From the Independent: Some stability seems to have returned to the mortgage market, with several high-profile lenders even moving to cut rates.
Nationwide and Abbey, have both reduced their prices recently, with Nationwide’s 0.3 per cent cut on a range of fixed-rate mortgage products cited by David Hollingworth, from broker London & Country, as particularly significant.
"Nationwide has been very careful about its lending policies during the credit crunch, introducing tiered rates benefiting those with big deposits, but raising costs for those with not much money to put down," he says. "The move to cut its rates now shows that it is more confident about what is going on. Overall, the good news is that the rush of lenders withdrawing or raising their rates seems to have halted."
And last Wednesday the Halifax cut its tracker mortgage and product transfer rates. Ray Boulger, technical manager at broker Charcol, comments: "This will affect a lot of borrowers as it’s the transfer rate that’s available when a fixed-rate mortgage term comes to an end [as well as the more expensive standard variable rate]. This should mean there is less pain for borrowers who can’t remortgage away from the Halifax."
Despite these rate cuts, however, Mr Hollingworth still sees clouds on the horizon: "These are only small signs of improvement. The worrying thing is that the Bank of England has signalled that an immediate cut in UK interest rates is unlikely. As a result, Libor [the interest rate at which banks lend to each other] has started to rise again in the past few days."
Nevertheless, Mr Boulger believes that the recent calm in the mortgage market is an indication that we are at the "end of the beginning of the credit crunch".
This view is echoed by Andrew Montlake at broker Cobalt Capital: "Things are looking a bit more optimistic and it’s good that we have got away from the position where mortgage deals were being pulled almost by the minute.
But he adds: "This is only the first stage of the comeback and I can’t see there being any significant downward moves in mortgage rates till the final quarter of this year. Borrowers just have to make the most of the market we have now."
Mortgage broker, John Charcol, has published its latest best-buy tables, which are headed by Nationwide and Abbey.
For fixed-rate loans, Nationwide’s two-year deal gained prominence, charging 5.95% and reverting to 6.49% at the end of the fixed period. A fee of £599 applies.
Abbey’s discount and tracker mortgages also appear high on the list with a rate of 6.02% (bank rate plus 0.97%).
Earlier this week, Abbey reported that its five-year fixed-rate mortgages have been increasing in popularity over the past three months. (The lender has recently reduced the interest rate on its five-year fix to 5.75%, for borrowers requiring a loan-to-value ratio below 75%.)
In a recent survey, Abbey found that 30% of those questioned said they would opt for a five-year fix if they had to remortgage now, up from 24% in April and 12% in February.
The research also showed that demand for two and three-year fixed rate loans has remained steady at 8% and 9% respectively.
Despite its appearance in the best-buy league, Nationwide announced earlier this week that its mortgage lending fell by 40% in 2007.
Meanwhile, Abbey has consistently increased its share of the market during the credit crisis, partly as a result of its Spanish parent company’s ability to borrow from the European Central Bank.
LONDON (Dow Jones) –U.K. house prices posted their biggest drop on the year for 2.5 years in May as a lack of mortgage liquidity and uncertainty about the economic environment scared buyers away from the property market, data from Hometrack showed Monday.
However, the housing valuation company said that although the deterioration in buyer confidence over the last six months had hit sales of residential property, it didn’t believe that was a precursor to a steep drop in house prices or major rise in forced sales.
House prices fell an average 0.5% in May, the eighth consecutive monthly fall following a 0.6% drop in April, it said. On the year, prices fell 1.9% after declining 0.9% in the previous month, the biggest drop on an annualized basis since prices slumped 2.3% in November 2005.
"It seems likely that in the short term prices will continue to edge down until they reach a level where buyers are prepared to commit," Hometrack Director of Research Richard Donnell said in a statement.
The U.K. housing market began to cool in the latter half of last year after the Bank of England raised interest rates five times between August 2006 and July 2007 and the credit crisis hit the mortgage market.
Even though the BOE has cut rates by 75 basis points to 5.0% since December, lenders haven’t reduced their mortgage rates in tandem due to the turmoil in financial markets triggered by concerns about the impact of the collapse of the U.S. subprime mortgage market.
Most housing market indicators in recent months have shown the reduction in housing loans has led to a stagnation in the market and weighed on prices, although the market has found some support from high employment and an imbalance between supply and demand for homes.
The Hometrack data showed that although the supply of housing for sale had risen more than 7% over the last two months and 20% since February, the number of new buyers registering with estate agents fell 6.7% after dropping 2.8% in April.
The average time taken to sell a property rose to 9.8 weeks from 9.1 weeks in April and 5.8 weeks in May last year, while the proportion of vendors who sold at their asking price fell to 92.3% in May from 93% in April, the lowest level since the Hometrack survey began in 2001.
"The current trends in the survey indicate that pricing looks set to remain under downward pressure over the coming months," Donnell said.
The figures showed there were people looking to sell their homes, but improved buyer confidence would be the key to a stabilization in prices, he said.
"The implication for prices in the short term largely depends on the split between those who have to sell within a certain period of time, compared with those looking to sell at the right price which is unknown," he said. "The former group of sellers will need to be more realistic on the achievable price compared to the latter group."