The Financial Blog

Phill Cliff, Director of Mortgages and Abbey said: “Today, Abbey is reducing the rate on all it’s 2 and 3 year fixed rate mortgages by up to 0.15 per cent. This is the second cut to rates in two weeks and shows our commitment to offering competitive deals to customers.”

The recent rate cut from Abbey comes as 86 per cent of people in Britain admit to cutting back financially in more ways than one. With inflation at an 11 year high people are looking to combat the affects on daily family finances in a number of ways;

• 84 per cent of people are going to cut back on non-essential items to try and save money and cover any increases in mortgage and/or energy bills
• 44 per cent are planning to raise additional cash outside their ‘normal’ day jobs, 12 per cent are planning on taking a second job
• 30 per cent are planning to sell possessions
• 1.3 million people are planning on selling their car because of rising fuel costs

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Since my post yesterday Woolwich cuts mortgage rates this has popped up..

Norwich and Peterborough have pipped Woolwich to the post with a market leading (at the time of this post!) interest rate on it’s 3 year tracker mortgage. The base rate tracker is just 0.70 per cent above base rate which means you’d currently be paying 5.70 per cent for 3 years, then the rate reverts to the N&P’s standard variable rate which is currently 7.05 per cent - of course you just switch mortgage lenders at this point!

Hurry though! John Willcock, N&P’s head of product marketing, said:  “With a market-leading rate, a free valuation and cash back or free legal fees on offer, we’re confident that this is a very attractive option for anyone currently looking to buy or remortgage.  Anyone interested should contact their local branch, or call our Contact Centre on                0845 300 2522         as soon as possible.  Unfortunately with the current market changing constantly, as with other lenders, we can’t guarantee how long the product will be available.”

• Maximum 85% loan to value
• £599 reservation fee
• Free valuation
• Free legal fees or £200 cash back for re-mortgage customers, £200 cash back for purchase customers
• Redemption charges of 3% in 3 years
• 10% penalty-free capital repayment per annum facility available (subject to £10,000 cap)

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Chief economist at Lloyds TSB Corporate Markets, Trevor Williams, said:

“The Bank of England is facing the unenviable task of having to fix two different problems with just one policy tool.  The UK economy is slowing; both manufacturing and services activity are showing signs of feeling the pressure and consumer confidence is fragile.  At the same time, price inflation - which is already high - is likely to rise further before it peaks.”

“By holding rates, the Bank of England has made the best it can of a very difficult decision.  The UK hasn’t yet reached recession, but the worry is that raising rates could trigger this.  Equally, not raising rates could risk even higher inflation later on.  The best option is to wait until the inflation picture becomes clearer. Importantly, this means ensuring that inflation is past its peak - or risk further elevating inflation expectations - before considering in which direction rates should move next.”

From 10/07/08 Woolwich is cutting interest rates on it’s Lifetime Tracker Mortgage. The hope is that this kind of mortgage will attract new customers who are looking and waiting for short term fixed rate mortgages to become less expensive. This mortgage is also fee free.

Woolwich are also offering it’s fixed rate mortgages again, these allow customers wanting up to 90 per cent of the property value, so if you have 10 per cent deposit or more this could be the mortgage for you!

Woolwich say The best rate available on a Woolwich Lifetime Tracker is now 0.89 per cent above base rate with no fees or early repayment charges. This makes it 1.18 percentage points better than the average two year fixed rate in the market which is currently 7.07 per cent according to Moneyfacts.

Head of Mortgages for Woolwich, Andy Gray, said: “The two year fixed rate market is hugely volatile at the moment. We have decided that our customers will be better served by other products such as the Lifetime Tracker which offers a much lower rate and full flexibility to change to another rate at a later time.”

“It is clear from Council of Mortgage Lenders figures this week that many borrowers are sitting tight and refusing to re-mortgage at the moment as they wait for better rates to come along. However, if customers are sitting on high standard variable rates having come to the end of a promotional period, they would be better switching to a Lifetime Tracker which has all the flexibility of SVR but a much better rate.”

