Housing & mortgage round up: Cheaper fixed rate mortgages? Stable house prices


Housing & mortgage round upThis week we bring you news of the Bank of England’s latest interest rate decision and also look at whether fixed rate mortgages are about to get cheaper.

On the house price front we have the latest Halifax house price survey.

Bank of England keep interest rates on hold

In a move that will be welcomed by mortgage borrowers the Bank of England decided to keep interest rates on hold at 0.5%.

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This is especially good news for existing borrowers with Tracker mortgage linked to Base Rate, whose interest payments will remain low.

Cheaper fixed rate mortgages?

Some mortgage brokers believe that we could be in line for cheaper fixed rate mortgages.

Mortgage lenders price their fixed rate mortgages based on the rate they can borrow money from each other, known as swap rates. Over the past month swap rates have fallen significantly, two year rates from, 1.35% to 1.20%, and five year swaps from 1.6% to 1.42%.

Time will tell whether these reductions are passed on to borrowers in the form of lower interest rates on fixed rate mortgage products.

Halifax says house prices to remain stable

The Halifax has predicted that house prices will remain unchanged for the rest of the year following a rise in May of 0.5%.

Last week the Nationwide Building Society said that house prices rose by 0.3% in May.

However, according to the Halifax, house prices over the past year have remained broadly unchanged with a small fall of just 0.1%, giving an average house value of £160,941. The Nationwide however believe that house prices fell by 0.7% over the past 12 months, whilst the Land Registry put the fall at 1%.

All the major house price surveys remain relatively volatile on a month by month basis and many industry experts prefer to use the three month average to see the true trend in house prices. The Halifax survey showed a rise of 0.8% in the three months to May.

Martin Ellis, Housing Economist at the Halifax said: “While there has been a modest improvement in the trend for house prices recently, the current average UK price is very similar to the levels both a year ago and at the beginning of this year.”

“We expect this situation to continue with prices likely to still be around today’s levels at the end of 2012 as the ongoing tough economic environment constrains housing demand.”

Property experts are concerned about many factors weighing heavily on house prices, including the general state of the economy, low wage inflation, tight mortgage lending criteria, nervousness about job security, and stubborn sellers who are reluctant to reduce their asking price. At present all of these factors seem to be more influential than the low interest rates, which should, in theory, be helping the housing market.

Low interest rates reduce queries to debt charity

The Consumer Credit Counselling Service (CCCS), a charity which helps people with their debt problems, said that low interest rates has meant less people in their 20’s contacted them last year about problems paying their mortgage.

It is clear from the figures that the current low interest rates on first time buyer mortgages are helping borrowers make ends meet, despite the tough economic climate. However, CCCS warned that things could change if interest rates were to rise.

Delroy Corinaldi of CCCS said: “While many young adults are struggling to get on the property ladder, the outlook is more positive for those that are already on it.”

“Nevertheless, this is not a time for complacency as there are multiple pressures attacking their ability to pay their mortgage and many will buckle under the pressure of rising interest rates.”

However, the story is different for those people who cannot get onto the property ladder and are forced to rent. Last week the CCCS reported an increase in the number of requests for help from tenants struggling to pay their rent.

Our mortgage adviser, Linda Wood, is here to help you. If you would like advice on your options or you are affected by any of the stories in this week’s housing round up please call Linda today on 0115 933 8433, alternatively enquire online or email linda.wood@investmentsense.co.uk

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