YourMortgage News

This is the news items from June 2009, kindly provided by YourMortgage.co.uk.

June News

Bank Base Rate held at 0.5% 4 Jun 2009

The Bank of England has maintained interest rates at their historic low level of 0.5% for the third month in a row. The Bank's decision came as no surprise to observers. At 0.5% the rate has little room to fall further, and with the economy still in the grip of the credit crunch, the Bank of England's Monetary Policy Committee was not expected to consider a rate hike, which would increase the cost of lending and discourage spending.

The Bank has already introduced quantitative easing, injecting £75bn into the money supply to try and revive the economy.Many experts believe that the Bank is likely to keep the Base Rate for several months on hold until it becomes more clear whether or not quantitative easing is working. The worry is that the Bank could then start to increase rates fairly quickly, which could deal a blow to mortgage borrowers who have been benefiting from the very low interest rate environment.

Borrowers switching back to fixes 11 Jun 2009

Take up of fixed-rate mortgages has increased further as the interest rate cycle has now reached its floor, according to the Council of Mortgage Lenders (CML).In April, 69% of borrowers took out fixed-rate mortgages with an average rate of 4.83%, the highest share since June 2008. There was a modest improvement in the number of loans for house purchase.

However, activity is still very low by historical standards with 35,600 house purchase loans in April, compared to an average of 88,000 loans in April over the last seven years. The number of loans for remortgage continued to decline as low reversion rates and stricter credit criteria for the best deals make refinancing less attractive. There were 31,000 remortgage loans in April, 22% down on March and 65% down on April last year.

Gross mortgage lending in April was £10.5bn, down from £11.5bn in March. There were 22,100 loans to home movers worth £3.1bn, compared with 30,600 loans worth £5bn in April last year. Lending criteria continued to edge down with a typical home mover putting down a 33% deposit and borrowing 2.63 times their income, compared with 30% and 2.69 in March. There were 13,500 loans to first-time buyers worth £1.4bn, compared with 18,800 loans worth £2.4bn in April 2008. The average first-time buyer had a 25% deposit (unchanged since February) and borrowed 2.96 times their income (2.99 in March).

The slowing rate of decline in these measures and the recent introduction of a number of higher loan-to-value products may indicate an easing in criteria in coming months advances. The cost of servicing new mortgages fell again in April, with first-time buyers typically committing 15% of income to pay their mortgage interest, the lowest proportion since May 2004. Home movers typically spent 11.3% of income on mortgage interest payments, the lowest proportion since November 2003.

CML head of research Bob Pannell said: "With the interest rate cycle now at its floor, an increasing proportion of borrowers are taking out fixed rates, including for longer term periods of 5-10 years. With expectations for rates to remain low in the near future, shorter term fixed-rate deals are less appealing than attractively priced variable rate deals.

"There are tentative signs of house purchase lending stabilising, but we need to see considerably higher transaction levels to underpin house prices."

Surge in homebuyer interest 9 Jun 2009

New homebuyer enquiries rose strongly in May, increasing for the seventh consecutive month. Figures from the Royal Institution of Chartered Surveyors (RICS) revealed the biggest surge in new buyers since August 1999, boosting hopes of a recovery in the housing market and potentially the wider economy. The number of homes sold by estate agents continued to increase, albeit from a very low level, to an average of 11.8 properties per month per agent over the three months to the end of May. That compares to 10.6 properties per agent for the three months to the end of April. The biggest surge in activity was recorded in London, followed by Scotland, the South East and the South West.

The RICS survey comes hard on the heels of positive data from both the Nationwide and Halifax House Price Indices , which showed prices rising by 1.2% and 2.6% respectively in May. RICS pointed out that property prices are being buoyed up by the lack of supply, with the stock of property for sale currently extremely limited. The average number of properties on a chartered surveyor estate agent's books stood at 58.4n May, and has been falling every month for two years.

Spokesperson Ian Perry said: "It is important to remember that the lack of supply has been as important in underpinning prices as the rise in demand."Moreover, with the economic backdrop still quite uncertain, unemployment is set to continue increasing sharply and finance for first-time buyers is still in short supply, there are a number of significant obstacles for the market to overcome over the coming months."

House purchases overtake remortgages 17 Jun 2009

The latest monthly mortgage monitor from brokerage John Charcol has revealed a sharp increase in purchase activity this year. It shows purchases now represent over half of all new mortgage applications and mean that purchase have overtaken remortgages for the first time since 2007.

Ray Boulger, senior technical manager of John Charcol, said: "In 2008 purchases made up an average of 25% of our business, however 2009 is a very different story. Purchases have taken an increasing share over the course of the year to date, hitting 53.4% in May.

"Furthermore, enquiries for new business have risen sharply over the last few months, particularly for purchases, and in May the proportion of mortgage enquiries for a purchase was up to 59.7%, compared to 49.0% in April. This suggests that as these enquiries translate into actual business the proportion of purchases in our business written will continue to rise over the next few months. It seems that the market is continuing to show positive signs of recovery.

"Although the take up of fixed rates is very slightly down from last month, they still account for some 79% of all mortgages arranged through John Charcol in May. This highlights that people are keen to seek refuge from the stormy economy and ensure they know exactly what they are paying each month for the foreseeable future. However, with the recent dramatic move north in fixed rates, next month's figures will be particularly interesting."

Average five-year mortgage hits 6% 29th June

The rising cost of fixed-rate mortgages continues as the average five-year fixed-rate mortgage has hit 6%, the highest level since December 2008, according to Moneyfacts. In the last month, the average five-year fix has increased by 0.43%, while the average two-year fix has increased by 0.41% to 5.08%. Borrowers have also seen a 5% reduction in the number of residential mortgages available this month, with the total today standing at 1,242. The reduction in product numbers is being felt in all LTV bands, with the exception of 90% LTV deals. Borrowers with a 10% deposit now have access to 21% more deals than they did at the start of the month.

New entrants into the 90% LTV arena this month include Britannia, Cambridge, Earl Shilton, Leek United and Saffron building societies. Louis Kaszczak, head of Moneyfacts, said: "The demand for fixed-rate mortgages continues to increase as borrowers look to fix their repayments ahead of expected rates rises. "Borrowers are now gambling on when the Bank of England will increase the base rate and by how much.

"Those on tracker deals or their lender's standard variable rate are likely to be seeing significantly lower repayments at present than those available on fixed deals. There appears to be little incentive for borrowers to switch over to a more expensive deal that might only achieve longer term rewards.

"Those that are looking for a new fixed deal need to act fast as the lenders continue to fall over each other to increase rates. No one seems to want to offer the lowest fixed rate deal at the moment.

"The only positive news is for those with a small deposit, where competition is slowly returning to the market. "Although with an average five-year fix standing at 6.79% for those with a 10% deposit, it is debatable how many borrowers will take up these deals."