The Bank of England have reduced the base rate by 1% to 2%. This is the lowest level since 1951.
City experts were hoping a radical 1.5% cut from the current 3% rate will be enough to kick-start spending on the high street, and prevent a slide into a depression.
Accountancy firm PricewaterhouseCoopers today warned Britain will be the worst performing major world economy next year, and called for urgent action this morning from the Bank.
Hetal Mehta, senior economic advisor to the Ernst & Young Item Club, said: ‘This is a grim set of data. With the services sector shrinking at a record pace and employment falling sharply, it is clear this recession is gathering momentum.’
Figures from the high street show inflation is in rapid retreat as retailers slash prices to boost sales in the run-up to Christmas. The British Retail Consortium said shop prices last month were only 2.7% higher than a year ago, down from 3% in October, and a peak of 3.8% in August.
The key three-month Libor rate, influential in pricing bank lending rates, has plunged more than 1%. Sterling three-month Libor fell from 5.56% to 4.49%, it was announced this morning. Libor is the rate at which banks lend to each other and so therefore influences mortgage rates, especially the price of new tracker deals.
The fall has come far quicker than expected. It took nearly a full month for October’s 0.5% reduction to be reflected in the three-month Libor rate.
Banks’ lending rates are influenced by three primary factors:
• The rate at which they can borrow from other banks and financial institutions, which is dependent on Libor rates and money market swap rates.
• The rate at which they borrow from the Bank of England - the so-called base rate.
• The rate at which they can borrow from customers in the form of savings accounts.
Libor, created in the mid-1980s, had traditionally tracked 15 or 20 basis points above the bank rate. But toxic debt from the subprime crisis caused distrust between banks, which were reluctant to lend to one another. So Libor spiked in August 2007, detatching from its usual bank rate relationship.
It had started to fall as some confidence returned in the summer months. This soon fell away with the collapse of Lehman Brothers in September. It peaked at 6.3% on 30 September and then steadily fell to yesterday’s rate of 5.56%.
That leaves the gap between bank rate and Libor at nearly 1.5%. Before the cut yesterday, the difference was 1.06%. Libor should continue to fall in the next few days if there are no further financial shocks.
Following pressure from the economy, businesses and consumers, the Bank of England has slashed interest rates by 1.5% to 3%.
This is the largest rate cut in 15 years, and follows a cut of 0.5% in October.
The BoE has faced pressure from lobby groups representing many sectors, including mortgages. Many expected a cut of 1%, but a 1.5% is very welcome.
The last highest cut was 1% after Black Wednesday, to draw the economy out of a major slump.
For borrowers, the cut could be very good news if it kickstarts the economy and allows mortgage lenders to adjust their rates.
Extract from the Mais Lecture on “Maintaining stability in a global economy”, given by The Chancellor of the Exchequer, The Rt Hon Alistair Darling MP, at the Cass Business School yesterday, within which the green light would appear to have been given to the MPC to cut interest rates without worrying about short term effects on inflation.
The Financial Services Authority (FSA) has published today its latest mortgage lending data covering the period from Q1 2007 to the end of Q2 2008.
The report shows the total value of outstanding loans is £1,178bn, an increase of 7.5% compared to a year earlier. But quarterly growth continues to slow, with a Q2 increase of just 1%;
New lending peaked in Q3 last year at £102bn before declining to £72bn in Q2, leaving gross lending 26% lower than a year earlier.
Loans to borrowers with an impaired credit history represented 2.1% of new lending in Q2, compared to 3.4% a year earlier.
While the number of new arrears cases has stayed constant at around 54,000 each quarter since early 2007 consumers are increasingly struggling to clear their arrears and consequently the total number of accounts in arrears is increasing. At the end of Q2 there were 312,000 loan accounts in arrears, an increase of 3% on Q1 and 16% up on a year earlier, with the total amount of arrears now standing at £1.6bn.
