What Will The Svr Increases (Ni Houses Prices?)

[2buyornot2buy]

I notice that lenders are announcing SVR increases. Halifax, Santander and BOI have all confirmed they are raising the rate they charge customers on their SVR.

I personally know several people on lifetime trackers of base +0.18% but there must be many more stuck on the SVR paying 2-3% up to now. How do we think this will affect house sales here and mortgage affordability? Will we see more repos coming to the market?

Is anyone on here currently on their lenders SVR and if so how do they feel about the inevitable increase?

I personally think there are many many people who have never had it so good - coming off fixes of 6+% onto 3% SVR. I think so many people living on the edge will find difficult to get the extra £40 a month to pay for this.

Edited March 7, 2012 by 2buyornot2buy

[Shotoflight]

The mort market is very fractured in terms of what is offered and who offers it ie banks & building societies and fixed, Base rate trackers, repayment, Interest only products etc., so I don't know the impact this will have or on how many locally - in its own right.

However it will impact sentiment/confidence and the direction of travel has been established. Other lenders, emboldened, will surely follow and I believe on interest only morts (of which close to 50% were taken at the peak), for example, the increase will be equal to a rise of 14%. Many may have been lulled into a false sense of security on rates and will get a wake up call whilst those thinking of buying will need to take it into account. And it will impact on affordability for new mortgagees - ie how much they can borrow. If potential buyers can't figure this out, the bank will do that for them. (I think Northern SVR is currently 4.39% BTW)

Currently BOE interest rate is at an emergency or distressed level. QE is linked to this. Once the economy and confidence does pick up, interest rates will normalise. How does a base rate tracker + 1.8% sound at a base rate of 5.5% rather than .5% ? If and when we get out of this mess, that's where we are heading.

I am still inclined towards inflation, pay freezes, job losses, benefit cuts and the cost of living (transport/food/clothes/energy) having a greater impact on a wider range of people than staggered .25% mortgage uplifts on some products - in terms of both sentiment, disposable income and house purchase affordability or indeed mortgage facilitation. But it is a welcome addition to the party.

It will certainly shoo things along.

Edited March 7, 2012 by Shotoflight

[Shotoflight]

BOI - wasn't aware of this earlier, even though you mentioned it.

Bank of Ireland to raise SVR mortgage rate

http://www.bbc.co.uk/news/business-17286520

The Bank of Ireland is raising the standard variable rate (SVR) on its mortgages to 4.49% from 2.99%, affecting 100,000 UK customers.

The increase will come in two stages.

The rate will rise to 3.99% in June, and will then be increased to 4.49% in September.

The lender said the cost of funding mortgages had increased significantly. It added that its current SVR was considerably lower than the market norm and its rates would remain competitive.

The full increase will lead to a £81 rise in the monthly cost of a £100,000 Bank of Ireland repayment mortgage on an SVR rate.

The change does not affect Post Office customers.

Some of the customers are likely to be people who first took out a mortgage with the former Bristol and West building society, which the bank bought in 1996.

Funding

The move comes after the UK's largest mortgage lender, the Halifax, said it would raise its SVR from 3.5% to 3.99% from 1 May.

The SVR is a benchmark mortgage rate which large numbers of borrowers revert to after discount offers or fixed rates have expired.

It often mirrors changes in the Bank rate, but that has stayed at 0.5% for three years and lenders say that mortgage funding has become more expensive recently.

The Bank of Ireland said this was the first time it had raised its SVR since August 2007.

On Friday, RBS raised the rate on two of its mortgages from 3.75% to 4%. This affected 200,000 borrowers with RBS and NatWest offset mortgages and home loans from RBS's One Account range.

[Shotoflight]

Just what we didn't need - the return of rising mortgage rates

Government hopes of falling inflation and a consequent return by the end of the year to real terms income growth are being threatened by a potent combination of rising oil prices and increased mortgage costs.

http://www.telegraph.co.uk/finance/comment/jeremy-warner/9129600/Just-what-we-didnt-need-the-return-of-rising-mortgage-rates.html

For those with a typical SVR loan, repayments will increase by £16.40 a month. It doesn't sound much, but the bigger the loan, the bigger the impact and for those already struggling, it will surely be enough to tip them over the edge.

And for all those affected, it is a further ratcheting up in the cost of unavoidable necessities, leaving even less for discretionary spending at a time when household incomes are already being severely squeezed.

Aggregated across the country as a whole, the macro-economic impact is also sizeable. The numbers on SVR mortgages have been growing rapidly in recent years, as mortgage holders take advantage of today's ultra-low interest rates to refinance from more expensive, older deals. SVR mortgages are also the default option for more distressed borrowers who find difficulty in re-mortgaging. In the past year alone, SVR mortgages have risen from 48pc of Halifax's loan portfolio to 56pc

According to the economic consultancy Fathom, a rise of 50 basis points across all mortgages would knock around 0.6pc off overall disposable income and therefore household consumption.

