Telegraph - For the third month in a row, the number of loans extended to home buyers has increased, climbing from a low of 17,900 in November last year to 28,179 in February.
The statistics from the British Bankers' Association are the latest evidence that the moribund housing market is showing some sings of life. Estate agents have reported that more people are coming in through their doors in recent weeks, as rock-bottom interest rates start to slowly trickle through to some lower mortgage deals.
The Royal Institution of Chartered Surveyors earlier this month said that while home sales fell to the lowest since at least 1978, the number of potential buyers registering with estate agents during February rose to the highest level since August 2006.
Economists at investment bank UBS this week suggested the worst may be over. "There are a few, but nonetheless important, green shoots emerging that provide a glimmer of hope," Amit Kara at the bank said. "We are not suggesting that the road from here is onward and upward, but rather that the intensity of the pain will gradually ease."
David Dooks, a director at the BBA, said: "There are certainly more mortgages being lent out by the largest lenders. But I don't think this is a sign of green shoots, more a symptom that we may be getting close to the bottom."
Most believe that too much should not be read into the BBA data. Seema Shah, property expert at the think tank Capital Economics, said: "Mortgage approvals for new house purchase are still extraordinarily weak, being 31 per cent lower than a year earlier and some 65 per cent below the late 2006 peak."
The BBA figures also show that savers continued to withdraw money from their savings accounts during February, fed up with record low interest rates.
After a net £2 billion being taken out in January, a further £100 million was withdrawn in February. Most are using their money to either pay off their debts or – in the case of people losing their jobs – fund everyday expenses.
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Wednesday, March 25, 2009
Monday, March 23, 2009
UK Mortgage lending drops 60%
LONDON, March 19 (Reuters) - British gross mortgage lending fell 60 percent from a year ago in February to 9.9 billion pounds ($14.10 billion), the lowest since February 2001, the Council of Mortgage Lenders said on Thursday.
The 15 percent monthly fall from January's figure of 11.7 billion pounds was much bigger than the 3-4 percent decline the CML said the market usually experiences at that time of year.
But the CML said February's number was in line with its forecast for 145 billion pounds of lending in 2009 as a whole.
Analysts expect the housing market, gripped by the credit crunch, to remain weak for some time.
"Housing market activity and prices remain under serious downward pressure from the awful economic climate and ongoing low mortgage availability," said Howard Archer, an economist at Global Insight.
"We continue to expect house prices to fall by 15 percent overall in 2009 and then dip by a further 5 percent in the first half of 2010 before stabilizing. This would take them some 35 percent below their 2007 peak levels."
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The 15 percent monthly fall from January's figure of 11.7 billion pounds was much bigger than the 3-4 percent decline the CML said the market usually experiences at that time of year.
But the CML said February's number was in line with its forecast for 145 billion pounds of lending in 2009 as a whole.
Analysts expect the housing market, gripped by the credit crunch, to remain weak for some time.
"Housing market activity and prices remain under serious downward pressure from the awful economic climate and ongoing low mortgage availability," said Howard Archer, an economist at Global Insight.
"We continue to expect house prices to fall by 15 percent overall in 2009 and then dip by a further 5 percent in the first half of 2010 before stabilizing. This would take them some 35 percent below their 2007 peak levels."
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Restoring faith in property
Telegraph - Estate agents on average are selling only two or three houses a month. Mortgages are harder to come by than springs in a desert. And yet, if a town house in a good address with peeling paint and dodgy plumbing, or a picturesque cottage desperately in need of renovation appears on the market, crowds of potential buyers suddenly emerge to compete for the pleasure of a life-changing project.
Nothing, it seems, has dampened property lovers' desire to rescue. Cluttons in London reports that unmodernised properties are attracting the "creative buyers" who anticipate huge price growth when the market starts to move again. "Both developers and individuals are searching out the real bargains," says James Hyman, partner for residential sales. "Unmodernised properties in need of complete renovation are coming back into vogue at knock-down prices and offer greater long-term added value than more expensive properties." This is the new wreckonomics.
Classic custom campersWhen estate agent Matthew Harvey of Chesterton Humberts put a Grade II listed two-bedroom thatched cottage at Rushall in Wiltshire on the market on March 7 with a guide price of £150,000, he was blown away by enquiries. No 2 Elm Tree Cottages has a solid-fuelled stove with a back boiler, a downstairs bathroom, and sales particulars bearing the magic words "requires modernisation". Matthew had eight viewings on the first day, and every other call thereafter was about the cottage.
"A lot of young couples who have always dreamed of having a cottage are interested," he says. "And a lot of older couples who are getting nothing for their money in the bank want a nice little cottage. An astonishing number of people have cash to buy with. It is a semi that needs just about everything doing to it – plumbing, wiring, new kitchen, bathroom – but it had new thatch in 2005 so it has a good lid."
But how do the sums work now that renovators can no longer build rising prices into their calculations? Are they on a road to ruin, spending vast sums they can never recoup? "I think the cottage probably needs around £35,000 spent on it," says Matthew. "In good times I have sold properties like this at £180,000 or £190,000, but the end value is never going to be more than £210,000. So there is a little bit of jam for people to take. But there are also buyers who aren't worried about making money and just want to live in it." Within 48 hours Chesterton Humberts (01672 519222) had an offer of the guide price and is still receiving more.
It is not just that keeping the money in the bank has lost its attraction. One interesting side effect of the recession is that the cost of hiring builders is dropping, so the cost of building work isn't frightening people away. The consultant E C Harris reported recently that tender prices could drop by 10 per cent in 2009, and by 6 per cent in 2010. In some areas they could fall by as much as 25 per cent over the next three years.
The chance to snaffle a substantial Queen Anne house at £695,000 instead of a million or two has proved impossible to resist. The words "total refurbishment" seems to have titillated interest even further. Brook House at Eastry, four miles from Sandwich in Kent, has nine bedrooms, two bathrooms, attics, a covered courtyard, outbuildings and five acres. "It needs £500,000 spent on it, at least," says Ed Church, handling the sale at Strutt & Parker (01227 451123). There were 149 viewings in less than a month, and last week the agent went to sealed bids.
