday 3rd April.”

Two year fixed rate deal withdrawn by Alliance and Leicester

In the wake of the global credit crunch, which has seen many banks and building societies withdrawing a range of their mortgage deals and tightening up on lending criteria, the Alliance and Leicester has announced that it is withdrawing its two year fixed rate mortgage.

Officials from the building society have stated that the reason behind the withdrawal of the two year fixed rate deal is because they lender cannot keep up with demand, which has far exceeded the ability to supply.

Many banks and buildings societies are now having to withdraw deals and cut back on lending levels as a result of difficulties in getting finance on the wholesale markets in order to fund their lending, which is a situation that has come about as a result of the credit crunch.

An official from the Alliance and Leicester stated: “Over the past few days we have seen a high demand for our 4.99% two-year fixed-rate product and therefore we have taken the decision to remove it from the range.”

In the past month the number of mortgage deals and products available to consumers has dropped dramatically from 7,726 to 5,700. The drop since last July, prior to the onset of the credit crunch is even more dramatic, with the number of deals plummeting by around two thirds from 15,599.

However, some industry officials state that the news could be good for first time buyers because the rapid fall in the range of mortgage products means that house prices will also fall.

One industry official stated: “The cheap and readily available credit has gone so there’s only one place for house prices to go and that’s to fall quite dramatically.”

Troubled mortgage lender to be shrunk

According to recent reports the chief executive of what was once the fifth largest mortgage lender in the nation has decided to scale down operations to try and halve the size of the bank.

Northern Rock hit problems last year after it became widely known that it had taken an emergency loan from the Bank of England, which resulted in the bank becoming the fist victim of a run on a British bank for around 140 years.

The bank was recently nationalised, coming into public ownership, and the man that was put in charge, Ron Sadler, said that he plans to cut the size of the bank by 50%.

In a bid to try and get the ailing bank to break even within the next three years, Sandler has laid out stringent plans to make cutbacks to Northern Rock operations.

His plan is to reduce the mortgage book of the bank from the current figure of £107 million to just £50 millions by 2011 Up to £30 billion worth of mortgages with Northern Rock could be up for renewal or subject to increased interest rates over the course of this year, and Northern Rock is trying to push some of its mortgage customers onto rival banks and lenders in order to try and reduce liabilities.

As part of his plans to downscale operations at Northern Rock Sandler plans to renew only 40% of mortgage redemptions that come up. He also plans to put an end to commercial and unsecured lending. Around two thousand staff members could lose their jobs as a result of these cutbacks, and costs will be cut by 20%.

He plans to repay the billions of pounds owed to the Bank of England by 2010. In a damning report over the true scale of Northern Rock’s losses last year it was revealed that in total consumers withdrew over £12 billion from the bank over a short period of time when the lender ran into problems last year.

Mortgage lender pledges to repay loan within next couple of years

The recently nationalised mortgage lender Northern Rock has promised that it will repay its state debt of £24 billion by 2010. This is despite the fact that it has been warned that it will not even start to break even for at least three years.

In 2007 the mortgage lender suffered pre-tax losses of £167.6 million in 2007. It has also admitted that it will be ’significantly loss making’ over the course of this year.

Adam Applegarth, the former chief executive of Northern Rock is to receive over three quarters of a million pounds as part of his severance agreement.

This level of payout has received criticism from shareholders given the extent of the problems that the mortgage lender suffered last year, when it became the victim of the first run on a British bank in nearly 150 years.

Roger Lawson of the Northern Rock Shareholders Association Group, stated: “A lot of shareholders will be very unhappy with the size of Mr Applegarth’s payoff but it looks like legally, the company could not have avoided paying that amount. Had Mr Applegarth taken the company to court then it could have ended up having to pay him even more.”

The former fifth largest mortgage lender in the UK is now looking to make a number of cutbacks in different areas in order to reduce costs.

In respond to these cutbacks, a union official said: “Unite is calling on the company to ensure that any proposed restructuring must consider the welfare of employees and long-term success of the bank. Decisions must not be made merely in the pursuit of short-term cost savings.

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