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Your Mortgage News

This is the news items from July 2007, kindly provided by YourMortgage.co.uk.

July News

House prices continue to soar

Long-term fixed rates still unpopular

Brits don't like long-term mortgages, a study has revealed. Over half of Britons would definitely not take out a 25-year fixed rate mortgage, with one of their main reasons being that they didn't want to commit themselves for a long period of time.

Sue Hayes, director of Abbey Mortgages, said: "It's clear that people don't have much of an appetite for 25-year mortgages. "We continue to see increasingly strong demand for five and ten year fixed deals, indicating that 25 years is just a step too far." More than a quarter (27%) of people said that committing themselves to a 25-year deal could potentially cause future financial difficulty, while  18% felt that they might lose money if interest rates fell.

Those who would definitely take out a 25-year mortgage said that they were attracted by the prospect of knowing their up front payments in advance, while 48% thought that long-term deals were appealing because of rising interest rates.

Sue Hayes said: "Given the great cultural and economic changes we've seen in the past 25 years, it's not surprising that as many people are not going for long-term mortgages. Few people are prepared to commit themselves for a quarter of a century."

Mortgage lenders' websites leave customers dissatisfied

Mortgage lenders' websites do not meet the needs of potential borrowers, a study has revealed.

Top lenders' websites were often found to omit crucial information about their interest rates and loan details, with the average website scoring less than six out of ten for helpfulness. Adam Goodvach, director of Global Reviews, which conducted the research, said: "Many lenders' websites don't really help people get their head around the mortgage process; they are more concerned with getting people straight to the application form itself. "People need to become engaged before they buy, but at the moment, the websites aren't doing enough to present an entire package to the consumer."

Research has looked at the websites of 13 leading mortgage lenders, and found that customers were often dissatisfied with the information available. While ING Direct led league table scores, it only achieved a meagre 6 out of 10 overall. Barclays failed to achieve higher than 3 out of 10, placing it last in the league table, just below Northern Rock and Cheltenham Gloucester.

According to the report, mortgage websites may often place heavy emphasis on their design and appearance, rather than their content.

Adam Goodvach said: "Most websites put more effort into the quality of the application form, which is where a lot of websites got their highest scores. "This means that while websites may have this as a strong point, even the highest overall scores are not very high." The study also shows that among those who research mortgage products online, 52% do so before they speak to a broker or adviser, with 18% using mortgage websites before they close their deal.

When asked why so many people choose to do their research online, Adam Goodvach said: "People want to arm themselves with as much information as possible before they speak to a broker, in order to prevent themselves from being taken advantage of."

Mortgage lending reaches a record scale

Mortgage lending is at a higher level than ever before, reaching a record £34.2 billion in June, according to figures from the Council of Mortgage Lenders (CML).

Stephen Leonard, director of mortgages at Alliance & Leicester, said: "The CML figures are a clear indication that borrowers have moved their house purchase decisions forward to April and May in anticipation of the recent rate rises. "The planned introduction of HIPs in July and the increased number of sellers on the market may have further contributed to this early peak in house buying."

The rate of increase was not as strong as has been seen in previous years, however. From May to June 2006 mortgage lending grew by 12 %, and for the same period in 2005 the rate of increase was 15 %.

Michael Coogan, director general of the CML, said: "Despite record mortgage lending there are signs that the market is feeling the cumulative effects of the five interest rate rises we have seen over the past year. "This will become much more evident in the coming months as borrowers with fixed-rate mortgages come off their existing deals into a significantly higher interest rate environment."

House price inflation set to be stronger than predicted in 2007

House prices will rise at a rate higher than expected in 2007, according to Halifax, reflecting stronger growth in the first half of the year. The bank has revised its forecast for house price growth in 2007 up from 4% to 6%.

An increase of 6% would still represent one of the smallest yearly increases since 1995 and is well under the long term average of 8% annual growth recorded since 1983.

Martin Ellis, chief economist at HBOS, said: "While house price growth was stronger than expected during the early months of 2007, there are now more signs that the market is slowing. We expect this trend to continue. "House price inflation should ease over the second half of the year."

The gap between house prices in the north and south is set to widen by £14,500 this year to almost £105,000.

First time buyers' share of the housing market increased in June

First-time buyers clawed back a greater share of the housing market in June as rising interest rates deter other buyers. According to figures provided by the National Association of Estate Agents (NAEA), first-time buyers now make up 10 per cent of the market, up from nine per cent in May.

Stuart Lilly, president of the NAEA, said: "New developments and greater numbers of properties put up for sale by landlords withdrawing from the buy-to-let market have led to a greater supply of first-time buyer properties." However, the outlook was not so bright for other sectors of the market.

The average number of property hunters on estate agents' books nationwide fell from 344 in May to 322 in June, while the number of properties for sale dropped by six percent that month. More sales also fell through in June than in May, as nine per cent of all deals came to an end before the exchange of contracts. Lilly said: "The situation has worsened for homemovers who have been reacting cautiously to mixed messages over the future likelihood of further rate rises. "This, coupled with the summer period approaching, suggests there will be a quieter housing market over the next few months." However, others do not see so much of a cause for concern.

Nick Goble, spokesman for Winkworth estate agents, said: "There is a grave danger of overemphasising the significance of the current situation. We are still experiencing a strong property market with historically low interest rates."

Government announces a range of housing and mortgage policies

Gordon Brown is attempting to radically change the nature of the British housing market with a series of measures announced in the Commons yesterday. In his speech the Prime Minister outlined his intention to raise the annual house building target for 2016 from 200,000 to 240,000 new homes a year. The draft legislation also seeks to speed up the planning process, encourage local authorities to expand development, and increase the take up of long-term fixed rate mortgages. Brown said: "Putting affordable housing within the reach not just of the few, but the many, is vital both to meeting individual aspiration and a better future for our country."

Rachel Hegson of the Department for Communities and Local Government said: "This target isn't just a headline, it is a carefully worked out policy. Everyone is agreed we need to do more. It's important to have an achievable target, but in a measured and sustainable way."

Rob Thomas, senior policy advisor to the CML, said: "The issue is just as much about the consumer appetite for long term fixed rates as about how they are funded."

The Prime Minister also wants to bring the British mortgage market in line with the US and the European Union by encouraging borrowers to take out more long-term fixed rate mortgages.

A survey from the Council of Mortgage Lenders (CML) published this week, however, has revealed that, while fixed rate mortgages are extremely popular, most borrowers are currently opting for short-term fixed rates. Almost nine out of 10 first-time buyers and three quarters of homemovers took out short-term fixed rate mortgages in May, a new record. The Prime Minister is planning to change financial regulations to "help mortgage lenders finance more affordable 20 to 25 year fixed rate mortgages".

However, industry experts are not convinced. Hamptons Mortgages technical director Jonathan Cornell said: "I think the Prime Minister flogging a dead horse. How many of us can guarantee that we will not divorce, split up, suffer bereavement, lose our job, or relocate abroad within the next 25 years? "Government intervention in the financial services market has always been rather unsuccessful. I can't see changes to regulation making the slightest bit of difference."

Several lenders have reacted with more enthusiasm, and Nationwide has announced a new 25-year fixed rate mortgage charged at 6.39%, with a registration fee of £599. Yorkshire Building Society is also preparing to launch a new long-term fixed rate mortgage within the next few weeks.

The Government measures were proposed in advance of the Queen's speech and in anticipation of impending policy publications "in the interests of good and open government."