Several small building societies have been restricting or halting lending as a result of the financial turmoil. With lenders’ funds drying up, higher deposits are being demanded from first-time buyers. The Co-operative Bank now demands a higher deposit by cutting its maximum loan-to-value ratio from 95% to 90%. Bigger lenders, such as the Halifax and the Woolwich, have slightly increased the interest rates on certain tracker or fixed-rate deals, while making other deals available only to those able to put down a 40% deposit. The Cheltenham & Gloucester, part of Lloyds TSB, has also raised the interest rate charged on some deals. More than a million fixed-rate deals, typically lasting for two years, are due to expire in 2008, which will add to demand. As a result, the smaller building societies are withdrawing deals instead of being swamped by demand. Those wishing to move house are being told to act fast on mortgage deals as lenders are changing their deals frequently, sometimes several times a week.
Archive for the ‘Mortgages’ Category
Mortgage criteria getting tighter
Sunday, March 23rd, 2008Homebuyers with no deposit are finding it tough
Thursday, March 6th, 2008Borrowers with bad debts are getting better mortgage deals than first-time buyers without a deposit. The cheapest deal for a first-time buyer with good credit history but without a deposit is with Bradford & Bingley - 6.89% with £999 fee. But a sub-prime borrower with missed mortgage repayments (in the past year, one of which is in the last six months), could get a rate of 6.69% with a £995 fee with Chelsea BS. However, those with a 25% deposit could get a rate of 4.75% from First Direct with a £1,498 fee. A year ago, 27 banks and building societies offered 100% mortgages compared with just 11 today at much higher rates. As the credit crunch hits banks and building societies, first-time buyers have been left out in the cold.
Government plans to grade mortgages
Wednesday, March 5th, 2008The Government is planning to use next week’s budget to introduce plans to grade all mortgages in a bid to kick start the wholesale money markets. Chancellor Alistair Darling is understood to be arranging the introduction of a new system under which all mortgages are graded, with the least risky awarded a gold standard ‘Kitemark’. Investors have been reluctant to buy mortgage-backed securities for fear they contain risky sub-prime loans and this has made it difficult for banks to remove mortgage assets from their books. It is hoped that by providing investors with greater reassurance about the quality of the loans they are taking on, it will make it easier for lenders to sell on mortgages to investors. The scheme could help re-vitalise the wholesale money markets and provide banks with access to cheaper funding, which subsequently could be passed on to consumers in lower mortgage rates.
Nationwide deposits up to 25%
Monday, February 25th, 2008Nationwide increased the minimum deposit required to secure its best rates from 10% of the value of the property to 25%. With the average price of a London house now more than £300,000, buyers will have to raise at least £75,000 up front. It is a major blow for first-time buyers in particular. The clampdown by Nationwide comes as banks and building societies tighten lending conditions following the credit crunch. Until today, borrowers needed only to raise a deposit of 10% or more to take advantage of Nationwide’s best rates. They now need 25% or more - or face an extra 0.2% of interest. The rise only affects new borrowers and wipes out the benefit they would have enjoyed following this month’s cut in interest rates by the Bank of England. Nervous rival lenders are set to follow suit as they chase margins rather than market share.
Last lender pulls 125% mortgage deal
Saturday, February 23rd, 2008Lenders have completely pulled out of the 125% mortgage market as the credit crunch continues to bite. Birmingham Midshires Solutions said it was pulling its version of the product, which will lend people up to 125% of their property’s value, due to market conditions. The group had been the only provider to continue offering the deals after Alliance & Leicester, Abbey, Northern Rock, Coventry Building Society and Godiva Mortgages all said they were scrapping them earlier this week. Faced with only limited availability of funds, lenders are keen to concentrate on less risky mortgages, and the problem has been compounded by fears that house prices could fall. There are now just two mortgage providers who will advance more than 100% of a property’s value, with Scottish Widows offering loans of 110% to professionals only, while Dunfermline Building Society is offering 110% to professionals and 105% to graduates but only in Scotland.