Numbers of new possessions have grown significantly since Q3 last year, with the 11,054 new cases in Q2 (after 9172 in Q1) being 71% higher than a year earlier.
In a very interesting speech last night to the CBI, Institute of Directors, Leeds Chamber of Commerce and Yorkshire Forward in Leeds, Mervy King mentioned the fact that we are probably in a recession, but also pointed to the among other things potentially selling units in the Banking Reconstruction Fund. Here is the speech which commences after the introduction, and includes bold print for key points made for those that don’t wish to read it in full.
Figures released today show that inflation as measured by the Consumer Price Index is running at 5.2% in September up from 4.7% in August.
The increase is mainly due to higher energy costs, and it is thought that with prices of energy now falling back, inflation has probably now reached its peak. Once the energy price reduction feed through in the next few months the index should start to go back towards target.
The Retail Price Index (RPI) is currently running at 5% up from 4.9% in August, and it will be this figure that is used to calculate the increase in pensions. So we have one group that will be happy as they should get sharply rising pensions at a time of falling inflation. However it will of course not bring pensions back to previous levels in real terms.
It’s all happening in the financial markets, with the Bank of England cutting the base rate to 4.5 per cent and Alistair Darling’s £500 billion rescue plan…
Chancellor Darling’s plan aims to bring Britain’s high street banks back from the brink of collapse and boost consumer confidence with a part-nationalisation.
Mr Darling has been a busy bee. On top of gambling £500 billion of taxpayers’ money to beat the credit crunch, he has told the Bank of England to cut interest rates and even found time to bail out all of Icesave’s savers.
He has said that the moves come in response to ‘extraordinary times.’
Half of the money is being offered to banks in a move that would make them semi-nationalised, allowing them to have the cash as capital in return for the Government taking a stake in the form of preferential shares. The other half will be metered out at a later date.
£200 billion will be given to the banks in short-term loans under the Special Liquidity Scheme set up to keep the financial system working on a day-to-day basis.
If no bank goes bust then none of the money will be needed atall. The total amount of public money involved is more than the entire £324 billion annual spending total by Whitehall departments.
Across the UK, houses are selling at an average of nine percent below the asking price with sellers in some regions being forced to accept as much as 12.5 percent discount off their advertised price, says RICS research.
As economic fundamentals continue to worsen, the gap between selling and asking prices is widening. In the North vendors are accepting the lowest offers - averaging 12.5 percent below the marketed price. Vendors in the North West, East Midlands, West Midlands and Wales are accepting offers averaging approximately 10 percent below but in London the figure stands at 8.5 percent. London has remained firmer than most as its diverse economy and large job market offers sellers more room for optimism. Interestingly, Scotland has yet to be affected (where the gap is only 2.4 percent) but price falls in this region have lagged significantly behind the rest of the UK and it is likely that the gap will widen in the coming months.
In the North West, the majority of vendors accepted lower asking prices with 82 percent of Chartered Surveyors reporting that the gap had widened while in the West Midlands 75 percent reported a widening gap. More surprisingly the gap did not appear to widen in London in August with 67 percent of Chartered Surveyors reporting no change.
The Treasury says it will be business as usual for B&B savers and borrowers
Mortgage lender Bradford & Bingley (B&B) is to be nationalised, the government has confirmed.
Under the arrangement, the government will take control of the bank’s £50bn in mortgages and loans. Shares in the company have been suspended.
B&B’s £20bn savings business and branch network will be bought by rival Abbey, which is in turn owned by Spanish banking group Santander.
B&B is the latest bank to fall victim to the crisis in the financial sector.
B&B is the second UK bank to be nationalised since the start of the global credit turmoil, following Northern Rock’s move into state ownership in February this year.
It is being reported that HSBC has cut 1,100 jobs in its global banking and markets division.
The reductions in the division’s back-office operations amount to about 4% of HSBC’s wholesale banking workforce.
The move follows yesterday’s news that Bradford & Bingley has shut a mortgage processing centre and cut its sales team that deals with mortgage brokers, not to mention its branch-based advisers.