Woolwich will be re-introducing a three year fixed rate at a competitive 6.49 per cent, well below the average two year fixed rate to offer certainty for those who would still rather fix.

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According to the Council of Mortgage Lenders (CML) lending for house purchasing increased from April to May 2008 by 4 per cent in volume to 52,700 and by 2 per cent in value to £7.9 billion. Compared to last year these figures are both 44 per cent lower.

Remortgaging numbers were down heavily compared to last year; just 71,000 remortgages which is a drop of 14 per cent for April and 23 per cent from May 2007.

The first signs of a slight recovery for first time buyers appeared with a rise of 4 per cent from April but this is still 41 per cent lower than May last year.

There is up to date mortgage approval data from the Bank of England that suggests the numbers of new mortgage loans will fall further still over the coming months.

Michael Coogan, CML director general, said: “The growing popularity of fixed-rate mortgages, despite the relatively high rates, suggests that many borrowers are prioritising certainty in their monthly payments.”

“Lending levels continue to be lower than last year and any recovery is still some way away, with little sign of the special liquidity scheme increasing the flow of funds to the industry or lowering the cost of funds as hoped. We look forward to an early, positive report from the Crosby review on how the market should address these issues with the support of the tripartite authorities ”

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According to new research from Abbey Mortgages 61 per cent of Estate Agents expect house prices to stop falling within the next year. 28 per cent of estate agents think it will be more like 1 or 2 years before we see a halt in the tubling of house prices.

This is very different compared to the thoughts of most homeowners, who think that house prices will stop falling in the next 7 months and that there is no way house price falls will last longer than a year.

Director of Abbey Mortgages, Phil Cliff, comments:

“Estate agents and homeowners believe that, despite current movements in house prices, we are unlikely to experience a really prolonged period of house price falls. Most think the period of decline will be over within a year and a very small minority think it will last longer than 2-3 years. While this is ‘light at the end of the tunnel’, it implies that estate agents and homeowners are bracing themselves for further falls in the very near future.”

>>Click here to compare mortgages, find the best rate today

According to Moneysupermarket figures released yesterday there are £30 billion worth of cheap fixed rate mortgages ending in July and Over half of all homeowners whose mortgages end soon haven’t started looking for a new deal - not a good move.
 
July is set to be a painful month for homeowners with cheap fixed rate mortgages, with £30 billion worth of deals due to finish this month. A Moneysupermarket.com poll of site users reveals 51 per cent of homeowners whose mortmortgages deals end soon haven’t started looking for a new one.

The poll revealed one in six have found a new deal but that monthly payments will be so much higher they fear they will struggle with repayments. A further 18 per cent have struggled to find a new deal they can afford or will be eligible for.

Louise Cuming, head of mortgages at price comparison site moneysupermarket.com, said: “Many homeowners will be plunged into a borrowing underclass in July when their fixed rate deal comes to an end. Banks are cherry picking customers, leaving many people unable to find affordable deals to service mortgages taken out in better times, when they were plentiful and easy to get hold of.

“However, burying your head in the sand isn’t going to help. Anyone whose fixed rate deal is coming to an end should start planning at least three months before the product is due to finish.

“You should approach your existing lender to find out what ‘retention’ product they will offer you. This will give you a useful benchmark to compare against other offers.

“compare mortgage rates across the market to get a rough idea if there are products available to beat those on offer from your existing lender. If you need some extra guidance, a mortgage broker should be able to recommend products to suit your circumstances.

“If you are confident you know which product is right for you, and that you are likely to be accepted, make the application directly to the lender. However, it is always worth double-checking the sums are correct and that all the costs have been factored in.

“Once you have made your choice, move quickly. Competitive deals are being pulled with very little notice and many people have been missing the boat by waiting to see if better deals pop up. In today’s mortgage climate, a bird in the hand is worth two in the bush.”

