According to the British Bankers Association (BBA) Mortgage lending in the UK by the major banks has fallen sharply, with mortgage approvals falling 60 percent lower than the same time a year ago for house purchases.

In November mortgage approvals for house purchases tumbled to an all time low of 17,773, this being a drop of 14 percent.

It’s no surprise that people are still concerned about the slowing economy and the effects on their personal finances. This uncertainty leads to consumers borrowing less.

November also saw a massive drop in people remortgaging and staying in their own home, showing that people are unsuccessful when trying to switch to a better deal. This fell to 29,798 people remortgaging and staying in their existing home compared to the previous month of 52,452, taking the figure to the lowest level for eight years.

Source: BBC

As the government hypes the fact that the Fannie Mae and Freddie Mac bailout has pushed the regular mortgage below 6 percent, why are they still advertising adjustable mortgage rate mortgages, Seeking Alpha don’t believe that ARM’s give any benefit to either the borrower or lender.

It’s always been the case that lenders believed that ARMs provide interest rate protection if their costs increase but this is simply not true according to Seekingapha website. If a borrower is underwritten at the fully indexed rate, their financial behavior will still be anchored to the introductory payment. Unless borrowers are limited from further impediment of their homes (mortgage collateral) during the life of the mortgage, the initial underwriting is pointless. Borrowers will not be ready for higher future payments.

And on the other hand, buyers falsely believed that it was better to pay a lower rate now than buy protection for the future. The new Fed regulations require that borrowers of high cost loans be underwritten at the full indexed rate, but if the rate increases it doesn’t necessarily mean the borrower will be able to handle it.

Different circumstances can change affordability, an income change or extra financial commitments could put pressure on you to find funds to pay your monthly mortgage payment, but higher rates and job loss goether could produce catastrophic affects.

We believe that Freddie Mac and Fannie Mac should not keep accepting ARM’s from banks, due to the present economic circumstances the difference between a variable and fixed rate home loan is less than one point, so it would seem crazy to opt for an ARM mortgage.

Let us know your views on adjustable rate mortgage loans and share with our readers.

Source: Seekingalpha

If you are looking to purchase a property in the UK you will need on average £40,000 deposit to be eligible for a best-buy mortgage deal. An average house in England and Wales is currently valued at £180,781 to purchase this property you would need an average of £37,119 according to mortgage company mform.co.uk to secure the competitive mortgage rate.

Last year if you were looking to purchase a home in England or Wales you would have needed an average of £20,980 for your deposit, so that is a massive 43 percent rise this year.

This is due to the lenders scaling back the loan-to-value ratios and becoming increasingly risk averse, although the house prices are falling it does not help the homebuyer as all other costs have risen.

If you want to look at the figures as a percentage of the property purchase price, you are looking at an average of 20.75 percent of the property’s value to secure the best buy mortgage rate, this is nearly double want you needed last year which averaged at 11.75 percent according to mform.co.uk.

If you looking to purchase a property in London, then you would be in for quite a shock, with the average home priced at £345,000 you would need a deposit of £71,616 according to mform.co.uk

Source: birminghampost

Home Trust the Toronto-based alternative lender has decided to launch a range of traditional mortgage products that will be competition for the major banks.

Most lenders have been unable to lend to riskier borrowers due to the U.S. Subprime crisis, but this is not the case for Home Trust, which use a deposit-based funding model, and will increase the growth of its core alternative-loan business, and help build relationships with mortgage brokers.

Gerald Soloway, chief executive officer of Home Trust’s parent, holding company Home Capital Group Inc said that they are offering a one-stop shop, this will speed up the process for the brokers and their clients.

The aim is to give brokers the chance to put their clients who are on the edge of qualifying for a traditional mortgage the option of pursuing that route first.

This way if their credit score lets them down to qualify for the traditional mortgage than we can just turn to the more expensive product offered by Home Trust.

Most of the competitors rely on bundling and selling uninsured loans to fund new mortgages, Home Trust is a deposit-taking organisation, and their eligible deposits and products are insured by Canada Deposit Insurance Corp.

Unlike some of its competitors that relied on bundling and selling uninsured loans to fund new mortgages, Home Trust is a deposit-taking organization, whose eligible deposits and financial products are insured by Canada Deposit Insurance Corp. The alternative loan business continues to go from strength to strength, with souring profits up by 20 percent in the second quarter from the previous year.

Source: Theglobeandmail

Read more about mortgages here.