The Property Investment Department at Attwells Solicitors has developed a package of sandwich lease documents to enable investors to secure these types of deals and to complete them quickly.
Simply explained, the scheme would be set up as follows:
- An investor secures an option over the property at a below market value price. The option is exercisable by the investor over an agreed period of time
- The investor manages the tenant on a day to day basis and makes the necessary payments to the mortgage companies each month. The seller has no involvement with the property throughout the option period
- The tenant at the property pays a higher rent each month to the investor and some of that increased rent is paid into a deposit account. This accrues over the period of time the option is in force
- At the end of the option period, and depending on the market conditions at the time, the investor can exercise the option and purchase the property from the seller
- In turn, the tenant raises a mortgage and purchases the property from the investor at full market value. The accrued deposit is returned to the tenant and is used as the deposit to purchase the property
If you are interested in this documentation or similar types of transactions, please email invest@attwells.com
As of next month, extensions of up to two storeys will be permitted as long as they extend no more than 10ft from the back of an existing property — enough for a small kitchen or spare bedroom.
Loft conversions will also be allowed without planning consent, as long as they extend no more than 20cm (about 8in) from the eaves of a property. They must also be no more than 50 cubic metres in size — roughly the equivalent of a room 18ft by 12ft. In conservation areas, loft conversions will still be restricted but single-storey rear extensions will be permitted.
The rules will remove as many as 80,000 householders a year from the planning system. About a quarter of all home development projects that currently require planning permission will be able to go ahead without formal authorisation from councils.
Ministers said the relaxation of the rules would make it easier for those who were struggling to move house because of the credit crisis to extend their homes instead.
However, there will be new restrictions on home owners who want to pave their front gardens. In order to cut down on the volume of water flowing off driveways into drains, home owners will need planning permission if they want to lay more than five square metres of asphalt or other impermeable materials.
Paving in two strips to act as “wheel tracks” for parking will effectively escape the restrictions, as will driveways using water-permeable surfaces.
Domestic planning applications have more than doubled in the past decade to 330,000 last year. They can cost thousands of pounds and leave home owners mired in red tape for months, even though 90 per cent of applications are eventually approved.
By extending the “Permitted Development” regime, ministers aim to prevent unnecessary applications for relatively minor alterations.
As long as building projects fall within the new limits, neighbours will not be able to object. Government officials say the new restrictions have been set to ensure that no “obtrusive” developments will escape the planning system.
Local councils will have discretion to vary the rules, meaning that people in heavily-developed areas may not get as much freedom to develop even under the new rules.
Building regulations will remain in place, meaning that householders will still have to demonstrate that alterations are constructed to health and safety standards.
The Royal Institution of Chartered Surveyors also supported the scheme but warned that it could increase tensions between neighbours.
Jeremy Tigue, Head of Global Equities at F&C Investments, gives his views on the bailout of Fannie Mae and Freddie Mac
“Monday has seen world markets rally as the US Government announced moves to bail out Freddie Mac and Fannie Mae - the quasi-private institutions responsible for financing the US mortgage market. Together Freddie Mac and Fannie Mae finance or guarantee nearly half of all outstanding US mortgage debt.
The move is the third US Government intervention in the ongoing credit crisis following the collapse of Bear Sterns in March and then initial efforts to sort Freddie Mac and Fannie Mae in July of this year. The latest move however, is by far the most significant and could, in my view, signal a real turning point - much like the bail-out of the failing Long-Term Capital Management hedge fund did in 1998.
While the first two moves saw markets bounce in a knee-jerk reaction only to fall back again, this time I believe the change is more fundamental.
To put the deal into some sort of context it is over 25 times the size of the UK government’s rescue of Northern Rock and probably the largest financial bail-out since 1945. It also means that the US Government now ‘owns’ around 50% of US mortgages - an amazing statistic in the land of free enterprise. The scale of the rescue means it removes a huge amount of systemic risk from the global financial system. It also provides support to the ailing US housing market by ensuring mortgages will still be available, albeit at more expensive levels than in the past.