So do the sums look healthy? In a buoyant market the house might be worth £1.5m to £2m. But these buyers are no longer looking at a two- or three-year turnaround with a quick profit. "Buyers are looking at this as a house they will live in for 30 to 40 years," says Ed. "They are returning to traditional values and looking for a home."
Two beguiling Cotswold properties, Grass Ground farmhouse and Grass Ground cottage at Hailey near Witney, have been setting hearts fluttering. With guide prices of £650,000 and £550,000, there were 80 viewings and offers on each within three weeks. Estate agent Harry Gladwin of Knight Frank (01865 790077) is about to go to sealed bids, as offers already exceed the guide prices. Whoever would have thought it in this market?
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Nothing, it seems, has dampened property lovers' desire to rescue. Cluttons in London reports that unmodernised properties are attracting the "creative buyers" who anticipate huge price growth when the market starts to move again. "Both developers and individuals are searching out the real bargains," says James Hyman, partner for residential sales. "Unmodernised properties in need of complete renovation are coming back into vogue at knock-down prices and offer greater long-term added value than more expensive properties." This is the new wreckonomics.
Classic custom campersWhen estate agent Matthew Harvey of Chesterton Humberts put a Grade II listed two-bedroom thatched cottage at Rushall in Wiltshire on the market on March 7 with a guide price of £150,000, he was blown away by enquiries. No 2 Elm Tree Cottages has a solid-fuelled stove with a back boiler, a downstairs bathroom, and sales particulars bearing the magic words "requires modernisation". Matthew had eight viewings on the first day, and every other call thereafter was about the cottage.
"A lot of young couples who have always dreamed of having a cottage are interested," he says. "And a lot of older couples who are getting nothing for their money in the bank want a nice little cottage. An astonishing number of people have cash to buy with. It is a semi that needs just about everything doing to it – plumbing, wiring, new kitchen, bathroom – but it had new thatch in 2005 so it has a good lid."
But how do the sums work now that renovators can no longer build rising prices into their calculations? Are they on a road to ruin, spending vast sums they can never recoup? "I think the cottage probably needs around £35,000 spent on it," says Matthew. "In good times I have sold properties like this at £180,000 or £190,000, but the end value is never going to be more than £210,000. So there is a little bit of jam for people to take. But there are also buyers who aren't worried about making money and just want to live in it." Within 48 hours Chesterton Humberts (01672 519222) had an offer of the guide price and is still receiving more.
It is not just that keeping the money in the bank has lost its attraction. One interesting side effect of the recession is that the cost of hiring builders is dropping, so the cost of building work isn't frightening people away. The consultant E C Harris reported recently that tender prices could drop by 10 per cent in 2009, and by 6 per cent in 2010. In some areas they could fall by as much as 25 per cent over the next three years.
The chance to snaffle a substantial Queen Anne house at £695,000 instead of a million or two has proved impossible to resist. The words "total refurbishment" seems to have titillated interest even further. Brook House at Eastry, four miles from Sandwich in Kent, has nine bedrooms, two bathrooms, attics, a covered courtyard, outbuildings and five acres. "It needs £500,000 spent on it, at least," says Ed Church, handling the sale at Strutt & Parker (01227 451123). There were 149 viewings in less than a month, and last week the agent went to sealed bids.
So do the sums look healthy? In a buoyant market the house might be worth £1.5m to £2m. But these buyers are no longer looking at a two- or three-year turnaround with a quick profit. "Buyers are looking at this as a house they will live in for 30 to 40 years," says Ed. "They are returning to traditional values and looking for a home."
Two beguiling Cotswold properties, Grass Ground farmhouse and Grass Ground cottage at Hailey near Witney, have been setting hearts fluttering. With guide prices of £650,000 and £550,000, there were 80 viewings and offers on each within three weeks. Estate agent Harry Gladwin of Knight Frank (01865 790077) is about to go to sealed bids, as offers already exceed the guide prices. Whoever would have thought it in this market?
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Tuesday, March 17, 2009
UK Home Repos up by 2/3
Telegraph - A total of 46,750 properties were repossessed by lenders during the year, up from 27,900 in 2007, the City watchdog said.
There was also a steep jump in the number of people who fell behind with their mortgage repayments during the final quarter of the year.
Around 68,000 people got into arrears during the period, a 13% jump compared with the previous quarter, which had seen a 10% rise.
The FSA said borrowers were increasingly struggling to clear their arrears, and this led to the total number of people who were behind with repayments steadily increasing since early 2007.
At the end of last year, 377,000 homeowners were in arrears, 10% more than in the third quarter and 31% higher than at the end of 2007.
The number of mortgages that were in arrears as a proportion of all loans also increased significantly during the year to 3.37%, up from 2.26% 12 months earlier.
The FSA's figures for repossessions are considerably higher then those reported by the Council of Mortgage Lenders, which said 40,000 people lost their homes during 2008, the highest level since 1996.
The difference is because the FSA covers all regulated lenders, whereas the CML includes only its members. The FSA also includes both first and second charge mortgages, while the CML looks only at first charge loans.
But the FSA figures did show a slight fall in the number of homes that were repossessed during the final quarter of 2008, with 13,028 properties taken over by lenders during the period.
This was 436 fewer than during the previous three months, although the figure was still 60% higher than a year earlier.
The fall may be due to the introduction of the Government's pre-action protocol in November, under which courts are allowed to grant repossession orders only as a last resort if all other measures have failed.
A pick-up in the number of repossessed homes that lenders were able to sell meant the number of such properties held by banks and building societies rose by only 1% during the final quarter to 27,903, although this was 88% higher than a year ago.
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There was also a steep jump in the number of people who fell behind with their mortgage repayments during the final quarter of the year.
Around 68,000 people got into arrears during the period, a 13% jump compared with the previous quarter, which had seen a 10% rise.
The FSA said borrowers were increasingly struggling to clear their arrears, and this led to the total number of people who were behind with repayments steadily increasing since early 2007.
