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Mortgage rates falling

Written by Roberta Murray

Monday, 08 September 2008

Moneysupermarket reports the start of a rate war.

In the past two weeks, nine of the UK's main 12 main mortgage lenders have reduced their two or three-year fixed rates, according to research from price comparison site moneysupermarket.com.

Louise Cuming, head of mortgages at moneysupermarket.com said, "we are in the midst of a mortgage crisis, yet three quarters of the nation's biggest lenders have recently slashed rates on deals. For such a significant proportion of mortgage providers to drop their rates underlines an industry wide recognition that rates were too high.

"This is good for borrowers who can take heart in some positive news – a rarity during the current credit crisis. I am also pleased see lenders making a real effort to make borrowing more affordable.

However it must be said that despite lower rates the required amounts required in deposits – most commonly around the 25 per cent mark - still remain prohibitively high for many, especially first time buyers.

Cuming also says the good news is restricted to customers with a spotless credit rating.

Lenders are also said to be 'cherry picking' which customers they offer the lowest rates to, meaning the gap between the 'haves' and 'have nots' in the UK is set to widen further.

Also out this afternoon:

Chestertons report significant house price fall

Prices are reported to be 3.4% lower than August 2007 but reports of fresh interest grow.

The credit crunch continues to plague the housing market and its effects are being felt throughout the UK.

The Chesterton House Price Poll of Polls (PoP) for August reveals that house prices last month were 3.4% lower than a year ago.

The report, compiled by the Centre for Economics and Business Research (CEBR), revealed that house prices fell in all regions in August, with the average price of a residential property in England and Wales falling to £188,431, a 1.1% fall from July.

One year ago, the average house price was £195,192.

All property types suffered in August with terraced houses the worst off, experiencing a 0.7% drop in month-on-month prices. London house prices are now 0.9% lower than in August 2007.

Douglas McWilliams, Chief Executive of CEBR, comments:

“The credit crunch is now having a profound effect on the housing market, causing the August house price Poll of Polls to show the largest year on year fall since the survey began.

Stamp duty

"While the Treasury’s announcement of a break in stamp duty may provide a small fillip to properties outside of London and the South East in the short term, until banks start lending again, house prices are likely to continue their downward descent. The latest Bank of England data shows only 33,000 mortgage approvals went through in August, which is 71% lower than the number of loans approved in August 2007,” says McWilliams.

Robert Bartlett, CEO of Chesterton says, “the announcement of the £175,000 stamp duty holiday may bring some hope to the lower end of the market but the market needs more support, particularly in London where there are very few properties available under £175,000. Sadly, the Government’s recent announcement will have little positive effect.”

Bartlett points to the establishment of property clubs - the banding together of private buyers to buy properties - as an example of renewed interest in the market.