Mortgage News

How Long WIll Interest Rates stay at 0%?

source: BBC

Interest rates could stay close to 0% for a long time, if the recession continues to worse and unemployment rises. The latest inflation forecast suggested CPI inflation will fall below the government's target and stay around 1%. Since this rate is below the governments target this will keep interest rates low.

However, despite the magnitude of the recession, government policies mean inflation could return in a couple of months. If it did interest rates would rise.

Inflationary policies include

Large depreciation in the Pound
QUantitative easing (increasing money supply)
Budget deficit of 12% of GDP

95% Mortgages

Nationwide are the first major building society to bring back a 95% mortgage. This may be helpful for first time buyers who are struggling to get a deposit. However, the rate at 7.19% is far above the base rate of 2%. Also there are still expectations of falling house prices so that many who take a 95% mortgage could be left with negative equity - where the value of the house is less than the value of the outstanding mortgage.

Mortgage Interest Rates UK

The recent cut in base rates by the Bank of England, will be welcome news for the UK's homeowners. However, despite the large base rate cuts, there is no guarantee that homeowners will benefit from cheaper mortgages. Banks are trying hard to improve their profit margins and improve their balance sheets.

These are reasons why the base rate cut may not be passed on - Mortgage interest rate outlook

House price trends in the UK - point to future rate cuts

Drastic measures for desperate times on interest rate cuts

Tesco Mortgage Deals

Tesco's have announced an entry into the mortgage sector. Previously they have avoided entering the market because they felt it was too competitive and profit margins too low. However, with the increased concentration of the mortgage sector. (the Government is effectively the second biggest mortgage lender now) and merger of Lloyds TSB / HBOS.

At the moment, Tesco's offer just a mortgage comparison service (link). But, now they feel that selling mortgages to be a good business plan. The new mortgage provider will help prevent the market get too monopolistic.

Tesco's current financial sector - Tesco Personal Finance specialises in loans, and credit cards. Tesco is one of the UK's most profitable companies.

Credit Crunch News

The credit crunch continues to cause problems for finance markets and the wider economy.
Losses from mortgage defaults caused big insurance firm AIG to require a bailout. Lehman Brothers went bankrupt, after the Fed decided they weren't important enough to bail out.

The Credit Crunch continues to cause problems for the beleaguered housing market. House price transactions have fallen to their lowest level since 1959 (link). See: Effect of credit crunch on housing market

The deteriorating housing market at least increases the hope for an interest rate cut

Because of continuing problems with the mortgage market and the economic slowdown, house prices are likely to continue to fall in 2009. However, house prices could rebound in the late 2009 - When Will house prices recover

The Fed is proposing a $700bn bailout for bad debt in America. It is being intensely scrutinised with many questioning the nature and scope of the deal. - Questions about Bailout

Banks at Risk from Collapse

Another frentic day on the stockmarket saw more banks lined up as potential victims of the credit crunch.

After the collapse of Lehmanh Brothers and rescue of HBOS by Lloyds TSB, share prices in investment banks plummeted on fears that the credit crunch could soon be hitting them.

Amongst the big losers were Goldman Sachs and Morgan Stanley.

They lost 25% and 37% respectively. The FTSE closed at its lowest level for 3 years. at 4,900.

The US government, who bailed out Freddie Mac and Fannie Mae, pumped over $80billion of money into insurance firm AIG. They didn't rescue Lehman Brothers, but, are looking closely at the financial state of Morgan Stanley. They will not want to let Morgan Stanley go under, but, are aware of the acute crisis occuring in the financial sector. With confidence on a knife edge, they will be reluctant to see another bank go under.

UK Bank Profits Rise

Banks Make Profit Despite Credit Crunch.

Despite having to write off bad debts in an unprecedented large scale, British banks have proved adept at maintaining what they do best - making profit. British banks made £3.8billion profits in last 12 months.

The Banks have used the credit crunch as an opportunity to increase bank charges on credit cards, mortgages. The result is that underlying profitability has continued to rise.

For example, HSBC, posted a 28% drop in global profits in its latest results, yet its UK personal-banking division was up 85% to £605m. For example, Over the past 12 months HSBC has increased the cost of its two-year fix for borrowers with 25% equity in their home by half a percentage point, from 6.34% in July 2007 to 6.84% . This amounts to an extra £62 a month on a £200,000 loan, or £1,505 over the two-year period.

The Royal Bank of Scotland also increased its operating profits by 9% and said it found the UK mortgage industry increasingly attractive and was trying to increase its market share here.