Whilst the move is undoubtedly good news, the US economy looks set to remain fragile in the foreseeable future and companies will continue to find the environment a challenging one.
From here on attention and pressure is also likely to focus on other countries whose housing markets are behind the US, including the UK. Indeed, at the weekend HBOS’s CEO said that he saw little prospect of any recovery until 2010, and indicated that the UK housing market could get worse from here. Irrespective of any potential moves by governments in the UK, Spain, Ireland or elsewhere we believe that, on balance, the US government intervention will prove to be a real turning point. Our view is supported by the fact that last week UK blue chips were yielding more than 10 year gilts, something which over the last 50 years this has proven to be a good buying signal.”
The Monetary Policy Committe (MPC) has announced that the base rate will remain unchanged at 5%.
Despite the prospect of recession and the need to give the economy a boost the MPC has, as widely expected, left the base rate unchanged. Presumably this is to fulfil its remit of keeping inflation at or below 2% rather than looking at the economy as a whole.
However there is now a feeling generally that with a potentially prolonged recession looming, that interest rate policy will be eased, and rates should start heading downwards before the end of this year. Indeed the recent OECD forecasts showed inflationary pressures easing, which would give the MPC scope to cut rates without going outside its current remit.
Hazel Blears has announced this morning that £300 million will be made available to help people facing repossession
The state will use £200 million to pay off mortgage arrears of “decent” families who have fallen into mortgage arrears and will allocate £100 million to pay mortgage interest. Despite initial public reaction which seems to be that people who have bought properties should have known the risks they were taking and should not get government support when they get into trouble, Hazel Blears believes that it is more cost effective to pursue this policy rather than see people thrown out of their homes.
Particularly upset are potential first time buyers who had previously been priced out of the market, and are now watching on as their taxes are used to subsidise homeowners.
Loans of up to 30% of a homes value is just one of a raft of measures that are to be formally announced today. Under the scheme loans will be made for a period of up to five years, to families with an income of up to £60,000, after which the loan will have to be repaid and a “fee” will be payable, the level of which is currently unclear. This will be a joint inintiative between the state and large property developers and will be known as Homebuy Direct.
The Department for Communities and Local Government saidt that “not only will this help first-time buyers, but it will also support the industry by identifying buyers for their new homes.” They added that ” this will help the housebuilding industry weather difficult conditions, so that, when the market recovers, they are ready to expand and get back on with building the new homes the country needs for the long term”
The price of a typical house fell by 1.9% in August according to the Nationwide.
This means that house prices are 10.5% down year on year, the building society said. The average home now costs £164,654 which is more than £19,000 cheaper than in the same month last year.
Commenting on the figures Fionnuala Earley, Nationwide’s chief economist, said: “The price of a typical house fell by 1.9% in August, bringing the annual fall into double digits for the first time since the fourth quarter of 1990. The price of a typical house fell by 10.5% over the last twelve months to £164,654. While the pace of monthly falls picked up during the month, the less volatile three month on three month measure, eased very slightly in August to 4.5% from 4.6% in July.
“Estate agents’ data across all property types is a little more optimistic and suggests that there may be some glimmers of interest returning to the market. Agents report an improvement in new buyer enquiries, perhaps stimulated by the recent falls in prices and the opportunity to negotiate a good deal. However, the reported numbers of sales have not been encouraging.
“There is clearly less mortgage borrowing taking place in the current market, but those borrowers choosing a new loan are tending to opt for fixed rate loans, even though they have been more expensive than trackers.
“The August Inflation Report struck a markedly more dovish tone than in May, even though inflation is at its highest level since 1992 and at more than twice its official target. There is still a great deal of uncertainty, but the Bank of England’s forecasts of growth and inflation have been widely interpreted as opening the door to rate cuts.
