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Mortgage Research Good News For House Buyers
By: R.Green
Figures from the Council of Mortgage Lenders show that in July gross lending in
totalled £25.2 billion, with fixed rate deal mortgages are at their most popular
for nearly six years.
Nonetheless, "July's growth in lending to individuals slowed from the recent
trend," said British Bankers Association (BBA) spokesman David Dooks, “this
could have reflected consumers waiting for the widely anticipated cut in
interest rates."
Miles Shipside, Commercial Director of Rightmove ( http://www.rightmove.co.uk/
), comments, “The belated but welcome drop in interest rates will be a real
boost for sentiment in the market and a springboard for a better 2006.”
However, more than half of all mortgage lenders have failed to pass on the full
Bank of England interest rate cut to borrowers, and those that haven’t done so
already look unlikely to do so in the future.
“How these things usually work is that if the lender is going to pass on the
full cut they announce so fairly quickly”, Ray Boulger of John Charcol mortgage
advisers.
Several lenders stated the rates on fixed mortgage deals from some providers had
already started to drop in anticipation of the cut in interest rates earlier
this month, while others argued that replicating the rate cut is not necessary
because they did not pass on past increases.
A few lenders, including the Halifax, the UK's largest mortgage lender,
immediately reduced its rates, but others have held off cutting borrowing costs
or have trimmed them by less than the bank's quarter of a percent.
Despite the rate cut anticipation and the increases in the take-up of fixed rate
deals, the British Bankers Association (BBA) said that net mortgage lending by
its own members slowed down last month.
Rightmove in its latest house price index has indicated that house sales have
slowed down. The numbers of completed sales for the three months from April to
June are the lowest since 1998. To improve the chances of achieving sales, many
new sellers are adjusting their prices in an attempt to undercut the
competition. Asking prices have now dropped by an average of 1.2% over the past
two consecutive months.
Rightmove believe that the housing market is gradually recovering, but “there is
currently too much unsold property still available to expect anything other than
a continuation of static asking prices this year”.
Miles Shipside adds, “Sellers are finally becoming more realistic on their
asking prices, which when combined with cheaper mortgages and rising wages,
means that more buyers can now afford to enter the market.” He went on to point
out that, “We still need more first time buyers for the long term health of the
property market.”
Financial comparison site, Moneynet ( http://www.moneynet.co.uk/ ), puts the
current first time buyers’ average joint salary at £39,382, with an average
mortgage amount required of £135,239 constituting a 66% borrowing on the cost of
a property. This means that with sellers asking prices remaining static, or even
falling, and wages gradually rising, for many potential first time buyers, there
is an increase in the realistic prospect of getting onto the property ladder.
Halifax hoped that the interest rate reduction by the Bank of England would,
"reduce mortgage payments as a proportion of gross income for the average new
borrower from 20% to 19%, the average for the past 20 years and well below the
34% peak in 1990".
With the mortgage market especially competitive at present and rate comparison
sources easily accessible, lenders who do not offer reasonable rates are liable
to lose out. All this appears to be good news for buyers as Rightmove states,
“there are now clear signs that the market is making sensible adjustments in
prices to improve buyers’ affordability.”
About the Author:
Richard lives in Edinburgh, occasionally writing for the personal finance blog
Cashzilla( http://cashzilla.blogspot.com/ ) , and thinks “Half Man Half Biscuit”
were a good band. |