Times article
Top 10 British Banks
Top British Banks and Building Societies

www.moneysupermarket.com | Price Comparison Site

www.moneysupermaket.com is one of the market's leading price comparison sites. By having access to many different suppliers they make it easier for customers to compare prices and find the cheapest deal. Money supermarket specialise in financial services such as mortgage deals, insurance quotes and loans. However, they also run price comparison services for other services such as mobile phones, travel, broadband and shopping. www.moneysupermarket.com has been valued at over £1billion and has an estimated 35% of the market share.

If you are looking to save money on finance products, it is also worth considering these practical tips for saving money:

Mortgage Application Fees

Fees on fixed rate Mortgages have shot up in recent months. The cost of many fixed rate mortgage deals have increased by nearly 55%. Application fees on variable mortgages have increased, but, at a slower rate. Research by mform.co.uk suggest that best-buy discounted rate mortgages only increased 11%.

The shorter the mortgage, the bigger application fees will be as a % of the total mortgage. If you have a small mortgage, which you hope to pay off quickly, avoid paying high application fees.

It also shows that when choosing a mortgage application fees can be as important as the basic interest rate for determining competitiveness.

Mortgage firms have been happy to increase application fees to ration mortgage lending. The market is becoming increasingly uncompetitive with potential lenders being in an unenviable position of facing high costs and difficulty in getting loans.

Check out a variety of mortgage lenders because often the biggest mortgage lenders are not the most competitive.

Fixed Rate Mortgages.

Fixed rate mortgages are also not great value because with impending economic downturn, interest rates are unlikely to rise.

Dealing With Empty Houses In the UK

The Problem of Empty Homes in the UK

It is estimate that there are nearly 1 million empty homes in the UK. Often landlords leave homes empty because they don't want to spend any money on redoing their house. However, an empty house is likely to lead to a depreciation in your asset and gives no rentable income. If you have an empty house it is better to make use of it rather than leaving it idle for a long time. These are some options for empty houses.

Approach council for refurbishment grant
Approach housing association who may buy the house quickly or even offer support for refurbishment
Let the house via the local council. They manage the letting side, you are responsible for external and structural repairs. the cost is usually 1/12th of the total rent.

Credit Card 0% Interest

Credit cards which offer 0% interest on balance transfers can be an excellent way of saving money on debt payments. They require careful management because if you miss a payment, you will end up paying Standard rates of upto 18% and also incur a penalty.

If you are careful, you can keep transferring a balance of a few thousand pounds at 0% interest. This enables better cash flow and avoids more expensive forms of borrowing.

Cost of Balance transfers

The only thing to be aware of is that these days most 0% balance transfers incur a balance transfer fee, usually around 2-3%. Therefore, it is best to try and get a credit card balance transfer for a longer period (some go upto 12-15 months). This means that in effect you are paying an interest rate of 2% a year, which is still very good and less than inflation.

Top 10 Finance Companies

Some of the top 10 companies grouped into different aspects of finance such as mortgages, building societies, banks and investment trusts

Housing Market Bust Threatens Recession

Continued falls in house prices threaten to cause a wider recession. Falling house prices combined with the credit crunch and rising oil prices have proved a toxic mix for high street retailers. Evidence suggests that hard pressed consumers are reluctant to spend. This lower disposable income is particularly affecting higher value shops such as Marks and Spencers.

Is UK at risk from recession

Can we blame media for housing boom and Bust? Former BBC journalist Evan Davis suggests yes.

Regional House Prices - Northern Ireland has seen the biggest drop in house prices following spectacular gains. Scotland is one of the few areas to avoid a drop in house prices, but, Scottish prices still remain below the UK average.

Average House prices in UK since 1980.

Help With Mortgage Arreas

Recent predictions by the Council of Mortgage lenders suggest that the coming months will see a marked increase in the number of home repossessions. If you are struggling to meet mortgage payments and fear slipping into arreas, there are a number of strategies that you can take.

Government Help. The government doesn't give much financial help for dealing with mortgage payments. The main thing is that the government offers advice through bodies such as the Citizens Advice Bureau and National Debt Helpline. See: Government help for Mortgages

Reducing Mortgage Payments. There are various things we can do to increase affordability of mortgage payments. For example: Struggling to pay mortgage?

How to avoid defaulting on mortgage payments

Current Mortgage Issues / Problems

Flats for Sale - But Who is Able to Buy Them? - How the credit crunch has affected the market for flats. - Flat for sale anybody?

The dilemma of the Bank of England - which is worse inflation or a recession. In the current climate it is difficult to reduce both inflationary pressure and prevent a slowdown. Rising oil prices have really made their job difficult. - What should Bank of England do to interest rates?

In the longer term, the UK may still face a housing shortage which doesn't bode well for long term housing prospects. - Why the UK still has a housing shortage

Trying to understand inflation - Why is their scepticism of the official figure? - Measuring inflation

Understanding Interest Rates - guide to interest rates at economics help