“Market rates have reacted to this and as a consequence mortgage rates, particularly fixed rates, have continued to come down. We expect the next move in the Bank Rate to be down, but the extent to which this will revive the mortgage and housing market is likely to be limited while overall confidence in economic and housing market conditions is low.”
The UK’s annual rate of inflation rose to 4.4% in July, up from 3.8% in June and more than twice the government’s 2% target, official figures have shown.
The rise in the Consumer Prices Index (CPI) was more than expected, with food prices up a record 13.7% on the year.
High petrol prices also helped to push up inflation as the data was collected before the recent drop in oil prices.
Inflation as measured by the Retail Prices Index (RPI) - often used in pay negotiations - rose to 5% from 4.6%.
The Bank of England’s Monetary Policy Committee opted to leave rates unchanged after weighing up the twin threat of rising inflation and the sharp slowdown in the British economy, which is increasingly at risk of sliding into recession.
The decision to hold rates was widely expected by economists, who argue that a rate hike would have sent the struggling economy into a deep downturn, while a cut would indicate that the Bank is less worried about inflation, even though it stands at 3.8pc, way ahead of its 2pc target.
House price slump continued in July according to the latest monthly report from the Halifax.
The lender said prices fell another 1.7% last month, taking the annual rate of decline down from 6.1% to 8.8%.
The Halifax calculates that the average house in the UK is now worth £177,351, back to the value seen in June 2006.
The bank said demand from home buyers had been “significantly curbed” by the lack of mortgage funds, high prices and the squeeze on household finances.
“Pressure on householders’ income, together with a very significant reduction in mortgage finance due to the global financial markets crisis, is constraining potential house buyers’ ability to enter the market,” said the Halifax’s economist Suren Thiru.
“This is resulting in both lower prices and activity levels,” he added.
The Halifax’s survey chimes with that of rival mortgage lender Nationwide, which recently calculated that UK property prices had fallen by 8.1% in the year to July.
According to the BoE, mortgage approvals have dived by almost 70% in the past year. Just 36,000 new loans arranged for people moving home during June - that is 69% fewer than in the same month last year and 12% lower than May’s figure, according to the Bank of England.
Mortgage lending also dropped steeply during the month, with net advances hitting a near eight-year low of £3.1bn.
The number of home loans approved has now fallen for 14 consecutive months and is at its lowest since the BoE first issued figures in 1993.
Lenders have tightened their criteria because of the credit crunch, reducing the availability of mortgages, especially to would-be buyers with small deposits.
The BoE figures come as a report for the Treasury warned there is no quick fix for the problems in the mortgage market.
The Crosby Review, which is being carried out by the former head of the Halifax Bank of Scotland Group (HBOS), Sir James Crosby, says funding of home loans should be left to the market.
Sir James says Britain should avoid setting up US-style government-backed agencies to tackle the funding crisis.
But his independent report stops short of making recommendations on how to tackle the problems caused by the credit crunch.
It moots the idea of possible further support from the Treasury to help kick-start mortgage lending
The Bank of England data shows a fall in all types of mortgage approval, with just 165,000 new loans agreed during June, down from 214,000 just three months earlier.
Retailers are facing tough conditions on the High Street, analysts say
Rising food and fuel costs pushed UK inflation up to an 11-year high of 3.8% in June from 3.3% in May, figures show.
The rise means inflation is now well above the government’s 2% target, and may reduce the chance of a UK rate cut.
The Bank of England, which has already said inflation may top 4% this year, has to balance the need to control inflation with worries over growth.
The RPI inflation measure - often used as a benchmark in pay negotiations - rose to 4.6% in June from 4.3% in May.
The Bank of England kept British interest rates at 5.0 percent today but analysts say a slowing economy will force it to cut borrowing costs next month, even though inflation is heading higher.
The average arrangement fee charged by 3 year base rate tracker mortgages has increased by 121%. In terms of rate increases the most significant increase has occurred in the two year fixed rate market were the average rate charged has increased from 5.42% eighteen months ago to 6.71% now.