Northern Rock axes 125% mortgage
Friday, February 22nd, 2008Northern Rock has pulled its 125% mortgage after heavy public criticism for the super-size homeloan. The troubled bank will no longer offer the Together mortgage to new customers as it seeks to move towards low-risk lending and shrink its mortgage book. Alliance & Leicester, Abbey, Coventry Building Society and Godiva all pulled their 125% homeloans earlier this week. The only lender still offering 125% mortgages is Birmingham Midshires and experts have suggested it will soon take the product off the market. Fears have been raised that those coming to the end of 100%-plus mortgages may be in for a payment shock and unable to find credit elsewhere. Mortgage lenders have been reassessing their ranges in response to tighter market conditions and have become more reluctant to lend to those with chequered credit histories or high loan-to-value ratios.
Banks protest at Rock’s unfair advantage
Tuesday, February 19th, 2008Rival banks protested that the nationalised company could enjoy a huge competitive advantage over them and steal business away. And MPs complained that the Rock was risking repossessions by attracting new customers with offers to lend them far more money than their homes are worth, by offering cheaper rates on loans of up to 125% of property values - where a quarter of the debt is unsecured. The political crisis deepened after the Government refused to deny claims that taxpayers face a £100m bill for the cost of advice from banks and lawyers during the failed efforts to secure a private sale. The Prime Minister has said nationalisation was a temporary measure, although new Northern Rock boss Ron Sandler has said it will be ’some years’ before the bank can repay its debts. Today’s emergency Bill will give the Government special powers for 12 months to nationalise any bank, not just Northern Rock where it is necessary to protect “the stability of the UK financial system”.
What now for Northern Rock mortgages?
Monday, February 18th, 2008Homeowners with a Northern Rock mortgage will continue to pay it as normal. Monthly payments and terms and conditions will remain the same, but Northern Rock mortgage holders now owe the taxpayer money rather than the bank. They will find, however, that securing a new deal from Northern Rock is unlikely to be worthwhile, as the bank’s mortgages have become uncompetitive since the crisis began and better rates can be found elsewhere. The number of new mortgages from Northern Rock will be seriously reduced and rates are likely to remain uncompetitive. The Government will seek to avoid being accused of using the benefits of state ownership to beat rival mortgage lenders’ offers. Currently, Northern Rock’s two-year fixed rate mortgage is set at 6.99%, with a £1,995 fee – this compares to Halifax, which is offering a two-year fixed rate at 5.89% with a £999 fee.
Mortgage lenders rush to cut rates
Sunday, February 10th, 2008Within hours of the Bank’s announcement at noon, nine of the top ten lenders said they would pass the full quarter-point cut to their borrowers. Only the stricken Northern Rock did not move its rates following the decision to bring down rates from 5.5% to 5.25%. The ‘rush to cut’ follows criticism of banks and building societies for ripping off mortgage holders after the last rate reduction just before Christmas. About 20% of lenders did not pass on the whole of the December decrease to hard-pressed borrowers. The rate cut will help only the minority of borrowers, roughly one in five, who have a mortgage with a variable interest rate. About 50% of homeowners have a fixed-rate loan which will not be affected.
Bank cuts interest rates to 5.25%
Saturday, February 9th, 2008The Bank of England cut interest rates on Thursday by a quarter point to 5.25 percent despite calls for a half-point cut. The widely expected quarter point cut by the Central Bank was modest compared to the recent cuts made by the US Federal Reserve (1.25% points last month alone). The Bank’s move will be welcomed by many mortgage borrowers, but homeowners who do not have a mortgage deal directly linked to the base rate may be disappointed as some lenders have been increasing their own rates in anticipation of a cut. The decision by the Bank of England’s Monetary Policy Committee comes as more evidence emerges of a slowdown in economic growth both in the UK and overseas.
