Early April has yielded a bit more confidence with the G20 summit and lending figures suggesting that the worst is over.  The news that February saw a rise of 19% in mortgage acceptance equating to around £250m was released at the same time 20 of the world leaders were to arrive in London to hopefully agree the way forward in terms of lending and working together during this financial crisis.

The feedback from the media was good even with attempts from demonstrators to mare the conference. Although not achieving everything, most financial advisers felt they could see improvements and confidence for the future, with estimates of later his year before real lending would start again.

The Bank of England kept the lending rates at .5% although it was hard to see why they would take them down to zero. Most mortgage lenders have significantly reduced their rates, although they are still around 3% above the base rate. Never mind though, these are still cheap mortgages if you can get one.

Rumours are also around that Northern Rock are about to offer 90% mortgages and Halifax may lend 100% for certain customers, we have yet to see the customer base this would apply to, but it is unlikely to be open to everyone and may be for existing customers within certain credit limits only.

There was even a small rise in house prices during February, suggesting that we are at the lowest price level. There has never been doubt that there has been a demand for homes, it has been the lack of mortgages that has brought home prices down to the level they are now.
Under normal circumstance, the lighter nights would stimulate the house buying market, so this news may have also come just at the right time, when families get in their cars and drive around the estates to see what property is available.

It is early days and we should not assume there will not be a dip at some point, or that recovery will be swift. But with banks being pretty much protected from any circumstances of bad lending, there does not seem any logical reason not to offer more mortgages and kick start this economy again.

Well last month there was information that lending for homeowners had increased month on month albeit by a small amount. But yesterday we got some more figures that contradicted that news. It seems that on 2008, the amount of mortgages offered was the lowest in history, falling by 47% on 2007.

Apart from the so called credit crunch it is believed their is plenty demand fro mortgages it is just the large deposits need to secure a home owner loans that is preventing many from buying especially first time buyers.
The measures put into place to encourage lending has yet to show continuous positive figures to prove it is working and with interest rates down to there lowest level ever, which is great news for borrowers, those trying to save for their deposit are getting very low interest rates in return.

There is a belief that this current trend is unsustainable and it is very possible that more people may pay their mortgage off than take up news ones. The frustrating thing for estate agents is that there are plenty of first time buyers wanting to take advantage of the drop in property prices, but cannot get on to that lender because of the higher deposits required fro security.

Waiting for Februarys stats will see if the trend will continue into 2009, or banks are at last lending more as promised.

Out of the blue came a report that house prices had risen by nearly 2% over the month of January 2009. The report came from the Halifax, whose figures have surprised some analysts. There were claims by so called specialists that we should not take one month figures as an indication the market was improving and suggested the trend was still downwards.

The Halifax house price index is published each month based on its own trading figures, which of course could be different for other mortgage lenders.  What is sure that Februarys figures will be a point of interest, either to dispel January figures as a blip or an indication that maybe some house prices had not reached there lowest level.
There were also comments stating that there were much fewer homes on the market at the moment, which in itself may have influenced a small price increase. There is also the human element, a new year and a new start and those who may have been put off from last years doom and gloom may have decided now was the time to buy.

If we thought that last months interest rate cut was exceptional, then look at what the Bank Of England has delivered yesterday.  They have once again delivered a record breaking interest rate cut down to 1%. This is clearly good news for those with mortgages providing the banks pass on those interest rate cuts down to the consumer.

However a mixed message came from small businesses who are saying it is all good and well reducing interest rates, but many banks are just not lending to certain business types or in fact increasing interest rates because they feel they are too much of a risk. The underlying message is good for existing borrowers, but not yet teh solution for first time buyers.

Many first time buyers are still no too impressed, with some mortgages requiring a 40% deposit. Of course the lower interest rates are also affecting the savers, and for many first time home buyers, they are a saver before a buyer.
A suggestion on a major national news channel yesterday was for the government to offer an interest free loan to cover the deposits required by mortgage lenders, to get those looking for a home into the market much quicker. The criticism was the interest rate cut is a good step, but probably will make little difference to last months already very low cut. The government needs new initiatives, was the suggestion, to cover the reasons why banks are just not lending money, was the comments.

Forget about the UK mortgage market for a moment and consider the Spanish mortgage situation, especially with Brits who have bought abroad and applied fora Spanish mortgage to do so. Well 3 years ago or so, this seemed sound economical advice. Every holiday home abroad programmer talked about how mortgages in Spain were much cheaper than in the UK and how they could get more for their money.

There was some truth in that at the time, you could get a Spanish mortgage for around 2.5% where the interest rates at home were somewhere around the 4.5% at the time. But this has backfired big style for those who took that option. Firstly the interest rates in Spain gradually caught up with those in the UK and continued to do so as they rose to 7% or so. The bad news is, Spanish mortgages have not reduced like they have here in the UK, with no government bail outs to the level we have with Bank Of England, so mortgages have doubled and more in only a few years. If that was not enough the drop in sterling has increased mortgages another 40% or so again, as Spanish mortgages have to be paid in Euros not the pound, 3 years ago you could almost get 1.5 Euros to the pound, now you are lucky if you can get 1.09 Euros to the pound.

The results are that many Brits are just handing their keys in and walking away, losing a considerable amount of money. The language difference and not having access to mortgage advice or even a lack of mortgage advisers means that many Brits do not know who to talk to or even if their are rescue packages out there. It doesn’t take a genius to figure out if 1 million Brits come home, there will be a huge drop in income in Spain and much of its infrastructure has relied on foreign investment.