A panel of economists has delivered a worrying prediction about the future of UK house prices…
A survey of the Society of Business Economists (SBE) members conducted by ITV1’s Tonight programme found that 60 per cent of economists do not expect prices to recover to the pre-credit crunch peak for at least four years.
The majority of the poll identified 2009 as the year when house prices will hit rock bottom, with most of the sample predicting that they will have fallen by 20 per cent from the peak of the market by then. However, one in five forecast a falls of 30 per cent - which would see the value of a home cut by £60,000.
Heriot Watt University vice-chancellor Anton Muscatelli told MPs: “There is a risk that people will begin to see current inflation levels as the norm and demand pay increases to match. Unless we see inflation falling later on this year… we will see inflationary expectations stick at the current levels which are around 4%.”
Bronwyn Curtis, chairman of the SBE, said: “It doesn’t look like we’re going to see a fall, which is what we’re in the middle of, and a quick bounce back. It does look as though it’s going to go on, and we’ll have slow growth for some time.
“On top of that, house prices were overvalued, according to most economists, and so you have the situation where they remain undervalued for a long time. As the economy slows we will get unemployment … and there will be much less pressure pushing for wage hikes.”
Roger Bootle, of consultancy Capital Economics, added “If the Bank of England doesn’t cut rates quickly enough as inflation subsides there is a risk the economy will be extremely weak, perhaps in recession and said inflation could fall well below the Bank’s 2% target”.
Rising food and energy prices have pushed UK consumer inflation up again, the Office for National Statistics (ONS) has said. The Consumer Prices Index (CPI) measure of annual inflation was 3.3% in May, up from 3% the previous month.
A recent New Statesman article entitled ‘Crash: The housing crisis is just beginning’ contained the following alarming facts about house prices and the UK mortgage market:
- 250,000 UK households in negative equity
- 50% fall in net mortgage lending expected this year (£53bn)
- 12m mortgages outstanding in 2007
- 25% predicted average house-price drop during current crash
- 3,775 mortgage products available now
- 15,599 mortgage products available in July 2007
Source: New Statesman, 5th June 2008
More than 23,200 people who took out 100% mortgages in the year to 31 March could face negative equity. Falling house prices mean the amount borrowed could be greater than the value of their properties. The data from the Council of Mortgage Lenders comes as figures show the housing market is slowing down further.
Separate housing figures suggest the number of transactions per estate agent has hit a 30-year low. These figures from the Royal Institution of Chartered Surveyors come as banks are imposing stricter requirements on borrowers, in the wake of the credit crisis.
The Monetary Policy Committee’s decision came despite widespread worries about the state of the UK economy amid a global slowdown. However, rising fuel and food prices means that there are still worries over controlling inflation.
Property guru David Lee moved into the property industry in 2001 and used his professional training to develop new methods of property investment strategies that were unheard of in the UK at the time. He has pioneered and revolutionised the ‘Rent Now, Buy Later’ concept within the UK.
Tom Toumazou is the Project Manager for Raising Housing Standards in the East Midlands. He oversees Regional Landlord Accreditation and will be discussing this important requirement as well as answering questions about the current market and how landlords are being directly affected.
US investor Texas Pacific Group is to buy a 20% stake in Bradford & Bingley for £150 million.
It follows a profits warning by the buy-to-let lender, which announced that profits for the year would be down about £100 million.
The move comes as its chief executive, Stephen Crawshaw, resigned with immediate effect because of “a serious cardiovascular condition”.
Homeowners refinancing their mortgages are in for a rude awakening as they face the highest fixed-rates deals since the start of the decade…
Hccording to figures compiled by MoneyFacts, the average rate for a two-year loan has hit 6.64% - up from just 4.34% two years ago, which means that someone coming to the end of a mortgage on a £150,000 house they took out in 2005, will see their average repayments jump by £206 a month to £1,025.