A report by Northern Rock, once the 5th biggest mortgage lender, shows losses of £585.4m for the first 6 months of the year.

The main bulk of the loss was down to the charges it takes to cover losses from struggling mortgage borrowers.

Northern Rock still owes the bank of England £17.5bn and has paid £9.4bn.

The number of residential mortgage customers in arrears has risen to 1.18%, in June 2007 the figure was 0.38% of mortgages.

The government, which nationalised the lender in February after the first run on a UK bank in more than a century, will inject £3bn to help the bank out, the £3bn cash injection will come by pausing repayment of the large taxpayer loan to the bank, so the £3bn will be turned into equity.

When the wholesale markets dried up Northern Rock was hit hard, the bank was taken into public ownership as they were unable to find and investor from the private sector.

Source:

Read more about UK mnortgage companies here.

CBO, a nonpartisan agency in Washington has said that there is probable a “`better than 50 percent chance taxpayer funds won’t be needed to save the two largest mortgage- finance providers, though, that scenario is far from the only possible result.”

There are many analysts who think that there is likelihood that the conditions in the housing and financial markets could get even worse than it is now, this is already being reflected in both the mortgage lenders finances.

The Treasury and the White House budget office has refused to estimate how much this bailout will cost however; Senators Jon Tester of Montana and Richard Shelby of Alabama think that it could end up costing $1 trillion.

Treasury Secretary Henry Paulson has said that he anticipated legislation will be passed this week to authorize his July 13 request for authority to extend credit to the mortgage-finance companies or take an equity stake.

Paulson has also said that Fannie Mae and Freddie Mac own or guarantee almost half the $12 trillion in U.S. home loans outstanding, and thereby pose little cost to taxpayers.

Source

The startling facts are that more than 250,000 properties or one in every 501 households are now in some stage of foreclosure, this is according to a statement issued by RealtyTrac Inc., an Irvine, California-based seller of default data.

In that report, RealtyTrac Inc. state that the highest rates for foreclosures are in Arizona, California and Nevada. Moody’s Economy’s chief economist, Mark Zandi, has said “The foreclosure problem is getting worse and will stay with us well into the next decade.”

Since the spring in 2006, about $3.5 trillion in homeowner equity has been wiped of housing prices from when they were at their peak.

Around 53 percent of borrowers, who have subprime loans for those who have poor or incomplete credit histories, will almost certainly be in negative equity by the end of the year, this number will rise to around 63 percent by 2009.

Read the full article from Bloomberg

Absa Group Ltd has said that growth was at 4.7 percent in May compared to the 3.8 percent in June, they have now said that the average price for a house was 965,500 rand, that’s £63 338.

Since June 2006, The South African Reserve Bank has increased interest rate 10 times, this was to try and quell inflation, and the rate was recently increased by half a point to 12 percent making it the highest is has been in five years.

The central bank has seen a surge in its targeted inflation rate, which is now at 10.9 percent, now there is increased pressure to increase lending rates by 50 basis points next month.

The second largest South African mortgage lender, Standard Bank Group Ltd has said that house prices have fallen 11.3 percent in June; these figures were based on the median price of mortgage applications that they had received.

Source

Hamish McRae, from the Independent has said that many people have been working under the assumption that as the economy is slowly falling, this means that there would be a cut in inflation as a result it would be the perfect opportunity for the Bank of England to reduce interest rates. The Bank of England’s job is to control the stability of the economy and try to keep inflation around 2 percent.

We are in for some hard times, many are saying that the housing market will fall much like they did in the 1990’s, but you have to remember that we are still in better shape than we was back then. For those of you who think that this is only a blip that will last just a few months, it looks as if house prices will depress consumption for years not months.

Bank of England Governor, Mervyn King has said “After a decade or more of economic stability we are now facing a period of rising inflation and falling economic growth.”

For more information on this visit: The Independent dark reprieve download

Some mortgages allow for you to pay a different amount in one month to what you had paid before then if you have a good month you are able to pay more. All the lender cares about is, as long as it all evens out and the end. Having a flexible mortgage does seem like the way to go in this current climate; it is a lot like a normal mortgage you can have it as a repayment or as an interest only, you can even take the loan out as a discounted or tracker rate and a fixed. The main difference with the flexible mortgage is it allows you to have more control over your payments. The great thing about this is the fact that when you first took out your mortgage you might have been on a low income, then you might have got a great pay increase so you can then pay more each month, this will then reduce the interest you pay as you will be paying your debt of quicker.

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