The bottom line is that for the first time since the crisis began more than three years ago, mortgage rates are on the rise, and for many it will quite badly damage their pockets. One of the main factors supporting demand through the crisis – ultra-low mortgage costs – is being partially removed.

it is in the nature of banking that once the market leader acts, everyone else finds some way of squeezing up prices, too.

The other big re-emerging negative is the rising oil price, which at one and the same time is both inflationary, by adding to costs, and deflationary, by reducing the amount that can be spent on other things.

No one really knows at what level a rising oil price begins to do significant damage, but we do know that virtually all serious recessions are preceded by an oil price spike. With oil back above $120 a barrel, we are back in the danger zone.

With devaluation, the terms of trade have moved badly against the UK, so for us, it may be rather lower. In sterling terms, the oil price is at record levels. Any major supply side shock, already to some extent anticipated in the price as a result of Israel's sabre rattling over Iran, would be a game changer.

In any event, the rising oil price is beginning to eclipse the eurozone debt crisis as the major concern for economic policymakers.

For the Bank of England's Monetary Policy Committee, which has been meeting this week, the policy choice just gets harder and harder. Just as things finally seemed to be moving in the Old Lady's direction, with inflation abating, along come rising oil and mortgage costs both to add to prices and to lower growth prospects.

For some years now, the Bank of England has consistently underestimated inflation and overestimated growth. The discomfort of this position may be more persistent than the Bank had hoped.

It was a big call for the Bank to ignore the inflation target in pursuit of demand and jobs. So far, the Bank has got away with it; Britain's inflationary adjustment is widely thought preferable to the deflationary one forced on the eurozone periphery. But there must be limits, and patience will have been tested to breaking point if, come the end of the year, living standards are still be squeezed by higher than expected inflation.

Edited March 7, 2012 by Shotoflight

[2buyornot2buy]

Great thread running on MSE on this. I don't know how much lending BOI had in England compared to NI but it looks like this will effect 150,000 borrowers. This doesn't even include their Post Office mortgages.

I think this could have a real effect.

I see the Post Office repayment calculator is down at the minute. Looks like they are updating for theis SVR increase too.

[Shotoflight]

Great thread running on MSE on this. I don't know how much lending BOI had in England compared to NI but it looks like this will effect 150,000 borrowers. This doesn't even include their Post Office mortgages.

I think this could have a real effect.

I see the Post Office repayment calculator is down at the minute. Looks like they are updating for theis SVR increase too.

http://www.bbc.co.uk/news/business-17286520

The full increase will lead to a £81 rise in the monthly cost of a £100,000 Bank of Ireland repayment mortgage on an SVR rate.

The change does not affect Post Office customers.

Some of the customers are likely to be people who first took out a mortgage with the former Bristol and West building society, which the bank bought in 1996.

The move comes after the UK's largest mortgage lender, the Halifax, said it would raise its SVR from 3.5% to 3.99% from 1 May.

The SVR is a benchmark mortgage rate which large numbers of borrowers revert to after discount offers or fixed rates have expired

[2buyornot2buy]

http://www.bbc.co.uk/news/business-17286520

The full increase will lead to a £81 rise in the monthly cost of a £100,000 Bank of Ireland repayment mortgage on an SVR rate.

The change does not affect Post Office customers.

Some of the customers are likely to be people who first took out a mortgage with the former Bristol and West building society, which the bank bought in 1996.

The move comes after the UK's largest mortgage lender, the Halifax, said it would raise its SVR from 3.5% to 3.99% from 1 May.

The SVR is a benchmark mortgage rate which large numbers of borrowers revert to after discount offers or fixed rates have expired

It looks like the Post Office is going to follow suit anytime now. As I say their affordability calculator on their site is down, meaning they are updating it with new rates.

[Shotoflight]

The flag has been raised, the hare is running. Logically the Post Office will follow - and so will all the rest.

The shock value and uncertainty is more influential than the actual % and amounts - at present - though these are not without consequence.

The question is, will it be a slow burner or is it full steam ahead?

Expect plenty of coverage in MSM especially Sat/Sun supplements.

And as stated elsewhere this move is, of course inflationary on top of everything else.

Post Office mortgages eh - what a mismatch.

On some of my Land Registry searches you wouldn't believe the variety off beam and 'non-traditional' financial institutions that gave out mortgages (from Wales, Scotland everywhere) and now have charges on said properties. Real sub-prime stuff with interest rates to match, no doubt.

