Friday, March 7, 2008

BoE: Out of touch and losing control…

Mortgage bills rising at the 'fastest pace in living memory' despite Bank of England holding rates

''Mortgage costs are rising at the fastest pace in living memory, a financial expert said yesterday. Ray Boulger warned it was becoming much more expensive to take out a loan, on the day the Bank of England decided to hold interest rates at their current level. Abbey, the second-biggest mortgage lender, yesterday announced its second rate rise in eight days. Halifax, the industry leader, and Chelsea Building Society have also hiked the rates on some of their mortgages.''

Posted by hpwatcher @ 08:57 AM (1469 views)
Please complete the required fields.



13 thoughts on “BoE: Out of touch and losing control…

  • BoE can now do what they like, no-one is listening.

    Putting up interest rates would have least kept some integrity intact….

    Reply
    Please complete the required fields.



  • it_is_going_with_a_bang says:

    Just maybe a typical new loan should NOT be for £155,000.
    Yes there is a problem, but they are looking at the wrong part of the equation.
    Typical new loan of under £100,000 would be more like it.

    Reply
    Please complete the required fields.



  • Anything (to a point) the BoE do will have no impact on what lenders do. When the BoE cut rates a few months back some lenders actually increased their rates the following day.
    Boulger’s comments make pretty grim reading for anybody making a living from the property market

    Reply
    Please complete the required fields.



  • “Mortgage costs are rising at the fastest pace in living memory, a financial expert said yesterday. ”
    “The rate on Halifax’s two-year fixed mortgage has gone up from 5.67 per cent to 5.77 per cent. ”

    Two quotes from the article. Just how is a .1% increase ‘the fastest pace in living memory? Perhaps the financial expert is a child and has only been alive for a few years.

    I seem to remember rates going up from 10 to 12 to 15% in one day not that long ago.

    Reply
    Please complete the required fields.



  • I seem to remember rates going up from 10 to 12 to 15% in one day not that long ago.

    You are getting me all excited now! A 10% IR would be absolutely stunning…but when my mother bought they were 14% and stayed that way for many years.

    My, how times have changed.

    Reply
    Please complete the required fields.



  • Squeeze: Homebuyers are feeling the pinch even though the average house price fell 3 per cent in February

    ………even though the average house price fell 3%, they need to multiply that by 10 if they are to get close to answering the affordability question. I do hope the tide is turning and that the media will not be able to stir up the sheeple into a fear driven buying spree

    Reply
    Please complete the required fields.



  • Dave The Box says:

    @hpwatcher, @cornishman

    Spot on guys. I had a fixed rate of 12.75% and that was good (SVR was at 15%).

    People have forgoten that long term average rates are around 7-8%.

    Reply
    Please complete the required fields.



  • There are several reasons why the BOE rate has become divorced from mainstream mortgage lender rates:-

    (1) In the first 6 months of 2007 Northern Rock gained 40% of the increase in gross UK mortgage lending and 20 percent of the net ! – from Sept 2007 it all went pear shaped

    (2) In view of what has happened at NR the FSA is trying to ensure we dont get a repeat performance elsewhere – lenders have been ordered to strengthen balance sheets and improve their own liquidity – hence if BOE cut rates, one way to improve margins is for lenders to increase their rates (eg Standard Life Bank up 0.15% despite 0.25% BOE cut in Feb)

    (3) With the aggressive Northern Rock effectively out of the market – the remaining mainstream lenders dont need to compete as much and hence can maintain or even increase rates.

    (4) Loan to value ratios are being reduced down – all of which must put downward pressure on house prices – they simply cannot defy gravity forever.

    Reply
    Please complete the required fields.



  • If mortgage rates, household bills and council tax are going up sharply, so should interest rates …

    Reply
    Please complete the required fields.



  • sacred contracts says:

    If house prices are dropping and many are avoiding taking out new mortgages right now the easiest way for the lenders to get more money is by increasing the rates of their variable mortgages safe in the knowledge that its now very expensive and difficult to change mortgages…

    Reply
    Please complete the required fields.



  • mark wadsworth says:

    Jack C, good summary!

    Anyway, it has always been the case that central banks have little influence on longer term interest rates. They could do well to re-read the story of King Canute, and read it properly. King Canute was trying to make the point that he was not all powerful and could not hold back the tides. It is quite amazing how little power governments and central banks have to actually influence things, they keep meddling and meddling and preening and posturing and making things worse in aggregate. Sensible banking supervision, yes, we need it (but clearly don’t have it). Central banks = a waste of time.

    Reply
    Please complete the required fields.



  • happyrenterz says:

    No one wants mortgage debt anymore. This on FT Alphaville.

    Citi ramps up mortgage sales, aims to free $45bn

    Citi plans to shrink its mortgage portfolio by $45bn – a capital raising (or rather, untying) measure in all but name.

    Is this part of a trend? It certainly bears a striking similarity to the elusive rumour about UBS selling of a huge portfolio of Alt-A mortgages earlier this week. Forget Sovereign Wealth Funds – are asset sales the recapitalisation way forward?

    For Citi, at least, the sting of the $45bn proposal is lessened by the fact that this isn’t really a “sale” at all – just a portfolio runoff. New mortgage origination and buying will be choked and the mortgage book will shrink as the £230bn existing stock is packaged into MBS – or sold to mortgage financiers. Death – or perhaps life – by securitization.

    CitiMortgage intends to increase the level of loans sold to Agencies (e.g., Fannie Mae, Freddie Mac) or securitized to approximately 90% of production by Q3, up from 65% in 2007, and focus on originating and selling the majority of its production for higher returns, further reducing capital and credit exposure and forcing discipline in sales origination.

    Reply
    Please complete the required fields.



  • Things are really gathering pace after a bit of a boring month. What I love about articles like this one is the way they make passing reference to falling house prices – it’s increasingly an absolutely accepted fact that they’re falling now. Instead of arguing about whether they really are falling, people are discussing the effects of the fact that they are.

    Reply
    Please complete the required fields.



Add a comment

  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user´s views and not the views of HousePriceCrash.co.uk.
  • Please adhere to the Guidelines

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>