At the end of last year, 377,000 homeowners were in arrears, 10% more than in the third quarter and 31% higher than at the end of 2007.
The number of mortgages that were in arrears as a proportion of all loans also increased significantly during the year to 3.37%, up from 2.26% 12 months earlier.
The FSA's figures for repossessions are considerably higher then those reported by the Council of Mortgage Lenders, which said 40,000 people lost their homes during 2008, the highest level since 1996.
The difference is because the FSA covers all regulated lenders, whereas the CML includes only its members. The FSA also includes both first and second charge mortgages, while the CML looks only at first charge loans.
But the FSA figures did show a slight fall in the number of homes that were repossessed during the final quarter of 2008, with 13,028 properties taken over by lenders during the period.
This was 436 fewer than during the previous three months, although the figure was still 60% higher than a year earlier.
The fall may be due to the introduction of the Government's pre-action protocol in November, under which courts are allowed to grant repossession orders only as a last resort if all other measures have failed.
A pick-up in the number of repossessed homes that lenders were able to sell meant the number of such properties held by banks and building societies rose by only 1% during the final quarter to 27,903, although this was 88% higher than a year ago.
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FSA to limit mortgage borrowing
Telegraph - As part of a wide-ranging package of announcements for banking regulation following the near-collapse of the financial system, Lord Turner, chairman of the Financial Services Authority, will also declare a ban on 100 per cent mortgages.
In all but the most exceptional circumstances, it will become "normal practice" again for loans to limited to a maximum of three times the borrower's salary.
The move comes after Gordon Brown asked the FSA to look into banning risky mortgage lending.
Last month, he called for a return to safety-first banking, saying: "We want to see the reinvention of the traditional savings and mortgage bank in Britain, making loans on prudent and careful terms."
The clampdown announced by Mr Turner is unlikely to have an immediate impact on the housing market, with lenders already severely curtailing their offers in the wake of the credit crunch.
Instead, the hope is that the measures will prevent a repeat of the current crisis, which was begun and fuelled by defaults on sub-prime mortgages - over-generous deals given to borrowers who could not afford repayments on properties worth less than the amounts raised against them.
So-called "extreme loans" of as much as six times borrowers' salaries became common during 2006 and 2007 as mortgage providers competed to attract business.
Many offered 100 per cent-plus mortgages, handing out cash over and above the value of the property, saddling thousands with negative equity and risk of repossession when the housing market ground to a halt.
Northern Rock, which had a number of sub-prime mortgages on its book when it was nationalised to stop it collapsing in September 2007, has repossessed a number of homes from borrowers who took out its "Together" mortgage - which offered loans at 120 per cent of value.
The mortgage cap forms part of a wider review of the regulation of the financial industry, which Mr Turner hopes will inject more rigour into the system.
He is said to be preparing a crackdown on executive bonuses which reward risk-taking, and is also expected to announce requirements on banks to hold greater levels of capital during boom years to protect against a sudden crash.
In what may prove a controversial move, the FSA is also said to be considering offering immunity from prosecution to whistleblowers within institutions who help prosecutors build a case against more senior staff responsible for financial wrong-doing.
Last week, Hector Sants, chief executive of the FSA, warned the City to be "very afraid" of the watchdog in future, promising that a recent shake-up had left the Authority far more prepared to take action against irresponsible behaviour.
The Conservatives have suggested that the FSA could be abolished as punishment for failing to prevent the current crisis and its powers returned to the Bank of England.
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In all but the most exceptional circumstances, it will become "normal practice" again for loans to limited to a maximum of three times the borrower's salary.
The move comes after Gordon Brown asked the FSA to look into banning risky mortgage lending.
Last month, he called for a return to safety-first banking, saying: "We want to see the reinvention of the traditional savings and mortgage bank in Britain, making loans on prudent and careful terms."
The clampdown announced by Mr Turner is unlikely to have an immediate impact on the housing market, with lenders already severely curtailing their offers in the wake of the credit crunch.
Instead, the hope is that the measures will prevent a repeat of the current crisis, which was begun and fuelled by defaults on sub-prime mortgages - over-generous deals given to borrowers who could not afford repayments on properties worth less than the amounts raised against them.
So-called "extreme loans" of as much as six times borrowers' salaries became common during 2006 and 2007 as mortgage providers competed to attract business.
Many offered 100 per cent-plus mortgages, handing out cash over and above the value of the property, saddling thousands with negative equity and risk of repossession when the housing market ground to a halt.
Northern Rock, which had a number of sub-prime mortgages on its book when it was nationalised to stop it collapsing in September 2007, has repossessed a number of homes from borrowers who took out its "Together" mortgage - which offered loans at 120 per cent of value.
The mortgage cap forms part of a wider review of the regulation of the financial industry, which Mr Turner hopes will inject more rigour into the system.
He is said to be preparing a crackdown on executive bonuses which reward risk-taking, and is also expected to announce requirements on banks to hold greater levels of capital during boom years to protect against a sudden crash.
In what may prove a controversial move, the FSA is also said to be considering offering immunity from prosecution to whistleblowers within institutions who help prosecutors build a case against more senior staff responsible for financial wrong-doing.
Last week, Hector Sants, chief executive of the FSA, warned the City to be "very afraid" of the watchdog in future, promising that a recent shake-up had left the Authority far more prepared to take action against irresponsible behaviour.
The Conservatives have suggested that the FSA could be abolished as punishment for failing to prevent the current crisis and its powers returned to the Bank of England.
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Thursday, March 12, 2009
New UK Mortgages at record low
Telegraph - The CML said just 23,400 loans were advanced for house purchase in January, less than half the amount approved during the same time a year earlier.
It is the lowest level since the CML began collecting the monthly data in January 2002.
However, while lending criteria remain tight amid fears about the economy, the CML said lower interest rates and income multiples have made payments easier for those able to obtain credit.
First-time buyers typically borrowed three times their income in January and the average loan was £97,000.