Ironically some Brits may be in a better situation to sell their property than last year. The strong Euro may help them sell their Spanish home to a new owner from a country that deal in Euros, sell it cheaper than they bought it for, but because the Euro is so strong actually come away with more in Sterling than the house was bought for. For example 100 Euros is worth the same as 150 Euros was 3 years ago in sterling. So if you bought a house for 150,000 Euros, roughly £1000,000 sterling 3 years ago, you could sell that house now for around 110,000 Euros now to get the same back in sterling.

The issue here is we don’t here this on TV. We are sure many Brits are not aware of this and so the Brits could sell their home cheaper than any other European owner, pay off the mortgage and walk away in a better position than handing the keys in.

It has been coming for some time if you believe what the government has to say, but now the HSBC has promised to increase its lending for homeowners during 2009.

The figures promised relate to £15bn which is an increase of 20 per cent, this would clearly be a step in the right direction to get homes selling again. As we know it is not for the want of a mortgage that lending is down, it is the stricter conditions applied to mortgage lending that has all but stopped the mortgage market.

A promise to increase its mortgage lending suggests that some requirements will be reduced allowing more applications to accepted.  The Telegraph has the full mortgage story for you to read

There doesn’t seem to be any good news on the homeowner front these days, even though the Bank Of England interest rates are at an all time low and house prices have reduced considerably also.  This latest piece of news, released by the media last week including the Sunday Express, is now reporting a huge increase of repossessions even though there have been agreements by Gordon Brown and the banks to help homeowners get through these difficult times.

The period from July to September saw an increase of repossessions of 92% compared to the same time in 2007. Of course as many job cuts have been announced since then, there is a real worry that the next set of figures will be even worse. Even though some safety measures have been announced to help those who forfeit on their mortgage keep their homes, there have been comments that they are not enough to help many homeowners through this time.

Gordon Brown has also announced another rescue plan to get the banks lending to people and businesses once again. One of the measures to help the mortgage market was guarantees for mortgage backed securities. However this scheme will not start to April 4th the tax year.

For most home owners the current situation is becoming too complicated to understand, in a world where we were brought up to never spend beyond our means, we are now being told that the economy is struggling because no one is lending to anyone and the vast amount of tax payers money is being invested to stimulate the money lending market.

The confusion is increased as financial experts just don’t seem to want to agree and the “we will work together” attitude of the political parties seems to have diminished as conservative disagree with Labour’s policies and in fact has suggested he could bankrupt the country

The news quoted that never since gravity had been discovered had the Bank Of England base rate been so low as the recent reduction down to 1.5%. Of course they were refereeing to the fact the Bank Of England was set up the same year as Newton dropped his apple, and in this period of time, never has the rate been so low.

Of course the newsmen went out on to the streets to get the reaction form the public, just to be told that cheaper mortgages would not encourage them to spend more and in fact they would use any savings to reduce their debt, not spend more or increase it. Business owners were quoted as saying that the bank rate was OK anyway, the problem was getting banks to lend to them in the first place.

The media seems to be delivering two messages, one from those who are still ion a job and have not been effected by the credit crunch, they are still getting paid, prices in general are dropping, fuel is no longer as expensive it was and they are benefitting from cheaper mortgage, providing they already have one of course. We are often hearing the words “Credit Crunch What Credit crunch”? The second message is from those who either do not own a home or are looking for one, or those who have been made redundant recently. This is the group who are finding it hard through this hard financial time.

Take those first time buyers. House prices have dropped, good news for them and mortgage rates are now also dropping, and so many are at a point where they feel they can get on the mortgage ladder. The problem is of course, they now need a substantial deposit to secure a mortgage, with the worry that the house they will be buying may put any borrower into a negative equity situation. The next stumbling block is that many lenders will not longer take bonuses or even overtime into account as part of the borrowing calculation. Finally those who work within certain industries may find it harder than others. It is unlikely that anyone in the car business will be looked on favourably at the moment with factories either reducing the workforce or working weeks.

So will the Bank Of England Interest rate drop help the economy. Well if you believe the news, it probably will not. But lets be honest, were all opinions expressed on TV, or were selected interviewees aired only, to ensure an interesting news item?

This is for you to decide!!

There will be many in the Mortgage business and finance in general that will be thinking, “what a year that was and roll on 2009”. Last year for many would have been their worst in the business, with mortgage applications down, financial institutions being bailed out from governments right around the world, and share prices in banks taking the lowest in value.

Many local mortgage brokers and advisers, whose incomes are directly reliant on the acceptance of mortgage applications to the willingness for banks and building societies to lend out money, were hurt badly last year, with an estimated 50% of mortgage advisers needing to find a new profession, within the London area alone.

This morning there will be a hope from all those in the business who offer mortgage advice, that the future is brighter and the insistence that mortgage lenders start being less critical in their acceptance procedures and kick start the borrowing, by the Government will make a difference to all.

It is amazing how a new year can change the focus for negative to positive; even Mortgagebam is setting out into a market at its weakest time, with the resolution to not let others get in the way of own standards and commitments. Life still goes on, people still get married, people still get divorced and people still need a home to live in.

With home considerably cheaper and even the national press suggesting it is time to shop around for new mortgage deals as building societies reduce their rates, because of the bank of England rate cut, for many this could be the best time to buy a new home and get a mortgage deal in 18 months or so.

It is time for those independent mortgage advisers out there, to compare what is on the market now to 6 months ago and spread the news and of course explain the downfalls of a long term financial commitment, not that it needs much explaining at the moment. Anyway, wish you all a happy and prosperous 2009, both you in the industry of help and advise and those who read our blog.

All the best!
Mortgagebam