Stolen from main board - M21er - with some more figure detail

http://www.cityam.com/latest-news/allister-heath/mortgage-time-bomb-uk-s-top-threat

SOME time-bombs can be defused. Not this one. At some point – in a year, in two, or perhaps even in five – the cost of borrowing for consumers will climb back to the sorts of levels we were used to 15 years ago. Complacent borrowers addicted to rock-bottom interest rates – and for whom an 8 per cent mortgage is almost inconceivable – will be in for the rudest awakening of their lives. The timings are unclear; the direction of travel isn’t. The Bank of England, which will doubtless keep base rates on hold today, has been desperately trying to keep money cheap, but it only controls very short-term interest rates.

Borrowing costs need to normalise. The bubble was caused by excessively cheap money; we can’t delay the necessary readjustment forever. But the pain will be almost unbearable for those caught unaware. They need to evaluate their debt levels, stress test themselves for rate hikes – and deleverage as fast as possible

Edited March 8, 2012 by Shotoflight

[tinbin]

Massive rate shock hits 100,000 MORE as Bank of Ireland and Bristol & West borrowers face 50% hike in their monthly payments

Bank of Ireland and Bristol & West borrowers are the latest to have been delivered a mortgage rate shock with a huge hike from 2.99 per cent to 4.49 per cent, despite believing they had escaped a hike by not being sold to Nationwide.

It is the latest in a round of rises that has shocked those sat on lenders' standard variable rates and believed they would not rise independently of base rate - more homeowners will now be worried their lender could follow suit.

The 100,000 Bank of Ireland and Bristol & West borrowers who avoided being moved on to Nationwide’s subsidiary The Mortgage Works have begun to receive letters from the Irish bank telling them that their mortgage payments could go up by 50 per cent from next September.

A borrower with a £150,000 interest-only mortgage would see their monthly payments shoot up from £374 to £561. Those with a repayment mortgage for the same amount over 25 years will see a smaller £125 per month rise.

A sizeable number of borrowers could be stuck with the higher payments, and unable to remortgage due to low equity, as the lender courted small deposit mortgage borrowers during the property boom.

The shock follows Halifax’s decision to hike its standard variable rate to 3.99 per cent from 3.5 per cent for an estimated 1million customers and RBS / NatWest lifting its SVR by 0.25 per cent to 4 per cent for offset mortgage customers.

Those customers who did get sold on to the Nationwide buy-to-let arm already have the threat of an even bigger rate shock hanging over them.

The building society says it will align their standard variable rates with the 4.79 per cent one charged by The Mortgage Works, rather than the 2.5 per cent or 3.99 per cent one it charges Nationwide brand borrowers.

That would hike payments by a huge 60 per cent for interest-only borrowers and those affected are still waiting in limbo to find out when they will be hit.

Bank of Ireland has announced the massive rise in its standard variable rate will arrive in two stages. First a hike from 2.99 per cent to 3.99 per cent will arrive in June and then a further move upwards to 4.49 per cent from September.

The Bank of Ireland move affects 100,000 borrowers with residential mortgages under that name and the Bristol & West brand, but not the vast majority of buy-to-let loans, which reverted to base rate trackers rather than an SVR. It does not affect Post Office mortgage borrowers.

http://www.thisismoney.co.uk/money/mortgageshome/article-2111627/Massive-rate-shock-hits-Bank-Ireland-Bristol--West-borrowers-face-50-payment-hike.html#ixzz1oXE4VEQn

[tinbin]

It is also my understanding that the Northern Bank has just increased the tracker rate for First Time Buyers to 5.99% ... although I haven't been able to find any online info to back this up

[tinbin]

Clydesdale and Yorkshire Banks to increase SVR

Clydesdale and Yorkshire Banks are increasing their SVR for residential mortgage customers from 4.59 per cent to 4.95 per cent.

The change, effective from May 1, will affect around 30,000 existing mortgage customers.

.The banks say borrowers will see an average increase in repayments of less than £30 a month.

They say the hike is due to the increased cost of mortgage funding.

Until July 31, the lenders will waive their exit fees so impacted customers can remortgage to another provider.

Retail director Steven Reid says: “While our SVR will continue to remain competitively below a number of other UK mortgage providers, the market and costs associated with providing mortgages have changed significantly in the three years since the rate last moved.

“We don’t take such decisions lightly and fully appreciate the impact this will have on some customers but you only have to look at the narrow gap between longer-term savings rates and mortgage borrowing rates to see how things have changed.”

http://www.moneymarketing.co.uk/mortgages/clydesdale-and-yorkshire-banks-to-increase-svr/1047738.article

[Shotoflight]

Clydesdale and Yorkshire Banks to increase SVR

Clydesdale and Yorkshire Banks are increasing their SVR for residential mortgage customers from 4.59 per cent to 4.95 per cent.

http://www.moneymarketing.co.uk/mortgages/clydesdale-and-yorkshire-banks-to-increase-svr/1047738.article

Some more - different source:

Clydesdale and Yorkshire banks follow Halifax with mortgage rate rise

http://www.guardian.co.uk/money/2012/mar/09/clydesdale-yorkshire-mortgage-rate-rise

Woolwich, part of the Barclays group, has already warned mortgage brokers that it will reduce funding for its deals.

