As Bad As It Gets: Mortgage Expert Lets A Ray Of Light Into The Market Gloom
- Lenders' rates could be at a peak, says leading broker
- High margins for banks means crunch might ease
Patrick Collinson and Rupert Jones the Guardian, Thursday June 26, 2008
Britain's mortgage market appears to be in meltdown, with first-time buyers going on strike and lenders joining them.
Only a week ago, First Direct was offering a best-buy two-year fixed-rate mortgage at just 5.49%. By the end of the week, it had risen to 5.99%. Yesterday it was raised to 6.15%. At the same time the average two-year fix has surged through 7%.
Falling house prices, down by up to £25,000 in a month in parts of London, are not encouraging first-time buyers. Their numbers fell to 300,000 in 2007, compared with 532,000 in 2002, and this year may hit record lows.
But one leading commentator predicted yesterday that this could be the month when mortgage rates peak and the credit crunch begins to ease. Ray Boulger of mortgage broker John Charcol said the margins were so good that it made sense for banks to take advantage by increasing their lending to the maximum.
His comments come at a time when mortgage finance for young buyers has virtually dried up. Cash-strapped banks, fearful of lending against an asset that is dropping in price, are demanding steep deposits that disqualify all but the most wealthy or thrifty first-time buyer. But just as important is the psychology of deflation: there is no point in buying now when the same house could be worth 10% less in a year's time.
Even mortgage brokers, usually keen to sell loans, confess there is little reason for first-time buyers to venture into the market. Richard Morea, at London & Country Mortgages, said: "A lot of people are, understandably, asking themselves if they should be buying at the moment. You can fix your rent for the next six months, save for a higher deposit, sit it out while interest rates go up and watch house prices fall. I can see no reason why a first-time buyer should want to buy in this market." Read more….
Source:
http://www.guardian.co.uk/business/2008/jun/26/banking.housingmarket1
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