MoneyFacts’ figures show that someone taking a typical five-year deal in 2003 on a £250,000 home loan will have to stump up almost £500 more when it comes to their new deal. Typical fixed rates are the highest since 2000.
It is estimated that around 1.4 million homeowners will see their fixed deals expire this year.
With 150 estate agent offices currently reported to be closing every week, Jonathan Haward, Managing Director of The County Homesearch Company says the face of the high street estate agency will change forever, and in today’s market only the very best will survive…
In the latest survey from the Royal Institution of Chartered Surveyors (RICS), 95.1% of surveyors saw house prices fall than rise in April.
That figure is up from 79.4% in March, with all surveyors in East Anglia, and the North and North West of England, reporting price falls. There has also been a continued fall in enquiries from prospective buyers.
The RICS shows price falls are far more widespread than at any time since 1978 and is further confirmation that house prices in the UK are now declining after a decade long boom.
The Council of Mortgage Lenders said 27,100 homes, the highest figure since 1999, were taken over by lenders after people fell behind with repayments.
The figure for the UK is more than the 22,400 in 2006, but not as extreme as the CML had forecast. It is still a sharp rise on the 8,500 of 2003.
The CML warned that the number of repossessions was likely to rise again in 2008 as the credit crunch tightened.
Meanwhile, the numbers of mortgages behind on payments rose by 8.6% compared to 2006, the organisation, which represents mortgage lenders, said.
With March mortgage approvals down 46.2% on 2007, the UK is certainly feeling the gloomy global economic conditions. Credit crunch has quickly become part of our vernacular, but has it entered your home yet?
Whether you’re a homeowner, a parent, retired or a student, let us know your experience of the credit crunch to date, and what you’re doing about it. Maybe you’re worried about mortgage repayments, or perhaps you’re wondering what all the fuss is about? Whatever your situation, we want to know.
Has your credit been crunched?
The Bank of England kept British interest rates at 5.0 percent today but analysts say a slowing economy will force it to cut borrowing costs next month, even though inflation is heading higher.
House prices in the UK have recorded their first annual fall for 12 years (i.e. since year 1996).
Prices fell by 1.1% in April, the sixth monthly decline in a row, and were down 1% from the levels seen in April 2007, the building society said.
Nationwide said the price falls reflected a weakening market which had been hit by “poor affordability and tighter financial market conditions”.
An average home now costs £178,555 which is £1,759 lower than April 2007.
As of midnight on Tuesday 22nd April 2008 Mortgage Express no longer accepts any remortgage business where the borrower has owned the mortgaged property for less than six months.
From the same date, the Extended Criteria 110% rental cover option and all 2 year deals for BTL deals will be withdrawn!
In spite of the Bank of England decision to cut interest rates from 5.25% to 5% last Thursday, mortgage lenders appear not to have passed the cut to borrowers.
This is increasing speculation that the Bank of England has lost control over the actual interest rates faced by borrowers.
Alistair Darling, commenting in Washington, says that he will do everything in his power to resolve the mortgage crisis, for first-time buyers and the economy at large.
He also pointed to an inevitable slowdown in house prices. Confidence in the mortgages market is at a low, and with lenders making mortgage more expensive despite base rate cuts, many borrowers are dreading remortgage costs when their fixed, tracker or variable rate deal comes to an end.
The UK’s fastest growing dedicated property investment event returns to the NEC for a second year 11 - 13 April 2008.
This exhibition is the property event for serious investors. So if you are considering buying residential or commercial property for investment purposes - in the UK or abroad - this show will answer all of your questions.
Features property and property related services from approximately 100 exhibitors including major house builders, developers, estate & letting agents, lenders, brokers, property investment training companies, landlord associations and other leading property experts … many of whom will be appearing at the show for the first time.
The quarter-point cut is the third since December and comes amid signs of gathering economic gloom, with figures earlier this week showing that house prices fell 2.5% last month - the biggest monthly drop since the property crash of the early 1990s.
