Mortgages | 24/7 Moneybox Blog

Posts Tagged ‘Mortgages’

Governmental measures to kick-start the mortgage sector show fundamental flaws

Tuesday, July 14th, 2009

How is your mortgage looking? The government is struggling to get the mortgage sector into swing as this latest attempt to get Britain out of the financial rut is being condemned as showing significant weaknesses, reports BBC Online.

The £50bn asset-backed guarantee scheme (ABS) has been criticised as ‘doomed to failure’, according to the Communities and Local Government (CLG) Committee.

Two reports from separate institutions have highlighted that UK property prices will continue to struggle to make a recovery until mortgages were more readily available.

Figures do show that mortgage lending has picked up, but the Council of Mortgage Lenders (CML) has highlighted it is still 28% lower than two years ago.

The government scheme, which was introduced in this year’s budget, provides a guarantee on lenders’ mortgage-backed securities. This allows lenders to sell on mortgages to lenders raising new money to lend to consumers.

However, MPs have highlighted that restrictions on the partaking institutions and the narrow band of loans that are actually covered has meant the scheme has limited effectiveness.

Dr Phyllis Starkey, who chairs the CLG, said that the CLG and senior officials must maintain pressure on the Treasury to bring in new measures to get the mortgage market moving. Further shortcomings have highlighted that not enough emphasis is being placed on the important rental sector.

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Tags: Council Of Mortgage Lenders, House Prices, Mortgages
Posted in Credit Crunch, Government, Recession | No Comments »

FSA admits impotence as building societies are scrutinised

Thursday, June 25th, 2009

The blame game is in full swing again today as accusations are being thrown about by top members of the Financial Services Authority (FSA), reports Times Online. High-ranking officials have pointed their fingers at some of the biggest building societies in Britain, who are being accused of ignoring numerous warnings and threats put forward by the FSA to stem borrowing.

Nick Lock, the manager of the FSA’s retail firms division, spearheaded the criticism. Hugh May, quoting Lock at the Building Societies Association (BSA) annual conference in Harrogate, stated that ‘we have seen unsustainable margins on prime-lending, over-ambitious growth targets and a risk appetite that was too great’. May also points out that there were ‘fundamental mispricing and inadequate investment in risk management’.

A number of building societies have been hitting the wall over the last 12 months. Scarborough Building Society has been rescued by Skipton and in March Nationwide bought the best bits of Dumfermline which had incurred losses amounting to £26 million.

Building societies had apparently ignored warnings from the FSA which had been repeated ‘over and over again’. But this only illustrates the argument that financial turmoil is not due simply to the building societies and financial institutions, but also to the lack of regulation.

Why did the FSA have no teeth to ratify their warnings? It is surely their job to prevent this situation occurring. It’s ot hard to see why building societies and all financial institutions have exploited the deregulated system for all it’ worth. A little reading into rational choice theory and Mancur Olson’s collective action problem can even describe how it has actually been rational for financial institutions to act greedily in a situation where regulation is sparse (Olson and his counterparts in game theory and collective action problems stipulate that irrespective of whether you choose to benefit or not from greedily exploiting a market, your rivals will, which will be to your detriment; firms are myopic especially as long-term goals require irrational collective action).

It is strange therefore that the FSA readily decides to stand up and show how impotent and pathetic it has been in reigning in their greedy subjects - perhaps in admitting their weak behaviour they will be allotted more powers in the upcoming regulation proposals.

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Tags: Building Societies, FSA, Mortgages
Posted in Government, Payday Loans, Recession | No Comments »

Housing sales: green shoots or ’spring bounce’?

Wednesday, June 24th, 2009

Optimistic findings today from HM Revenue and Customs (HMRC) which show that the number of homes being sold is continuing to rise, reports BBC Online. However, it is key to note that this may be due to the usual ’spring bounce’ period, when sales traditionally have tended to increase.

This complements or (could be attributed to) the increase in mortgage approvals in the last six months, highlighted by the British Bankers’ Association (BBA). The BBA put mortgage approvals up by 15.8%, at 31,162 since this time last year. But again the BBA points out the market as still subdued.

According to HMRC, 62,000 homes worth over £40,000+ have been sold in May, up 7% from last month. BBC then pointed out the truism that this is nowhere near the levels of the boom in housing.

Critics point out the usual spring bounce findings which occur every year, but, stripping out the seasonal factors, March saw a 40% leap in property sales from the month before. Perhaps, it can be argued, that green shoots are emerging in the property market. Home loan providers have even begun increasing their cost of fixed rate mortgages in the last couple of weeks in response to higher demand.

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Tags: HMRC, Housing, Mortgages
Posted in Recession | No Comments »

Number of repossessions overestimated but still rising

Monday, June 22nd, 2009

Some relatively good news from the world of property repossession, BBC News Online has led with an article saying that predictions for repossessions for the rest of 2009 have been overestimated, but they do still remain high.

The Council of Mortgage Lenders (CML) had originally predicted the number of repossessions at 75,000 in last December; however, latest findings have put the level of repossessions closer to 65,000 - a drop of at least 10,000. Despite this, the level of repossessions has gone up overall by 50% in the last three months.

Even with the recalculation the CML states there are still no signs of a ‘robust recovery’, and attributes the repossession reduction to a number of factors not really related to the health of the economy. First of all, the reduction in interest rates, from 5% in October 2008 to 0.5% now, has alleviated homeowners from steep mortgage payments. In-court advice schemes have, according to the Housing Minister John Healey, prevented 4 out of 5 repossessions in court. Finally, not-for-profit organisations are soon to be piloting a £285m scheme to buy homes and affordably rent them out to struggling homeowners.

The CML, short of endorsing the government’s schemes, has said that they have allowed people to get in touch with their lenders and subsequently get help.

However, the CML highlight that job losses and reduced bonuses have made meeting payments extremely difficult. The CML predicts that these will get worse as the recession continues and predicts that 428,000 may get into arrears on their home loans.

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Tags: CML, Mortgages, Payday Loan, Recession, Repossession
Posted in Credit Crunch, Recession | No Comments »

Hurrah! Mortgage approvals up - some good news at last

Monday, March 30th, 2009

Official figurers released by the Bank of England show that mortgage approvals increased more than expected in February. There were 38,000 approvals in the month, up from 32,000 in January.

Citing a BBC article, Vicky Redwood at Capital Economics believes February’s household borrowing figures suggest that housing market activity may finally have turned a corner. However, approvals have a long way to go before they get to levels that are no longer consistent with falling house prices - in fact they need broadly to double.

Well, at last some positive data has come out, and what with the clocks springing forward and Jenson Button winning in the Aussie GP what a good way to start British Summer Time!

However, it’s not all good news this week as unemployment figures creep up. David Blanchflower, Bank of England Monetary Policy Committee member, warned that unless the government takes drastic action to tackle the recession, spending up to £90bn on new projects, unemployment could double to as high as 4 million.

Quoting from a Telegraph article:

‘The Bank’s forecast is that there will be a strong recovery and that this will pick up later this year, but there are strong arguments about why that won’t happen,’ he said. ‘The problem is that in forecasts [economists] tend to be over optimistic. Likewise, the probability is that unemployment of 3m is an underestimate.’

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