Clydesdale and Yorkshire, part of National Australia Bank group, blamed the increase on the rising cost of providing mortgages at a time when they are having to pay higher rates to attract savers.

Retail director Steve Reid said: "You only have to look at the narrow gap between longer-term savings rates and mortgage borrowing rates to see how things have changed. For instance, on our market-leading five-year savings account we are offering interest rates that are just 0.7% below the new standard variable rate (SVR). With significantly more savers than borrowers, it is important that we balance the needs of all of our customers."

Reid added that Clydesdale and Yorkshire banks are among just a handful of lenders that offer 95% loans, and that they are committed to remaining in the market.

It is unclear how many borrowers are on SVRs, but at the end of 2010, the Council of Mortgage Lenders said that about 1.8 million people had come to the end of a fixed-rate deal and moved on to their lenders' SVR.

In the past, borrowers who faced high SVRs were free to remortgage elsewhere to better deals. But first-time buyers who bought during the boom are finding it difficult to remortgage as they have no equity and can't meet minimum deposits required for most loans today.

The result is that banks can now raise SVRs with little fear that they will lose customers to rivals. "Anyone on their lenders' SVR is at risk of a hike in payments," warned Mark Harris of broker SPF Private Clients

[Shotoflight]

Mortgage holders face fix or twist decision

http://www.bbc.co.uk/news/business-17371515

Faced with a slew of lenders raising their standard variable mortgage rates, some homeowners will be questioning whether to fix or twist.

The standard variable rate (SVR) is arbitrarily set by each individual lender, taking into account the Bank of England base rate, the cost of funding mortgages and the balance between savers and borrowers.

Over the last few years there has been a "clear trend", according to the Council of Mortgage Lenders (CML), for homeowners to revert to the SVR.

Collectively, this will lead to a million households seeing their mortgage bill rise this summer. If they have a £100,000 loan, they could see about £30 a month added to their bill.

[tinbin]

I posted an article from this source before as it summarised the position of those on SVR much better than I could have. http://www.mortgagerates.org.uk/news/svr/

Highlights relevant to this topic are;

2.3 Million borrowers are on their lenders standard variable rate. It is believed that this accounts for 30% of the UK mortgage Market.

Borrowers tend to end up on standard variable rate mortgages once their fixed term, discounted mortgaged has ended. Terms can vary as different borrowers prefer opt for various timescales but the most common are two, three and five year terms.

Many borrowers are now stuck on standard variable rates as they do not have enough equity in their homes to find a better deal.

Tom Girling, a mortgage product manager at Yorkshire Building Society, said: “A record number of mortgage customers are currently stuck in ‘mortgage limbo’ on SVR rates that are generally far higher than best buy deals.“

The biggest concern borrowers have with staying on their lenders standard variable rate is that interest rates will rise. As rates rise so does the SRV which increases your overall monthly repayments. This is why many prefer to fix their monthly fee by moving so they can be confident of the amount that is due in repayments per month.

Most ppl believed that SVR's would only increase when the BOE started to increase the BOE Base rate, with many not expecting any change for years. What we are now starting to see is lenders increasing the SVR anyway because of their own long term funding etc.

It is very difficult to obtain information regarding historical SVR's online but I have managed to find a few below that you can use for comparison to see just how SVR has dropped over the last few years. (I cannot confirm the accuracy 100% but it would appear to be in line with what I would have expected to see)

Standard Variable Rates - 2008

HBOS 6.50%

Nationwide BS 6.19%

Abbey 6.94%

Lloyds TSB/ C&G 6.50%

Northern Rock 7.34%

Barclays 6.64%

RBS 6.69%

HSBC 6.25%

Alliance & Leicester 6.94%

Bradford & Bingley 7.09%

Bristol & West 6.59%

Britannia BS 6.30%

Yorkshire BS 6.60%

GE Money 10.39%

Coventry BS 6.84%

Standard Life 6.59%

Clydesdale & Yorkshire 6.64%

Chelsea BS 6.94%

Skipton 6.45%

One Account (RBS) (avg) 6.55%

Here is a list of Standard variable rates for comparison (this data was accurate as of 16 July 2010)

RBS             4.00%

Nationwide   2.5% or 3.99%

Halifax            3.5%

Santander     4.24%

HSBC             3.94%

Barclays         2.99%

Leeds Building Society   5.69%

Natwest           4.00%

In 2008 and before there wouldn't have been that many on SVR's. Many have since came out of fixed rate deals and defaulted onto SVR and are 'stuck' on them. That is fine while they are around the above levels i.e. 2.5-4%. But if lenders keep on increasing the SVR and they go up anywhere near the 2008 and before levels - crisis time for a lot of ppl!

