The Treasury Department has commissioned Sir James Crosby, the former chief executive of HBOS, owner of the Halifax and the Bank of Scotland to carry out a report on the mortgage market. His report suggests that he feels the mortgage market will be paralysed until 2010 as there will be a shortage of mortgage finance during this period.
Sir James Crosby suggests that new mortgage lending could possibly fall below zero next year. This will happen as the mortgage lenders will be putting less money back into the UK housing market than they would be taking out. This will lead to a slow down in the recovery of the housing market and further falls in house prices along with falling consumer spending and rising unemployment.
During the last twelve months we have seen the number of new mortgages arranged by mortgage lenders drop drastically. The amount of new mortgage lending has dropped by 62.96% from £108 billion in 2007 to a forecasted figure of £40 billion for 2008. Yet The Council of mortgage Lenders has said that the number of repossessions in the UK has increased by 12% in the third quarter of this year. Repossessions are expected to hit 45,000 by the end of this year a massive jump of 71% on last year.
An area of concern to Sir Crosby is the collapse of mortgage finance for housebuilders as they are now dependent on buyers being able to afford a deposit of 10 to 15% on average £21,000. First time buyers are finding it extremely difficult to save such a large deposit and this is keeping them away from buying their own home. Mortgage lenders are currently reluctant to offer mortgages above 90% loan-to-value due to the falling house prices.
Earlier this month moneyfact released information that suggested that there was only 66 mortgage deals left to choose from that allowed a 10% deposit , compared with 1,197 over nine months ago. O’boy has the mortgage market changed in the last year!
Let’s not forget that the housing market has seen property prices drop to February 2006 prices and it is suggested that house prices will end this year between 15% and 20% lower than at the beginning of the year.
The remortgage market remains in turmoil as borrowers hunt arround for new mortgage providers. Long gone are the days of finding a quick mortgage or remortgage. Homeowners are finding themselves unable to remortgage their homes due to some of the following reasons:
- Their homes have been down valued.
- The lack of equity in their homes.
- Changes in mortgage criteria.
- Withdrawal of mortgage products for borrowers requiring a 90% plus mortgage.
- High interest rates
The chancellor announced the following changes in his pre-budget speech that should go some way to helping homeowners:
- Mortgage providers had agreed to wait three months after someone falls into arrears before initiating repossession proceedings.
- The Chancellor announced yesterday that Income Support for Mortgage Interest (ISMI) will be further increased from £175,000 to £200,000. This support for mortgage interest will benefit people who may lose their jobs through unemployment or sickness and is welcome news. It means that homeowners with mortgages up to £200,000 are now protected after 13 weeks and they will have the interest part of their mortgages paid until they return to full-time employment.
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