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House prices increased by 0.1% in September. Price of a typical home in September is 0.3% lower than one year ago, reveals the latest Nationwide House Price Index.
Robert Gardner, Nationwide’s Chief Economist, said:
“UK house prices continued to tread water in September, with prices rising by 0.1% during the month. Prices were also essentially flat over the year, just 0.3% lower than September 2010. The three-month on three-month measure of house prices was unchanged in September.
“Sluggish demand for homes on the back of weak labour market conditions, combined with only a gradual rise in the supply of available properties, has helped to keep property prices fairly stable since the summer of 2010.
“We expect this trend to be maintained over the remainder of 2011, although downside risks have increased as UK and global growth prospects have weakened.
The potential impact of recent financial market turbulence
“The outlook for the global economy has darkened in recent months, with official and private sector forecasters paring back their expectations for growth for the next few years – including for the UK.
“This, together with mounting concerns about the Eurozone debt crisis, has generated significant volatility in financial markets in recent weeks.
“Equity markets across the developed world have recorded double digit declines. The FTSE100 index fell by almost 20% between early July and mid-September, while many European markets fared even worse.
“For example, the main stock market Index in Germany declined by almost a third over the same period. Against this backdrop, investors have become increasingly risk averse, preferring safer assets like UK, US and German government bonds.
“This helped push long-term interest rates in the UK, US and Germany back towards all time lows.
“In the near-term, the main channel through which these market gyrations are likely to impact the housing market is by further denting sentiment – especially for buyers. Consumer confidence as tracked by Nationwide is already close to all time lows.
“Sentiment towards major purchases is depressed, as a result of weak labour market conditions and ongoing pressure on household budgets from above-target inflation.
“There is also a risk that, if the Eurozone situation continues to deteriorate, it could affect the cost and availability of credit (as the UK financial system has close links to the European banking system).
“The three month Libor rate, which tracks the interest rate at which banks will lend to each other for three months, has been creeping up in recent months.
“However, this key borrowing rate remains well below the levels seen during the financial crisis and recent measures by the Bank of England and other central banks around the world which made additional funding available to banks, should limit the risks to credit supply.
Not all bad news
“Not all recent financial market movements are bad news for households. The decline in commodity prices for example, if maintained, should ease the squeeze on household budgets – oil prices are currently 30% below their May peak.
“Similarly, the decline in long-term interest rates should continue to provide support for housing demand, providing the strains in the banking system do not intensify. Indeed, mortgage interest rates have continued to decline in recent months, including for borrowers with smaller deposits
Looking ahead
“Providing the UK recovery gradually gathers momentum in the months ahead, we continue to expect house prices to move sideways or to drift modestly lower over the remainder of 2011 and into 2012.
“Nevertheless, with demand and supply in the housing market finely balanced, recent financial market gyrations and the more challenging global economic backdrop have increased the downside risks in the period ahead.”
Source: Myintroducer.com
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July 2011 saw a 10% fall in fixed rate mortgage applications compared to June as the threat of an imminent interest rate rise eased.
Fixed rate mortgages have steadily dropped each month this year from its peak in March when 80% of all mortgage applications were fixed rate deals.
However, fixed rate deals still made up 74% of all applications in July.
The number of mortgage applications also fell in July, down 8% on June numbers.
The average loan size on mortgage applications in July was £135,873 compared to £138,965 in June, a drop of 2.2%.
Re mortgage applications fell by over 18% in July this year with the total number of applications in the year to date still 34% higher than the corresponding period in 2010.
Brian Murphy, head of lending, independent mortgage broker Mortgage Advice Bureau:
“Surprisingly, fixed rate mortgage applications fell in July at the same time as average two and five year fixed rates dropped to all time low levels. This shift towards variable rate products is likely to be a response to expectation levels of an imminent interest rate rise easing.
“With a raft of economic indicators showing further slowing of the UK economy, and a recent poll of leading UK economists forecasting no bank base rate increase in 2011, and several predicting no change until 2012, variable rate mortgage take up has strengthened.
“Also, the view that low rates are here to stay for some time yet, will have been boosted by the US Federal Reserve announcing that, due to sluggish growth, it envisages holding its official federal funds interest rate for the next two years.