It said the typical first-time buyer spent 15.8 per cent of their income on mortgage interest payments, the lowest proportion since July 2004.
Michael Coogan, CML director general, said that while January and February are usually the quietest months in the mortgage market, the current withdrawal of many lenders from new lending had created "a huge gap" in the capacity to fund mortgages to match consumer demand.
He said: "People want to know why lenders are not lending. They are, but government schemes to restore the flow of funds are primarily focused on a few large banks and recent lending commitments by a few lenders cannot fill the gap overnight although we hope to see more funds flowing into mortgage activity later in the year.
"On top of the action to plug the funding gap and stabilise financial markets, we need to see a sustained revival of consumer demand. Mortgage affordability is good for those borrowers with deposits, but consumer confidence and lender appetite will remain muted in the face of rising unemployment and falling house prices."
Melanie Bien, of mortgage brokers broker Savills Private Finance, said: "Despite the recapitalisation of the banks and dramatic slashing of interest rates in recent months, the number of mortgages taken out continues to fall.
"These desperately low numbers show how important it is that the Treasury and Bank of England work together with lenders to encourage them to regain their appetite for lending. Without mortgage approvals increasing, the housing market is likely to remain in the doldrums."
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It is the lowest level since the CML began collecting the monthly data in January 2002.
However, while lending criteria remain tight amid fears about the economy, the CML said lower interest rates and income multiples have made payments easier for those able to obtain credit.
First-time buyers typically borrowed three times their income in January and the average loan was £97,000.
It said the typical first-time buyer spent 15.8 per cent of their income on mortgage interest payments, the lowest proportion since July 2004.
Michael Coogan, CML director general, said that while January and February are usually the quietest months in the mortgage market, the current withdrawal of many lenders from new lending had created "a huge gap" in the capacity to fund mortgages to match consumer demand.
He said: "People want to know why lenders are not lending. They are, but government schemes to restore the flow of funds are primarily focused on a few large banks and recent lending commitments by a few lenders cannot fill the gap overnight although we hope to see more funds flowing into mortgage activity later in the year.
"On top of the action to plug the funding gap and stabilise financial markets, we need to see a sustained revival of consumer demand. Mortgage affordability is good for those borrowers with deposits, but consumer confidence and lender appetite will remain muted in the face of rising unemployment and falling house prices."
Melanie Bien, of mortgage brokers broker Savills Private Finance, said: "Despite the recapitalisation of the banks and dramatic slashing of interest rates in recent months, the number of mortgages taken out continues to fall.
"These desperately low numbers show how important it is that the Treasury and Bank of England work together with lenders to encourage them to regain their appetite for lending. Without mortgage approvals increasing, the housing market is likely to remain in the doldrums."
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Wednesday, March 11, 2009
Savills sees foreign investor return to the UK market
Telegraph - However, the company expects the volume of transactions overall to be "significantly lower" in 2009, because of the difficulty of raising money for mortgages.
The recovery of the property market is dependent on the financial system starting to function again, Savills said.
"Demand from cash rich investors and up-sizers is likely to emerge as price falls work their way through the market. This will make residential investment property start to look especially attractive to foreign buyers benefiting from the weakness of sterling," the company said. Interest rates close to zero may also stimulate demand for commercial property, Savills said.
Savills said its finances are robust enough to cope with the recession, after it agreed a new £80m banking facility which lasts until 2011.
In 2008, Savills slumped to a pre-tax loss of £7.7m, from a profit of £85.9m the previous year. Revenue fell 13pc to £568.5m and the estate agent had to write down £42m on the value of acquired businesses and asset impairments.
The company made redundancies, closed offices and cut £22m of costs during the year.
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The recovery of the property market is dependent on the financial system starting to function again, Savills said.
"Demand from cash rich investors and up-sizers is likely to emerge as price falls work their way through the market. This will make residential investment property start to look especially attractive to foreign buyers benefiting from the weakness of sterling," the company said. Interest rates close to zero may also stimulate demand for commercial property, Savills said.
Savills said its finances are robust enough to cope with the recession, after it agreed a new £80m banking facility which lasts until 2011.
In 2008, Savills slumped to a pre-tax loss of £7.7m, from a profit of £85.9m the previous year. Revenue fell 13pc to £568.5m and the estate agent had to write down £42m on the value of acquired businesses and asset impairments.
The company made redundancies, closed offices and cut £22m of costs during the year.
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US Mortgage applications rise
NEW YORK, March 11 (Reuters) - U.S. mortgage applications rose for the first time in three weeks as near record low interest rates spurred demand for home refinancing and purchase loans, data from an industry group showed on Wednesday.
The jump in demand came several weeks after the unveiling of the strongest government action yet to aid homeowners since the housing market's meltdown began and may help gauge what is in store this spring, the peak home-buying season.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended March 6 increased 11.3 percent to 723.4.
U.S. President Barack Obama last month announced the Homeowner Affordability and Stability Plan, which is designed to provide much-needed support to the housing market. The goals of the housing plan are to support refinancing for good quality borrowers; help distressed borrowers avoid foreclosure; and stimulate new housing demand through the expansion of Fannie Mae (FNM.P)(FNM.N) and Freddie Mac (FRE.P)(FRE.N), the top two U.S. home funding companies.
Mark Goldman, lecturer of real estate at San Diego State University, said interest rates on mortgages are at enticing levels that could lift demand in the months ahead.
"It does not really matter if interest rates on mortgages move up one week or move down another, they are still at historically low levels," he said.
"What is important right now is that home affordability has improved and low interest rates help more people afford to buy a home," he said.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.96 percent, down 0.18 percentage point from the previous week and the second lowest rate since the weekly MBA survey began in 1990. The record low was 4.89 percent for the week ended Jan. 9, 2009.
Interest rates were well below year-ago levels of 6.37 percent.
The U.S. housing market is in the worst downturn since the Great Depression and its impact has rippled through the U.S. economy, as well as the rest of the world. Economists contend the United States might not emerge from recession unless the housing market stabilizes.