Edited March 16, 2012 by tinbin

[Shotoflight]

Co-op Bank to raise mortgage rate

http://www.bbc.co.uk/news/business-17585150

The Co-operative Bank will raise its standard variable mortgage rate (SVR) by 0.5 percentage points from 1 May.

The rate, which sets monthly payments for 54,000 mortgage borrowers, will go up from 4.24% to 4.74%.

The average increase in cost for these customers will be £15 per month, or £180 a year.

Some homeowners across the UK have been preparing to pay more after Halifax and Bank of Ireland sparked a round of SVR increases.

Lenders to have announced increases in SVRs in recent weeks include:

The Halifax, which will raise its SVR from 3.5% to 3.99% on 1 May

The Bank of Ireland's UK arm, which includes Bristol and West, which will put up its SVR from 2.99% to 3.99% in June, then increase it again to 4.49% in September

Clydesdale and Yorkshire banks, which will raise their SVR from 4.59% to 4.95% on 1 May

The Co-op said the move was the result of the higher costs it faced to fund mortgages, as well as "changing conditions in the mortgage market".

"When changes are made that impact our customers, we do seek to ensure that wherever possible, we provide solutions for them," a Co-op spokesman said.

An SVR is arbitrarily set by each individual lender, taking into account the Bank of England base rate, the cost of funding mortgages and the balance between savers and borrowers.

Over the last few years, there has been a "clear trend", according to the Council of Mortgage Lenders (CML), for homeowners to revert to the SVR.

This means that when the term of their fixed-rate deal - which offers a certain monthly bill - comes to an end, they switch to the often cheaper SVR rather than remortgage on to another fixed-rate deal.

[tinbin]

MORTGAGE RISE TO HIT MILLIONS

Mortgages are set to soar as banks push up rates

MILLIONS of homeowners are facing “shocking” mortgage rises as banks ramp up their lending rates.

Hard-pressed families will be punished in the coming weeks despite base interest rates being at a record low for three years.

Yesterday the Co-operative Bank, which prides itself on its ethical lending policies, pushed up its standard variable rate by 0.5 per cent to 4.74 per cent.

That forces a typical payment up £15 a month, or £180 a year. But as other banks rush to join in, worst hit borrowers could see bills soar by up to £840 a year.

The higher payments, which start on May 1, means the Co-op joins Clydesdale and Yorkshire banks, RBS-Natwest, Halifax and Bank of Ireland in increasing its terms.

Experts say homeowners are facing a “mortgage time-bomb”. Yet savers, who out- number borrowers seven to one, are seeing no growth in their rates for investing.

William Hunter, of Hunter Wealth Management, said: “Lenders are upping their rates for borrowers but are far less active when it comes to upping their rates for savers. Savers, as ever, are on a hiding to nothing.”

Consumer champion Marc Gander said: “It’s shocking...a nice thank you gesture from the banks to all those taxpayers who bailed them out.” Estate agency founder Peter Hughes called the latest rate hike “another hammer blow for homeowners” that would only serve to hold back the property market.

He added: “Once again, it feels like lenders are looking after their own backs. Worst of all, other lenders are likely to follow. There is comfort for them in numbers.”

The average Co-operative Bank borrower has a balance of £48,000 to pay over 11.5 years. Their monthly bill will go up from £440 to £455.

But some borrowers will have to find an extra £840 a year if, based on calculations for a typical interest only loan and property, their bill shoots up from £605 to £675.

Michael Ossei, personal finance expert at website uSwitch.com, said: “This news is another blow to homeowners who could see their monthly costs shoot up at a time when their finances are already stretched to the max. Many of those on tracker mortgages have been enjoying drastically lower mortgage payments over the last few years as a result of the low base rate.

“However, this will bring them back down to earth with a bang. And because these increases are nothing to do with the base rate, which still shows no signs of budging, the blow won’t even be softened by a corresponding increase to savings rates.”

Millions of homeowners with a standard variable rate mortgage are already paying 4.16 per cent – the highest rate since March 2009.

Chris Taylor, chief executive of insurer MarketGuard, said: “SVR mortgages are a time-bomb waiting to happen.”

Marc Gander, founder of the Consumer Action Group, said: “Banks have never had it so good.

“They are doing fabulously well. It amazes me that they can’t share some of the burden the rest of us are under.

“If they are saying they have to pass on rising costs, why can’t they pass some of the good times on as well as the bad? These rises come at a time when people need them least of all.”

Clydesdale and Yorkshire banks are increasing their SVRs from 4.59 per cent to 4.95 per cent. RBS- NatWest is ramping up rates on its Offset and One accounts by 0.25 per cent, taking them to four per cent.