>>Click here to compare mortgage deals now!

From today Alliance and Leicester will offer a new 2 year tracker mortgage to new and existing customers.

The 2 year base rate tracker mortgage

• 5.98 per cent - which is Base Rate +0.98 per cent, then Base Rate +1.49 per cent
• Customers can borrow up to 75% of the property value
• £999 product arrangement fee
• Maximum loan - £1 million
• Full flexible features

It’s good to see a fairly competitive interest rate with the added benefit of a reasonable product arrangement fee. I say ‘reasonable’; personally I think mortgage fees are a rip off becuase the lender is providing mortgages to people every day, at the very least I think there should be a cap on mortgage fees. However, in today’s market a fee under £1,000 is a good start.

It’s also quite a warning sign for me that all the tracker mortgages seem to have competitive interest rates and low fees at the moment, compared to fixed rate mortgages. I say this because industry experts are predicting interest rate rises in the coming months, no-one knows when exactly of course but I’d say interest rates will rise again before the end of 2008.

This means that everyone taking out a tracker mortgage now will end up with higher monthly payments by the end of the year.

It seems like lenders may be trying to attract new customers with the low fees and relatively low interest rates of a tracker mortgage rather than a fixed rate mortgage. No wonder the fees and interest rates of fixed rate mortgages are increasing - lenders don’t want people to take out these products so they’re pricing consumers out.

I suppose mortgage lenders are running a business and it’s up to them to determine the fees and charges they impose on customers. One thing is for sure though - you have a choice so make sure you research carefully before making a decision and seek professional financial advice if you’re unsure.

>>Click here to compare mortgages online and find the best rates

This isn’t good news for consumers in the midst of struggling property prices and the mortgage market seeing it’s worst time for decades.

Commenting om this Lousie Cummings, Head of Mortgages at price comparison site moneysupermarket.com, said:

“HBOS has waited until the exit fees debate has died down before sneaking in a more expensive charge.”

“When exit fees were under the microscope after last year’s FSA investigation, HBOS was hailed for reducing the controversial charges from Halifax Halifax deals from £225 to £50. Disappointingly it has now decided to introduce a fee of £245 just when borrowers are feeling the pain of increasing rates and the rising cost of living.”

“I urge HBOS to scrap this decision. Borrowers need all the support they can get at the moment, and more decisions like this from other lenders could shift the housing market from a stagnating slump into a fully blown crash.”

It seems to me that banks and mortgage lenders are using the ‘risk’ of lending in such an unstable economic climate as an excuse to pile on the fees; and now this new mortgage account fee has been dreamt up. The only aim of this and other mortgage fees is to line the profit pockets of mortgage lenders - they’re certainly not helping anyone but themselves.

Whatever next? I bet it won’t be long before you have to pay a fee just to submit a mortgage application, regardless of the fact it may be rejected.

>>Click here to compare fee free mortgages, find the best deals today!

I’ve never really thought about it quite like this but smokers are spending on average £170 a month if they smoke 20 cigarettes a day.

The health benefits of giving up are obvious but smokers could also make a fantastic financial decision. If a 20 a day smoker put the £170 monthly spend on cigarettes into a high interest savings account like the Abbey fixed rate monthly saver that pays 7.25 per cent Gross for 1 year, they could have built up just over £2,000 worth of savings in the last 12 months.

The 1st July 2007 was the first day of the smoking ban in the UK, and the anniversary should make smokers think very seriously about quitting and saving money.

Instead of spending £5 a day on cigarettes smokers could save £5 a day and use this money to overpay on their mortgage. Abbey says that customers could knock 8 years off their mortgage and save a staggering £50,000 over 25 years, in the process. Not a bad tip!?

Reza Attar-Zadeh, Director of Savings and Investments at Abbey said:  “It goes without saying that giving up smoking is not only great for your health but also for your bank balance.  Using the saving wisely could knock years off your mortgage”

>>Click here to compare mortgages and make sure you get the best rates