Goldman, who is also a mortgage broker, said for people who have equity in their home the opportunity to refinance to lower monthly payments should provide a bit of relief to strapped consumers amid a shrinking economy.
"The main problem is that wages are stagnant, but it does present the opportunity to save more money and go consume, which will help the economy," he said.
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The jump in demand came several weeks after the unveiling of the strongest government action yet to aid homeowners since the housing market's meltdown began and may help gauge what is in store this spring, the peak home-buying season.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications
U.S. President Barack Obama last month announced the Homeowner Affordability and Stability Plan, which is designed to provide much-needed support to the housing market. The goals of the housing plan are to support refinancing for good quality borrowers; help distressed borrowers avoid foreclosure; and stimulate new housing demand through the expansion of Fannie Mae (FNM.P)(FNM.N) and Freddie Mac (FRE.P)(FRE.N), the top two U.S. home funding companies.
Mark Goldman, lecturer of real estate at San Diego State University, said interest rates on mortgages are at enticing levels that could lift demand in the months ahead.
"It does not really matter if interest rates on mortgages move up one week or move down another, they are still at historically low levels," he said.
"What is important right now is that home affordability has improved and low interest rates help more people afford to buy a home," he said.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.96 percent, down 0.18 percentage point from the previous week and the second lowest rate since the weekly MBA survey began in 1990. The record low was 4.89 percent for the week ended Jan. 9, 2009.
Interest rates were well below year-ago levels of 6.37 percent.
The U.S. housing market is in the worst downturn since the Great Depression and its impact has rippled through the U.S. economy, as well as the rest of the world. Economists contend the United States might not emerge from recession unless the housing market stabilizes.
Goldman, who is also a mortgage broker, said for people who have equity in their home the opportunity to refinance to lower monthly payments should provide a bit of relief to strapped consumers amid a shrinking economy.
"The main problem is that wages are stagnant, but it does present the opportunity to save more money and go consume, which will help the economy," he said.
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Tuesday, March 10, 2009
RBS criticism for refusing to pass on rate cuts
Telegraph - RBS is refusing to help borrowers or savers despite receiving a £20 billion bailout from the taxpayer, experts said.
Other leading high street banks, including Nationwide, Lloyds TSB and Halifax, have confirmed that they will be lowering their standard variable rate for mortgage borrowers.
RBS is maintaining its SVR at 4 per cent despite the Bank of England cutting interest rates to just 0.5 per cent on Thursday.
The bank has also it would be cutting some of its savings deals by up to 0.2 per cent.
Politicians and financial experts attacked RBS's decision, calling for pressure to be put on bank chiefs at RBS to pass on the cuts to borrowers.
Tim Newhouse, of the price comparison website Moneysupermarket.com, said: "It is disappointing to see the bailed-out RBS Group freezing SVR mortgage rates while cutting savings returns. It shows the futility of the Bank of England's decision on Thursday."
Vince Cable, the Liberal Democrat shadow chancellor, said: "My primary concern is for savers and they need to be given the best possible outcome."
RBS said the Government wants it to operate on a commercial basis in order to allow us to repay the UK taxpayer as soon as is practicable.
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Other leading high street banks, including Nationwide, Lloyds TSB and Halifax, have confirmed that they will be lowering their standard variable rate for mortgage borrowers.
RBS is maintaining its SVR at 4 per cent despite the Bank of England cutting interest rates to just 0.5 per cent on Thursday.
The bank has also it would be cutting some of its savings deals by up to 0.2 per cent.
Politicians and financial experts attacked RBS's decision, calling for pressure to be put on bank chiefs at RBS to pass on the cuts to borrowers.
Tim Newhouse, of the price comparison website Moneysupermarket.com, said: "It is disappointing to see the bailed-out RBS Group freezing SVR mortgage rates while cutting savings returns. It shows the futility of the Bank of England's decision on Thursday."
Vince Cable, the Liberal Democrat shadow chancellor, said: "My primary concern is for savers and they need to be given the best possible outcome."
RBS said the Government wants it to operate on a commercial basis in order to allow us to repay the UK taxpayer as soon as is practicable.
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Branson returns to Mortgages
LONDON (Reuters) - Virgin Group VA.UL will return to the mortgage market and obtain a license to operate a high street bank, the group's billionaire founder Richard Branson told the Times newspaper.
"We are going to get back into the mortgage business and we will become a bank either by acquisition or by getting our own banking license," he said.
"You will see us become a consumer bank within the next couple of years."
Branson's Virgin Group, which led a failed attempt to take over ailing lender Northern Rock last year, sold its mortgage finance arm, Virgin One, to RBS (RBS.L) in 2003.
Branson, of the government's business advisers, said he was urging Prime Minister Gordon Brown to make the liquidity crisis a top priority.
"The prime minister realizes that the most dangerous thing is the liquidity issue," Branson told the newspaper. "We cannot allow perfectly decent companies go to the wall just because they cannot get liquidity."
Branson was giving the interview while flying round the world last week to promote the launch of his newest airline, V Australia.
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"We are going to get back into the mortgage business and we will become a bank either by acquisition or by getting our own banking license," he said.
"You will see us become a consumer bank within the next couple of years."
Branson's Virgin Group, which led a failed attempt to take over ailing lender Northern Rock last year, sold its mortgage finance arm, Virgin One, to RBS (RBS.L) in 2003.
Branson, of the government's business advisers, said he was urging Prime Minister Gordon Brown to make the liquidity crisis a top priority.
"The prime minister realizes that the most dangerous thing is the liquidity issue," Branson told the newspaper. "We cannot allow perfectly decent companies go to the wall just because they cannot get liquidity."
Branson was giving the interview while flying round the world last week to promote the launch of his newest airline, V Australia.
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US backs bailout bill
WASHINGTON (Reuters) - Bankruptcy judges could cut the mortgage debt of homeowners in bankruptcy court as a last resort to avert foreclosure, under a bill approved by a 234-191 vote on Thursday in the U.S. House of Representatives.
