Interest rate rises will hit British households hard, say economists

The first rise in Bank Rate could be just months away. How will mortgage rates react, and what should borrowers do?

Interest rate rises will hit British households hard, say economists

Mortgage borrowers have been rattled by fears that their interest rate may rise following indications from the Bank of England that the first increase in the official cost of borrowing is only months away. This is becoming a concern for current property owners and first timers, it is also a concern for self-builders who already have to consider structural warranties on new buildings before their mortgage is issued.

The rate at which lenders can access money to lend is the key to what they charge you. They usually get this money either from savers’ deposits or by borrowing from other banks on the money markets.

For fixed-rate mortgages, which are more popular when the cost of borrowing is about to rise, the key rate that determines what banks pay for their funds is called the “swap” rate. Swap rates react to expectations of future interest rates and inflation.

The other major factor is competition for mortgage business. Lenders have been competing fiercely to attract customers in order to meet their lending targets and this has helped to keep mortgage rates at record lows for much of the year.

It’s slightly different for tracker mortgages, which are less popular at the moment. Here, the key wholesale rate is “Libor”, which is currently a little above Bank Rate.

Barclays has increased the rate on its popular five-year mortgage from 2.39pc to 2.59pc. It also increased the rate on its market-leading 10-year loan from 2.99pc to 3.25pc.

Santander withdrew its popular 2.19pc five-year fix and increased the cost of a range of other deals, including two-year fixes, although only by 0.1 of a percentage point.

But amid these price rises other lenders, such as HSBC and Coventry, cut their rates last week in a bid to attract customers.

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Build-Zone supports Government strategy to deliver homes and strengthen the economy

An ambitious new strategy to tackle the housing shortage, boost the economy, create jobs and give people the opportunity to get on the housing ladder was announced today (21 November 2011) by the Prime Minister and the Deputy Prime Minister.

The Prime Minister and Deputy Prime Minister said the Government has inherited a broken housing market and a devastating collapse in construction from the era of top down targets, but new plans will give the housing market a shot in the arm by boosting supply, easing financial pressures and helping with demand. The action we take will drive up the level of housebuilding, ensure we are helping new home owners and boost consumer confidence.

The Strategy will break the current cycle in which lenders won’t lend, builders can’t build and buyers can’t buy. We’ll be making it easier for people to secure mortgages on new homes, help people get on the property ladder, address unfairness in social housing and ensure homes that have been left empty for years are lived in once again.

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Mortgage lending up in September whilst approvals dropped

Figures from the British Bankers Association (BBA) have found that the figure for gross mortgage lending in September increased to £8.4billion, despite approvals dipping slightly.

The amount of money lent by the banks was up from £8.3 billion in August, with a spokesperson for the BBA suggesting that the increase is due to more activity in the buy to let market.

However, the number of mortgage approvals were down 6% compared to August’s figures. 33,130 mortgage loans were approved in September, whereas at the height of the housing market there were about 130,000 approvals a month.

First time buyers who are struggling to get on the property ladder are still concerned about the lack of mortgage lending but the number of 90% mortgages on the market are increasing, so it is important to keep looking.

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CML issues advice to friends taking out first-time buyers mortgages

Groups of friends who are looking at taking out their first mortgage together have been reminded of the implications of such a move.

According to Sue Anderson, an official at the Council of Mortgage Lenders (CML), each individual is responsible for ensuring mortgage repayments are delivered on time, the Daily Mail reports.

Therefore, every person who has taken out one of these mortgages for first-time buyers must fulfil their personal responsibilities.

“If one stops paying, the others have to cover the difference or face losing their home,” she commented.

Ms Anderson added that relatively few first-time buyers mortgages are taken out by groups of friends, which usually means three or more people.

Indeed, she said this type of buyer has never accounted for more than one per cent of the mortgage market.

This comes after Grant Shapps, the housing minister, highlighted this option as one he would “like to see explored”, as products for friends who are “perfectly capable” of meeting monthly mortgage payments but are “struggling” to pay for a deposit without help should be easier to access.

First time buyers have a lot to research, not least, the best deals amongst mortgages for first time buyers.

Source: First Rung Now

For more information from Build Zone about Structural Warranties, 10 Year Structural Warranties, contact the Build-Zone team on (0)845 230 9873 or email sales@build-zone.com

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Number of mortgages at highest level in three years

The number of mortgage products available to UK mortgage intermediaries is at its highest level since 28 April 2008, figures from Mortgage Brain’s Monthly Product Analysis show.

Mortgage products numbers have increased for the seventh month in a row, rising by 4% in June.

As of 4 July 2011, Mortgage Brain’s mortgage sourcing system listed 12,525 mortgage products – up from 11,996 on 30 May 2011.

Positive movement was seen across the board for all main product types with variable rate loans seeing the biggest rise in product numbers at 21% to now represent 1,500 of all available mortgages.

A 6% increase (180 new products) during June saw the number of trackers climb for the third month in a row to 3,237.

Fixed rate products rose for the fourth consecutive month – by 1% – to their highest level since August 2008 and now represent 7,788 of all available mortgage products.

Over 4,000 new fixed rate products have been introduced to the UK intermediary mortgage market over the past 12 months further cementing them as the market’s most popular and dominant product type.

Mark Lofthouse, CEO of Mortgage Brain, commented: “Further encouraging data has been extracted from this month’s product analysis, which is great news for brokers and the mortgage market as a whole.

“Around 4,500 new products have become available during the past seven months alone and healthy increases across the board has seen the number of fixed, variable and trackers climb to their highest level since the summer of 2008.”

Source: Mortgage Finance Gazette

For more information from Build Zone about Structural Warranties, 10 Year Structural Warranties, contact the Build-Zone team on (0)845 230 9873 or email sales@build-zone.com

Subscribe to the RSS of the Structural Warranty blog or Subscribe by Email