Halifax raises its SVR from 3.5 to 3.99 per cent. The Bank of Ireland is increasing its SVR from 2.99 to 4.49 per cent in two stages.

The Co-op Bank said it was facing higher costs to fund mortgages, as well as “changing conditions in the mortgage market”.

http://www.express.co.uk/posts/view/312241

Edited April 3, 2012 by tinbin

[tinbin]

This is an article based from March last year but it is really worth a read. It is not specifically about SVR rates nor Northern Ireland but is very relevant and in keeping with the 'timebomb' theme I thought it would be a useful read in this topic.

One year further down the line there has been nothing but more evidence to support that the Housing Market really is a time bomb waiting to go off.

The time-bomb ticking under Britain's house prices

Around 90% of all mortgages held in the UK come with a variable rather than a fixed rate of interest. That's up from 60% in 2007. You can understand why this might be. The best five-year fixed-rate mortgages on the market cost 4.5%. But the best variable rate mortgages come in at as little as 2%. On a 20-year repayment mortgage of £150,000, that makes a difference of £200 a month. So, it makes sense that most people choose the cheaper looking option. You might hope, however, that those who choose such risk over certainty do so knowingly, having run through the risks they will face if the UK base rate rises from its 340-year low of 0.5% to something that is more of a reflection of our inflation rate.

But you would hope in vain if a survey from Shelter is to be believed: it says one in four mortgage holders has no idea what the UK base rate is.

Either way, the idea that 90% of mortgage holders will be hit by rate rises matters.

Why? Because while there is some evidence that there might be some kind of UK recovery under way (JP Morgan is claiming to see a mini boom in UK manufacturing), the housing market remains a miserable husk of its former self ... every leading indicator suggests that the falls have only just begun.

First, look at affordability ratios. These are disregarded by bulls as being irrelevant in the days of dual-earning households and ultra-low rates. (Sound familiar to anyone on this forum??) ... However, it is dangerous to dismiss historical norms as irrelevant. The long-term average house price to salary ratio is something in the region of three and a half to four times. Today, depending on whom you listen to, it is around five and a half to six times.

That's the kind of disparity that can only be resolved by one of two things:

rising real incomes ...or falling real house prices.

Resolution isn't coming from the former – the retail price index is running at 5.1%, but wage settlements were a mere 2.8% in the three months to January. That leaves the latter.

Anyone in any real doubt that this will happen (and there are still bulls out there) need only look at all the numbers that house prices tend to track.

Next up is consumer confidence – something house prices have always followed very carefully. This is looking pretty ropey both statistically (the GfK Consumer Confidence is at its lowest since March 2009) and anecdotally.

In the name of research, I spent much of the last week standing on cold street corners asking passers-by about their debt: every single person I spoke to was either out of debt and never touching it again or desperately trying to get rid of what they had. On Monday, it took me the entire morning just to find someone who actually still used their overdraft facility. No confidence there.

Finally, note the disappearance of first-time buyers. There are 90% fewer of them than there were at the height of the bubble and their average age is now 37.

All this suggests that something will soon push the market over the edge.

That something could be the first interest rate rise. According to Legal & General Investment Management, a rise in the base rate and hence in variable mortgage rates will mean that huge numbers of consumers will see "a meaningful impact to their cash flow".

Shelter goes further. The Bank of England hasn't raised rates for 25 months, but when it does, says the charity, it could push those assuming that low rates are forever into a "spiral of debt and repossession".

That really wouldn't help the bull case for house prices much.

It is also why Mervyn King is doing all he can to resist a rate rise.

http://www.moneyweek.com/investments/property/uk/time-bomb-ticking-under-britains-house-prices-11011

[2buyornot2buy]

I honest fee that the sooner rates are raised, zombie households get taken out, the unviable BTLs are repossessed and we can move on the better it will be for all concerned.

[Shotoflight]

Uk

Mortgage demand tumbles as lenders' funding costs rise

Mortgage approvals fall to their lowest level since December 2010 as lenders tighten criteria again.

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/9202915/Mortgage-demand-tumbles-as-lenders-funding-costs-rise.html

Mortgage approvals for home purchases fell sharply to 43,450 in March, their lowest level since December 2010, according to the latest Mortgage Monitor from e. surv chartered surveyors,

It blamed the fall on increasing funding costs which has forced banks to reduce lending to borrowers with small deposits.

First time buyers were the hardest hit as banks reduced the availability of high loan-to-value mortgages in response to increasing funding costs and tightening credit conditions.

Tighter criteria on high-loan-value mortgages meant lending to borrowers with a deposit of 15pc or under accounted for only 10pc all loans in March – well down on the three month average of 13pc – and falling from 12pc in February.

Richard Sexton, director of e. surv, said, “Up until now high-street mortgage lenders have been able to absorb steadily increasing costs, rather than passing them onto the consumer.