Seen by Democratic supporters as vital to stabilizing the crumbling U.S. real estate market, the so-called "cramdown" bill has been opposed by bankers, despite amendments made this week to limit its scope, including one restricting it to existing primary residence mortgages, not future loans.
The Senate was expected to consider its own version of the House bill soon, but chances of passage are uncertain there.
The House bill has additional provisions meant to help homeowners in the worst housing market in decades, a slump that has helped pull the U.S. economy into a deepening recession.
Under present law, bankruptcy courts may reduce many forms of debt for struggling borrowers -- including a boat, car, vacation home or family farm -- but not a primary residence.
Changing bankruptcy law to allow this, say bankers and Republican opponents of the bill, would raise costs for everyone by diverting capital from the mortgage debt market.
But Democrats backing the bill discount such fears and say it could sharply cut the high U.S. home foreclosure rate.
About one in eight U.S. homeowners with mortgages, a record share, ended 2008 behind on payments or are in the foreclosure process, a mortgage industry group reported on Thursday.
President Barack Obama on Wednesday launched a $75 billion foreclosure relief plan, part of a $275 billion housing stimulus program announced last month.
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Seen by Democratic supporters as vital to stabilizing the crumbling U.S. real estate market, the so-called "cramdown" bill has been opposed by bankers, despite amendments made this week to limit its scope, including one restricting it to existing primary residence mortgages, not future loans.
The Senate was expected to consider its own version of the House bill soon, but chances of passage are uncertain there.
The House bill has additional provisions meant to help homeowners in the worst housing market in decades, a slump that has helped pull the U.S. economy into a deepening recession.
Under present law, bankruptcy courts may reduce many forms of debt for struggling borrowers -- including a boat, car, vacation home or family farm -- but not a primary residence.
Changing bankruptcy law to allow this, say bankers and Republican opponents of the bill, would raise costs for everyone by diverting capital from the mortgage debt market.
But Democrats backing the bill discount such fears and say it could sharply cut the high U.S. home foreclosure rate.
About one in eight U.S. homeowners with mortgages, a record share, ended 2008 behind on payments or are in the foreclosure process, a mortgage industry group reported on Thursday.
President Barack Obama on Wednesday launched a $75 billion foreclosure relief plan, part of a $275 billion housing stimulus program announced last month.
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Thursday, March 5, 2009
Interest rate cut
A mortgage fix could pay off in the long term
It all depends on what you want from your mortgage, says Kara Gammell
By Kara Gammell
Last Updated: 3:04PM GMT 05 Mar 2009
Interest rates may be at an all-time low, but many borrowers are still struggling to snap up competitive mortgage deals.
Those looking to remortgage, or take out their first loan, may be tempted by some of the cheaper tracker rates on offer – but many advisers say they may be better off in the long run by opting for a more expensive fixed-rate deal.
Melanie Bien, director of independent mortgage broker Savills Private Finance, said: "The best mortgage rate for you will very much depend on your own particular circumstances."
Some borrowers are currently paying low rates because their loan is linked to the lender's standard variable rate (SVR). But sticking to an SVR could backfire. Matt Andrews of Moneyworkout said: "Beware of the SVR handcuffs. If you are thinking of sitting on your SVR, you must also think about your property value."
As property values fall the percentage of your borrowing against your mortgage – loan to value or LTV – increases, he said, and this affects borrowers in two ways.
"Firstly, many lenders tier their interest rates, with a higher rate for a higher loan to value. You could slip into a more expensive category if you wait. And many lenders are not lending if your loan to value is greater than 80pc. Those with less equity could find it impossible to remortgage, and find themselves handcuffed to the standard variable rate, hoping it doesn’t go up."
He added: "You may have a fantastic SVR now, but look at your loan to value, look at property prices in your area and how they are moving, think about your needs over the next few years, and if your mortgage may cross the 80pc boundary with the fall in property prices, you may want to consider fixing now, before its too late."
Fixed-rate deals also offer security to first-time buyers and those whose budgets are stretched, as they have the peace of mind that monthly mortgage payments won't suddenly rise.
Ms Bien said: "While two-year fixes tend to be the cheapest fixed-rate deals and the most popular, it may be worth fixing for a longer period. While interest rates remain low now – and may fall further this week – there is no guarantee that they will be as low two years from now when you need to remortgage."
In fact, many economists are expecting rates to rise over this period, particularly if, as expected, inflation starts to pick up again over the medium term. What's more, few are expecting house prices to recover in the near future. This could leave those remortgaging in two years' time in a difficult position, with less equity in their home and interest rates rising.
Ms Bien said: "If lenders are still not offering mortgage to those with less than 10 per cent equity in their home, you could find it difficult to remortgage, leaving you at the mercy of your lender's standard variable rate."
For first-time buyers, a very competitive deal available is the five-year fixed rate from the Post Office at 6.01 per cent. This is available to those with just a 10 per cent deposit and has a £599 fee. If you can afford to borrow only 85 per cent of your home's value, Leeds Building Society offers a five-year fix at 5.25 per cent with a £199 fee.
For those who don't need the certainty of a fix, a base-rate tracker may look more attractive as starting rates are significantly lower. Many are expecting interest rates to remain low for a year or 18 months, giving home owners the benefit of cheaper monthly mortgage payments.
However Ms Bien said that borrowers should be wary of trackers that have penalties after three years, as these may give borrowers less flexibility to switch if rates start to rise sharply.
Woolwich currently offers a tracker charging 2.99 percentage points over the Bank Rate, for the term, giving a current rate of 3.99 per cent. There will be penalties to pay if you remortgage within three years. This rate is available up to 70 per cent loan-to-value (LTV) with a £995 fee. Nationwide has a two-year tracker at 2.83 percentage points over base, giving a rate of 3.83 per cent with a £995 fee, available up to 60 per cent LTV.
Ms Bien said: "For those with significant equity in their home of at least 40 per cent, the pick of mortgage deals are available." Alliance & Leicester, for example, offers 2.04 percentage points above the base rate for two years, giving a rate of 3.04 per cent. However home owners pay a fee equivalent to 2 per cent of the sum they are borrowing.
