Property Market stagnates – as mortgage lenders tighten up on product criteria.

House Prices have seen its sharpest drop since the 1990s. Halifax reported a fall in house prices by 2.5 per cent during March 2008.

The overall growth has been at its lowest this year as house prices across the country is just 1.1 per cent higher than they were a year ago.

The 2.5 per cent fall in house prices is not evident in all areas of the UK; Greater London experienced a 1.6 per cent increase in house prices, East Anglia saw a 1.4 per cent increase in house prices, compared to East Midlands which saw a 2.2 per cent increase. Areas such as West Midlands and Wales saw a fall in house prices of 5 per cent and 4.7 per cent respectively.

However significant this fall may seem, when it is put into context with the 171 per cent increase over the last 10 years and 51 per cent over the last 5 years the fall in house prices could be seen as a welcomed correction in the market.

Mortgage lenders are becoming stricter on their product criteria; therefore we are seeing buyers with little or no deposits being declined for a mortgage. This is having an adverse effect on the property market as we are seeing bigger properties remaining on the market for longer than usual as further down the chain first time buyers buying the properties of those wanting to upgrade cannot get a mortgage.

This will see further fall in house prices and therefore may prompt the Bank of England to reduce interest rates by a further 0.25 per cent to 5 per cent tomorrow.

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There’s been an influx of sub prime borrowers coming out of their fixed rates and looking for better rates, but they are being refused because these types of mortgage application are seen as high risk. Borrowers are advised to ensure all their payments are on time due to lenders being very picking with applications they choose to fund. Its been reported by Ernest & Young that the credit crunch may see an economic growth slow down by as much as 1% in 2008 and 2009.  Their report also showed evidence of a housing cool down in US and EU, which may overspill to the UK. Last night one of Britain’s well known bank First Direct, closed its doors to new mortgage business.  The bank decided to take ‘drastic’ action by not offering mortgages to anyone other than its existing borrowers as they are overwhelmed with applications for home loans. Nat West and Scottish Widow also increased their borrowing costs yesterday.  The rash decisions amongst banks are having a knock-on effect on market confidence. Bank Of Ireland are also following suit by withdrawing majority of their mortgage range products by 5pm today.  First Time Buyers may no longer be able to get 95% Loans, they’ll find that the minimum deposit required will be 10%.  Meaning a typical new buyer in London would have to save around £20,000.

www.ckfs.co.uk

Mortgage arrears and repossession seems to be at it highest in the last 10 years.

Citizens Advice reports show that home owners in England and Wales saw mortgage arrears rise by 35% in the first two months of 2008 compared to 2007. With the increase in living costs such as Gas, Electric, food, borrowers are finding it increasingly difficult to afford their debt payments.

This comes at a time when many borrowers are coming out of their fixed rates, reverting to the standard variable rate which sees an increase in their mortgage payments by over £200.

Lenders are being very picky to who they lend to, therefore many people should use mortgage brokers to source the best products to suit their circumstances.

Scenario

Client is coming out of a 3 year fixed rate at 4.59%. The loan amount is £120,000, the property value is£ 400,000. If the client has good credit they may be eligible for a Abbey fixed rate 5.89% with a free valuation and £250 cash back or Cheltenham & Gloucester fixed rate 4.99% free valuation but £99 booking fee.

If the client has bad credit e.g. 2 missed mortgage payments in the last twelve months they will be eligible for a Future Mortgages 6.95% 2 years fixed

British Banks have been applauded today for holding out well against the credit crunch.Banks have survived largely by being highly selective as to which customers to take on and by making sure their assets have more liquidity.

Banks are recommending that potential customers have a good credit record. Those with stains on their credit history are advised to pay off any missed payments.
Even if one has something as serious as a CCJ (county court judgement) and is ordered to make a missed payment in full by a court of law.

The customer still has 30 days to make the missed payment and clear their name with no bad history to show for it. Conversely you can have your credit record stained for around 6 years if one fails to make their court ordered payments.

Having a better credit record will allow one to benefit from better rates.

Abbey National insurance surveys have revealed that British people worry the most about finance than any other nation in the world. Each individual surveyed worried on average 20 hours a week. Mainly this worry was due to debt, fears over health and mortgage payments.