"The tactic boosted activity during last autumn and early part of this year, albeit artificially, and veiled a multitude of underlying weaknesses in the market. Now that the banks can no longer afford to take on extra costs, those weaknesses are beginning to come to bear once again.”

Edited April 13, 2012 by Shotoflight

[Shotoflight]

More of the same. Hurry or you'll miss the boat, mortgage hunters.

Mortgage rates edge upwards

Fixed and variable rates have been increased by several lenders, so mortgage-hunters should look to grab a deal

http://www.guardian.co.uk/money/2012/apr/13/mortgage-rates-edge-upwards

Anyone looking for a mortgage, or whose deal will end in the next few months, should act sooner rather than later to secure one of the current rates in case they rise further," says Clare Francis at Moneysupermarket.com.

[tinbin]

THE GREAT MORTGAGE PANIC

HOMEOWNERS are rushing for fixed-rate mortgages as concern grows that lenders are forcing up interest rates.

The number of borrowers choosing the static deals increased to 78.7 per cent in March from 73.3 per cent in February – the biggest hike in the last 12 months and the second high- est since the summer of 2009.

Lenders have faced accusations of profiteering by raising their standard variable rates (SVRs) while the Bank of England has kept the base rate at the record low of just 0.5 per cent for over three years.

Millions of customers with the Halifax, the RBS-NatWest group, the Bank of Ireland and Bristol & West plus many others are now facing more expensive monthly payments.

When the Halifax, Britain’s biggest mortgage lender, increased its SVR from 3.5 per cent to 3.99 per cent, the average payment went up by £735 a year.

This suggests many are expecting further rate rises and are eager to lock into attractive deals

The race to obtain fixed deals shows how worried borrowers are that more rate rises are on the way.

Brian Murphy, head of lending at Mortgage Advice Bureau, which produced the latest figures, said: “Consumers are increasingly switching to fixed-rate mortgages, and they now account for more than three out of every four transactions. This suggests many are expecting further rate rises and are eager to lock into attractive deals as soon as possible.”

http://www.express.co.uk/posts/view/314758/The-great-mortgage-panic

Rates rise to deter borrowers without large deposits

Mortgage rates continued their slow but steady rise this week as banks and building societies, struggling to process existing applications, took action to deter new borrowers. On Thursday, Nationwide increased its fixed and tracker rates at 85 per cent loan to value (LTV) by 0.2 percentage points. A fee-free two-year fixed-rate mortgage now charges 5.09 per cent. The rate on a three-year tracker has gone up to 4.29 per cent above the Bank of England base rate, or 4.79 per cent. Loans at 75 per cent and 80 per cent LTV have increased by 0.1% percentage points. Northern Rock and Santander have also upped rates on popular deals.

Source: The Times page 63 - 14.4.12. Also reported in Financial Times page M4.

[Shotoflight]

Mortgage rates rise for new deals

http://www.bbc.co.uk/news/business-17782451

At least 10 lenders, including some of the UK's biggest, have announced rate rises in the past week for people taking out new deals.

Also, Bank of England figures show that the average two-year fixed rate deal, with a 25% deposit, has risen from 2.9% last September to 3.45% in March.

The moves are further evidence that obtaining a mortgage is likely to become more expensive and difficult.

The figure for the average two-year fixed rate deal in September was the lowest on record after rates for such deals had fallen from a recent peak of 6.35% in the middle of 2008.

"Lenders seem to have increased their rates in two stages this week, some at the beginning and the others catching up later in the week," said Aaron Strutt of mortgage brokers Trinity Financial.

They argue that the increase is due to the rise in the cost of raising mortgage funds on the wholesale financial markets.

Fewer deals

In March, the Bank of England reported that banks and other lenders were preparing to restrict their mortgage lending even more in the coming months. That was despite the lenders expecting to see a rise in demand from potential borrowers.

Among those making changes to parts of their mortgage ranges this week have been Abbey, HSBC, Halifax, Lloyds TSB, Santander, Britannia, and Cheltenham & Gloucester.

Their new deals, for fixed, tracker or discounted home loans, have typically been repriced with interest rates now between 0.1% and 0.4% higher than before. "When you take into consideration that some lenders have raised their rates at least twice in the past month, they all add up," said Aaron Strutt.

In some cases, deals have simply been withdrawn, leaving existing but more expensive ones on offer.

Market 'dampened'

At the start of April, the financial information service Moneyfacts noted that the past two months had seen a sudden drop in the total number of mortgage deals available to borrowers.

Even before that, lenders had started to rein in their riskier interest-only mortgage lending, with many lenders now demanding at least a 50% deposit from borrowers interested in this type of loan.

The National Association of Estate Agents (NAEA) said that development, along with the end of the stamp duty concession for first-time buyers last month, might lead to sales falling back again, after they had picked up in the run-up to the expiry of the concession.