This is only available to those with 60 per cent LTV.
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It all depends on what you want from your mortgage, says Kara Gammell
By Kara Gammell
Last Updated: 3:04PM GMT 05 Mar 2009
Interest rates may be at an all-time low, but many borrowers are still struggling to snap up competitive mortgage deals.
Those looking to remortgage, or take out their first loan, may be tempted by some of the cheaper tracker rates on offer – but many advisers say they may be better off in the long run by opting for a more expensive fixed-rate deal.
Melanie Bien, director of independent mortgage broker Savills Private Finance, said: "The best mortgage rate for you will very much depend on your own particular circumstances."
Some borrowers are currently paying low rates because their loan is linked to the lender's standard variable rate (SVR). But sticking to an SVR could backfire. Matt Andrews of Moneyworkout said: "Beware of the SVR handcuffs. If you are thinking of sitting on your SVR, you must also think about your property value."
As property values fall the percentage of your borrowing against your mortgage – loan to value or LTV – increases, he said, and this affects borrowers in two ways.
"Firstly, many lenders tier their interest rates, with a higher rate for a higher loan to value. You could slip into a more expensive category if you wait. And many lenders are not lending if your loan to value is greater than 80pc. Those with less equity could find it impossible to remortgage, and find themselves handcuffed to the standard variable rate, hoping it doesn’t go up."
He added: "You may have a fantastic SVR now, but look at your loan to value, look at property prices in your area and how they are moving, think about your needs over the next few years, and if your mortgage may cross the 80pc boundary with the fall in property prices, you may want to consider fixing now, before its too late."
Fixed-rate deals also offer security to first-time buyers and those whose budgets are stretched, as they have the peace of mind that monthly mortgage payments won't suddenly rise.
Ms Bien said: "While two-year fixes tend to be the cheapest fixed-rate deals and the most popular, it may be worth fixing for a longer period. While interest rates remain low now – and may fall further this week – there is no guarantee that they will be as low two years from now when you need to remortgage."
In fact, many economists are expecting rates to rise over this period, particularly if, as expected, inflation starts to pick up again over the medium term. What's more, few are expecting house prices to recover in the near future. This could leave those remortgaging in two years' time in a difficult position, with less equity in their home and interest rates rising.
Ms Bien said: "If lenders are still not offering mortgage to those with less than 10 per cent equity in their home, you could find it difficult to remortgage, leaving you at the mercy of your lender's standard variable rate."
For first-time buyers, a very competitive deal available is the five-year fixed rate from the Post Office at 6.01 per cent. This is available to those with just a 10 per cent deposit and has a £599 fee. If you can afford to borrow only 85 per cent of your home's value, Leeds Building Society offers a five-year fix at 5.25 per cent with a £199 fee.
For those who don't need the certainty of a fix, a base-rate tracker may look more attractive as starting rates are significantly lower. Many are expecting interest rates to remain low for a year or 18 months, giving home owners the benefit of cheaper monthly mortgage payments.
However Ms Bien said that borrowers should be wary of trackers that have penalties after three years, as these may give borrowers less flexibility to switch if rates start to rise sharply.
Woolwich currently offers a tracker charging 2.99 percentage points over the Bank Rate, for the term, giving a current rate of 3.99 per cent. There will be penalties to pay if you remortgage within three years. This rate is available up to 70 per cent loan-to-value (LTV) with a £995 fee. Nationwide has a two-year tracker at 2.83 percentage points over base, giving a rate of 3.83 per cent with a £995 fee, available up to 60 per cent LTV.
Ms Bien said: "For those with significant equity in their home of at least 40 per cent, the pick of mortgage deals are available." Alliance & Leicester, for example, offers 2.04 percentage points above the base rate for two years, giving a rate of 3.04 per cent. However home owners pay a fee equivalent to 2 per cent of the sum they are borrowing.
This is only available to those with 60 per cent LTV.
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Wednesday, March 4, 2009
U.S Homeowners struggling
One in five U.S. homeowners with mortgages in america owe more to their lenders than their properties are worth, and the rate will increase as housing values drop in states that have so far avoided the worst of the crisis, a new study shows.
About 8.31 million properties had negative equity at the end of 2008, up 9 percent from 7.63 million at the end of September, according to the study, released Wednesday by First American CoreLogic. The percentage of "underwater" borrowers rose to 20 percent from 18 percent.
Another 2.16 million properties could go underwater if home prices fall another 5 percent, the study shows.
First American said the value of residential properties fell to $19.1 trillion at year-end from $21.5 trillion a year earlier, with half the decline in California. Forty-three U.S. states and Washington, D.C., were included in the study.
While states such as California, Florida and Nevada were particularly stressed, the study showed worrying signs of deterioration in relatively healthy parts of the nation.
"The economic slowdown is broadening," said Sherrill Shaffer, a banking professor at the University of Wyoming at Laramie and a former Federal Reserve official. "As more people lose jobs, it will be more difficult to sustain the levels of pricing and home ownership, and that is a big factor driving down housing prices in more parts of the country."
Arizona, California, Florida, Georgia, Michigan, Nevada and Ohio remained the most stressed states, with 62 percent of underwater borrowers and just 41 percent of mortgages.
Other areas, though, also face more stress. Connecticut, for example, saw a 25 percent increase in homes with negative equity, while Washington, D.C., had a 44 percent increase.
"Even I continue to be surprised at the tentacles of this financial and economic debacle," said Robert MacIntosh, chief economist at Eaton Vance Management in Boston. "More people are being laid off, resulting in reduced income and therefore less consumption. That leaves fewer people with money to buy homes, and the mentality is that people believe they should wait six months rather than buy now. Less demand means falling prices."
Roughly 68 percent of U.S. adults own their own homes, and about two-thirds of these have mortgages. Many economists expect the nation's unemployment rate to rise above 9 percent before the recession ends, up from January's 7.6 percent.
About 8.31 million properties had negative equity at the end of 2008, up 9 percent from 7.63 million at the end of September, according to the study, released Wednesday by First American CoreLogic. The percentage of "underwater" borrowers rose to 20 percent from 18 percent.