The decision will be a welcome boost to cash-strapped borrowers, already under pressure from soaring inflation. Monthly repayments on a £100,000 mortgage will fall by £16 if lenders pass on the cut in full, reducing them from £722.80 to £706.77 a month, based on a new rate of 7%.
The latest monthly figures from Halifax, the UK’s largest mortgage lender, reveal that house prices fell by 2.5% in March, the biggest monthly decline since September 1992. Prices are now just 1.1% higher than they were a year ago, the slowest annual growth rate for 12 years.
The Halifax has also revised its predictions and now expects prices to fall over the course of this year. The Nationwide took a similar stance earlier this month after reporting that prices had fallen for five months in a row.
Numerous mortgage providers have removed mortgage deals from the market or increased rates to discourage new business over the last month, with First Direct taking the shocking action of suspending its entire range of products.
The Co-operative Bank has recently withdrawn its two-year mortgage deals, and the US investment bank Lehman Brothers is withdrawing from the UK mortgage market with immediate effect.
Up to 6.5 million people have been forced to consolidate their debts in the past three years in a bid to keep borrowing under control.
And 1.29 million of them have moved debts of more than £20,000 run up on loans, credit cards, store cards and overdrafts to one lender, the independent financial comparison website says.
The study shows 14 per cent of people have moved debts to one lender in the past three years and it is younger people who are most likely to have consolidated - 23 per cent of 25 to 34-year-olds have moved all borrowing to one lender.
House prices fell for the sixth month in a row over March, according to Hometrack’s national housing market survey.
Average prices were down by 0.2% over the month with the annual rate of growth slipping to +0.4%, the lowest level for two years since March 2006. The survey highlighted a continued improvement in both levels of demand and transaction levels although pricing levels are likely to remain under pressure over the coming months.
Why has council tax risen so much more than inflation?
| Item | 1998 | 2008 | Change |
| Council Tax* | £616.51 | £1,435 | +123% |
| Bread | £0.51 | £1 | +98% |
| Av. Wage/Week | £260 | £367 | +41% |
| Pint of Milk | £0.35 | £0.39 | +11.4% |
* for Band D property.
Citizens Advice (CAB) has seen a dramatic surge in consumers seeking help with mortgage arrears in 2008.
In the first two months of the year, Citizens Advice Bureaux across England and Wales saw mortgage arrears enquiries climb by 35 per cent compared to early 2007 - with the total number of debt problems dealt with amounting to 215,000 across three-quarters of Bureaux.
Meeting other household bills such as water, gas and electricity and council tax, was also seen to be a growing issue.
Debts is top priority for consumers contacting Citizens Advice, accounting for one in three enquiries, with those relating to credit, store and charge cards forming the largest individual category.
However the figures for plastic debt bucked the trend usually seen at this time of year, falling by 9 per cent, with overdraft issues up 7 per cent to fill the gap.
Teresa Perchard, director of policy for Citizens Advice said: “These latest figures paint a worrying picture - the combination of big increases in household bills, especially fuel, and rising housing costs is putting additional pressure on people’s finances when they are already stretched to the limit.”
Property price panic has seen a raft of high-value properties come to market, pushing up asking prices, Home.co.uk research has shown.
City workers cashing in on their investments were pinpointed by the firm’s Asking Price Index Report as key drivers of this national trend, with the impact particularly being felt within Greater London.
Indeed 23 per cent of the current stock up for sale in Greater London was rushed to market in the last 14 days.
This has had a significant impact on both the average asking price in the region, which has risen by 3.4 per cent since February to £361,414, and on a wider scale in England and Wales - pushing it up by 1.4 per cent. The average asking price in England and Wales in now £259,026.
The increasingly uncertain economic outlook, driven by fluctuations within the financial markets over the last month and the threat of redundancy, has led a number of investors to cut their losses with the hope of selling up before the Chancellor’s changes to capital gains tax legislation take effect.
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