“However, even though the Bank of England could well keep the base rate at 0.5% until early 2012, what we’re unlikely to see is a seismic shift towards borrowers choosing variable rate products.
“With so much uncertainty in the UK economy, mortgage applicants are still keen to take any risk out of the equation, and are happy to pay the premiums on fixed rates for that security element. There will always be a nucleus of borrowers who want the comfort that fixing provides.
“What we may well see over the coming months are more applicants locking themselves into longer five-year fixed rate deals, enabling them to manage their monthly budgets more effectively.
“Any shift in numbers towards variable rate products are unlikely to be this group of safety first borrowers, and more likely to be the ‘sitting on the fence’ applicants who were undecided which way to go, and maybe now feel more comfortable choosing a variable product in light of the short and medium-term economic outlook.
“Not surprisingly, mortgage transaction volumes eased in July after hitting a high point in June, as families headed off on their summer holidays. In a normally functioning mortgage market, application numbers drop off during July and August, so the market performed as expected.
“A stronger indicator as to the health of the mortgage market will be applications in September and October, as historically we would expect to see numbers start to pick up.
“In terms of product availability, competition amongst lenders continues to pick up, however deals throughout July remained at similar levels to the previous month.
“Products numbers were around 8,700, although products typically available to intermediaries eased a little to 7,250, while those available directly via lenders increased towards 1,500.”
Northern Rock has reduced their mortgage rates by up to .90% and extended its £500 cash back incentive to include all Buy To Let products with percentage fees.
Northern Rock’s 2-Year Everyday fixed rates with a £995 product fee now start from 2.67% for both purchase and re mortgage customers with a 30% deposit – a reduction of 0.32%.
For those who wish to keep their costs as low as they can however 2-year Everyday fixed rates with no product fees, start from 3.19% at 70% LTV.
Northern Rock continues to be committed to helping those with smaller deposits (including first time buyers). They have reduced selected mortgage rates across its products at 80% LTV (20% deposit required), 85% LTV (15% deposit required) and 90% LTV (10% deposit required).
A 2-Year Everyday fixed rate mortgage at 90% LTV exclusively for purchase customers, is now available from just 5.25% with a £995 product fee. Customers will also get £500 cashback.
Mortgage possession claims have been reasonably stable in 2010 reveals the latest Mortgage and landlord possession statistics report.
This follows the downward trend since the beginning of 2008, increasing from 2003.
There were 19,329 mortgage possession claims issued in the last quarter of 2010 on a seasonally adjusted basis which was 2% lower than the previous year.
48% of first orders made in mortgage possession claims were suspended in the last quarter of 2010 compared to 46% in the same time in 2009. This has remained reasonably stable over the last few years after decreasing from 60% in 2003 to 46% in 2007.
On the 19th November 2008 the Mortgage Pre-Action Protocol for possession claims relating to mortgage or home purchase plan arrears came into effect. This introduction coincided with a sharp fall in the number of new mortgage repossession claims.
The number of actual repossessions occurring (as reported by the Council of Mortgage Lenders), expressed as a proportion of mortgage possession claims which led to an order being made in the county courts, was 67% in the year ending 30 September 2010, compared with 57% in the year ending 30 September 2009.
More borrowers are seeking out professional advice for the first time. A survey of more than 617 mortgage intermediaries has found that nearly one in five (around 18%) say over half of the clients they have seen in the past quarter we’re talking to a mortgage advisor for the first time.
On top of this over one third of intermediaries say that between a quarter and a half of clients in the last 3 months had never been to a mortgage broker before.
Charles Morley, Head of Sales at Kensington, says:
“It is incredibly encouraging that so many intermediaries are seeing such a large proportion of clients who have never sought the help of an adviser before.
“This shows that more borrowers are recognising the benefits of professional advice, both in terms of helping them to make the right decision, but also in accessing lenders that are able to offer intelligent lending, rather than a one-size-fits-all tick box approach.
“I would recommend that intermediaries take this information on board and use it to go out and promote their services to new customers.
“There is clearly a previously untapped appetite for mortgage advice out there and this could fuel business growth, which looks very much like a flat market in the coming months.”