Another 2.16 million properties could go underwater if home prices fall another 5 percent, the study shows.
First American said the value of residential properties fell to $19.1 trillion at year-end from $21.5 trillion a year earlier, with half the decline in California. Forty-three U.S. states and Washington, D.C., were included in the study.
While states such as California, Florida and Nevada were particularly stressed, the study showed worrying signs of deterioration in relatively healthy parts of the nation.
"The economic slowdown is broadening," said Sherrill Shaffer, a banking professor at the University of Wyoming at Laramie and a former Federal Reserve official. "As more people lose jobs, it will be more difficult to sustain the levels of pricing and home ownership, and that is a big factor driving down housing prices in more parts of the country."
Arizona, California, Florida, Georgia, Michigan, Nevada and Ohio remained the most stressed states, with 62 percent of underwater borrowers and just 41 percent of mortgages.
Other areas, though, also face more stress. Connecticut, for example, saw a 25 percent increase in homes with negative equity, while Washington, D.C., had a 44 percent increase.
"Even I continue to be surprised at the tentacles of this financial and economic debacle," said Robert MacIntosh, chief economist at Eaton Vance Management in Boston. "More people are being laid off, resulting in reduced income and therefore less consumption. That leaves fewer people with money to buy homes, and the mentality is that people believe they should wait six months rather than buy now. Less demand means falling prices."
Roughly 68 percent of U.S. adults own their own homes, and about two-thirds of these have mortgages. Many economists expect the nation's unemployment rate to rise above 9 percent before the recession ends, up from January's 7.6 percent.
Dollar at new high
The US dollar extended gains to hit a fresh 3-year high against a basket of currencies on Monday as another U.S. bailout for American International Group sparked a flight into perceived safer assets.
The troubled insurer also reported a record fourth quarter loss of $61.7 billion, extending hefty stock market losses.
The dollar index .DXY hit a high of 88.956, its highest since April 2006 as European stock markets fell 4 percent .FTEU3. The U.S. currency's gains also took the pound to its lowest in just over a month at $1.4036.
"There's no good news out there and that is leaving the euro and sterling looking really heavy right now. Stock markets are working in the dollar's favour," a London-based trader said.
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The troubled insurer also reported a record fourth quarter loss of $61.7 billion, extending hefty stock market losses.
The dollar index .DXY hit a high of 88.956, its highest since April 2006 as European stock markets fell 4 percent .FTEU3. The U.S. currency's gains also took the pound to its lowest in just over a month at $1.4036
"There's no good news out there and that is leaving the euro and sterling looking really heavy right now. Stock markets are working in the dollar's favour," a London-based trader said.
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Tuesday, March 3, 2009
The euro extended losses against the dollar on Tuesday as U.S. stocks turned negative after Federal Reserve Chairman Ben Bernanke said more must be done to secure financial market stability.
Euro buying hit a session low of $1.2522, according to Reuters data, after earlier rising as high as $1.2677. It was last changing hands at $1.2542, down 0.3 percent on the day.
Bernanke told Congress the government must take bold action to fight the crisis even if it means a rise in government debt. Some analysts said that was good for the dollar buyers because it suggested U.S. authorities would do whatever it takes to help the economy recover.
A weak U.S. housing report and Bernanke's warning that the near-term economic prospects remain uncertain, also dulled risk-taking, prompting investors to move away from stocks and other currencies and toward the relative safety of the dollar.
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Euro buying hit a session low of $1.2522
Bernanke told Congress the government must take bold action to fight the crisis even if it means a rise in government debt. Some analysts said that was good for the dollar buyers because it suggested U.S. authorities would do whatever it takes to help the economy recover.
A weak U.S. housing report and Bernanke's warning that the near-term economic prospects remain uncertain, also dulled risk-taking, prompting investors to move away from stocks and other currencies and toward the relative safety of the dollar.
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Monday, March 2, 2009
Spanish Lending falls again
The fall in Spanish home sales accelerated in the final quarter of 2008, a report showed on Tuesday, reflecting a collapsing property sector that has helped tip the fourth-largest euro zone economy into recession.
Some 113,274 homes were bought and sold in the fourth quarter, down 13.5 percent from 130,884 in the third, Spain's College of Registrars said.
The drop was sharper than a 8.6 percent fall between the second and third quarters.
For the year, 561,420 sales were registered, down 28.8 percent from 2007.
The average value of Spanish mortgages declined for a fourth consecutive quarter, falling 1.84 percent year on year to 136,148 euros ($174,400), the college said.
Average mortgage values fell 6 percent in 2008, it said.
Figures from Spain's National Statistics Institute published last month showed mortgages in Spain fell 23 percent in November compared to a year earlier, reflecting both weaker demand and tighter bank lending.
Most analysts say Spanish house prices will fall by up to 30 percent from their highs, though some see greater declines as possible as the end of a decade-long residential construction boom coincides with credit market turmoil. Add into this the cost of buying euros and the Spanish property market seems to be in some pain.
Pounds to Euros exchange rate = 1.1128
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Some 113,274 homes were bought and sold in the fourth quarter, down 13.5 percent from 130,884 in the third, Spain's College of Registrars said.
The drop was sharper than a 8.6 percent fall between the second and third quarters.
For the year, 561,420 sales were registered, down 28.8 percent from 2007.
The average value of Spanish mortgages declined for a fourth consecutive quarter, falling 1.84 percent year on year to 136,148 euros ($174,400), the college said.
Average mortgage values fell 6 percent in 2008, it said.
Figures from Spain's National Statistics Institute published last month showed mortgages in Spain fell 23 percent in November compared to a year earlier, reflecting both weaker demand and tighter bank lending.
Most analysts say Spanish house prices will fall by up to 30 percent from their highs, though some see greater declines as possible as the end of a decade-long residential construction boom coincides with credit market turmoil. Add into this the cost of buying euros and the Spanish property market seems to be in some pain.
Pounds to Euros exchange rate = 1.1128
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