"The recent move by some major lenders to severely limit the availability of interest-only mortgages is no doubt dampening the levels of supply in the market," said Wendy Evans-Scott of the NAEA.

In the past six weeks, several lenders have also announced increases to the cost of their standard variable rate mortgages for existing borrowers.

Edited April 20, 2012 by Shotoflight

[Shotoflight]

Mortgage rate misery for one million borrowers

More than a million home owners will see the cost of their mortgage payments increase from Tuesday.

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/9236468/Mortgage-rate-misery-for-one-million-borrowers.html

The majority of those affected are Halifax customers, who could typically find themselves paying nearly £200 extra a year, following a series of recent rate rise announcements from lenders.

The Co-operative Bank, Clydesdale Bank and Yorkshire Bank are also among those raising rates from Tuesday, blaming the weak economy and the increased cost of funding a mortgage.

Fears have been raised that people could struggle to switch to a better deal as lenders have already started tightening their borrowing criteria, triggering a fall in the proportion of mortgages being approved.

Halifax is raising its standard variable rate (SVR) from 3.5pc to 3.99pc, affecting 850,000 home owners. Borrowers revert to paying an SVR when their fixed rate deal ends.

The average balance of those affected is £67,500, meaning payments would increase by nearly £16.40 a month to £498.95 on a capital repayment mortgage with 15 years remaining. This equates to nearly £200 extra a year.

Someone with a higher balance of £100,000 would pay £24.30 extra a month, with monthly repayments going up to £739.19, the equivalent of nearly £300 more annually.

Greater restrictions are set to be placed on mortgage loans due to a clampdown by the Financial Services Authority (FSA) on irresponsible lending, to make sure borrowers can only take out deals they can afford.

The FSA's Mortgage Market Review (MMR) proposals will place new rules around mortgage advice and income will have to be verified in every application, with lenders placing greater emphasis on other regular outgoings.

The FSA does not plan to implement most of the proposals before the summer of 2013.

[tinbin]

Mortgage rate misery for one million borrowers

More than a million home owners will see the cost of their mortgage payments increase from Tuesday.

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/9236468/Mortgage-rate-misery-for-one-million-borrowers.html

The majority of those affected are Halifax customers, who could typically find themselves paying nearly £200 extra a year, following a series of recent rate rise announcements from lenders.

The Co-operative Bank, Clydesdale Bank and Yorkshire Bank are also among those raising rates from Tuesday, blaming the weak economy and the increased cost of funding a mortgage.

Fears have been raised that people could struggle to switch to a better deal as lenders have already started tightening their borrowing criteria, triggering a fall in the proportion of mortgages being approved.

Halifax is raising its standard variable rate (SVR) from 3.5pc to 3.99pc, affecting 850,000 home owners. Borrowers revert to paying an SVR when their fixed rate deal ends.

The average balance of those affected is £67,500, meaning payments would increase by nearly £16.40 a month to £498.95 on a capital repayment mortgage with 15 years remaining. This equates to nearly £200 extra a year.

Someone with a higher balance of £100,000 would pay £24.30 extra a month, with monthly repayments going up to £739.19, the equivalent of nearly £300 more annually.

Greater restrictions are set to be placed on mortgage loans due to a clampdown by the Financial Services Authority (FSA) on irresponsible lending, to make sure borrowers can only take out deals they can afford.

The FSA's Mortgage Market Review (MMR) proposals will place new rules around mortgage advice and income will have to be verified in every application, with lenders placing greater emphasis on other regular outgoings.

The FSA does not plan to implement most of the proposals before the summer of 2013.

Anyone who dismissed the conquences of Interest rates rising in the past need only to look at the extent of the media coverage of these 'relatively minor' interest rate rises and the negativity from the Joe Public about it.

I will repeat what someone said a while back on this forum ... the housing market really is a stack of cards waiting to come tumbling down. If 4% interest rates mean its game over for many folk then its pretty obvious what is going happen when rates return to normal 'pre-credit crunch' levels.

[tinbin]

Greater restrictions are set to be placed on mortgage loans due to a clampdown by the Financial Services Authority (FSA) on irresponsible lending, to make sure borrowers can only take out deals they can afford.

The FSA's Mortgage Market Review (MMR) proposals will place new rules around mortgage advice and income will have to be verified in every application, with lenders placing greater emphasis on other regular outgoings.

The FSA does not plan to implement most of the proposals before the summer of 2013.

Section taken from Shotoflights post above ... worth highlighting again as this is important information that might get missed by anyone scanning through the post.

Some think deposits are the main obstacle to obtaining a MTG. I agree that it is an issue but this is more relevant IMO

... its all about affordability. No proof ... no MTG, and its only going to get worse!

Edited May 1, 2012 by tinbin