Housing round up: Two surveys show house prices fall whilst Standard Variable Rates rise


Housing & mortgage round upA packed housing round up this week. Firstly, two surveys indicate house prices have fallen over the past couple of months and continue to do so year on year.

Secondly, the mortgage market looks as though it will continue to get harder for borrowers who want an Interest Only mortgage after the announcement by the Co-operative Bank that they are pulling out of this type of lending.

Finally, over one million borrowers have seen their mortgage payments rise after a number of lenders increased their Standard Variable Rates at the start of May.

Nationwide Building Society: House prices fall in April

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The latest figures from the Nationwide, the country’s largest mortgage lender, show that house prices fell in April by 0.2% and are down 0.9% on this time last year.

The latest figures mean that house prices have now fallen in four out of the past five months with the average UK home now worth £164,134.

Robert Gardener, the Nationwide’s Chief Economist was not optimistic about the prospects for the UK housing market: “Much of the recent softness in measures of housing market activity and house prices is likely to relate to the expiry of the stamp duty holiday in late March.”

He continued: “This provided a temporary boost to house prices in early 2012 as buyers brought forward purchases that would otherwise have taken place later in the year.

“This effect should fade in the months ahead, and measures such as the Government’s NewBuy scheme should provide some support to buyer demand.”

Land Registry: House prices fell in March

The Land Registry have published figures which show that house prices in England and Wales fell by 0.6% in March and are down by the same amount over the past 12 months.

The Land Registry survey is based on actual house sales, and despite lagging behind others, is often seen as the most reliable source of house price trends.

Standard Variable Rates increase

This week saw the monthly payments of around one million mortgage customers rise, as previous announcements of increases to the Standard Variable Rates (SVR) kicked in.

The majority of the borrowers affected have mortgages with the Halifax, who are increasing their SVR from 3.5% to 3.99%. However, borrowers with the Co-operative Bank, who increased their SVR by 0.5%, as well as those with the Clydesdale Bank and Yorkshire Banks, who will see an increase of 0.36%, will also be affected.

The 100,000 borrowers with a Natwest / RBS One Account mortgage will see their rate rise, by 0.25%.

The lenders have blamed the increased costs of mortgage funding on the wholesale market, however many mortgage experts have suggested it is unfair to make existing customers pay extra so more competitive deals can be offered to new customers.

Mortgage experts are also concerned that with lending criteria becoming ever tighter, especially around Interest Only mortgages, some borrowers may find it hard to remortgage onto a better deal.

Co-operative pulls out of Interest Only mortgages

The Co-operative Bank has announced that from 8th May it will only offer Capital Repayment mortgages, making it the first high street lender to completely pull out of the Interest Only mortgage market.

Interest Only mortgages rose in popularity in the 80’s and 90’s when borrowers often used Endowments, PEPs (Personal Equity Plans) and ISAs (Individual Savings Accounts) to repay the loan at the end of the term. However, during the last housing boom, following the turn of the century, more borrowers took on Interest Only mortgages with no specific repayment vehicle.

Financial experts and the FSA (Financial Services Authority) are both concerned that an Interest Only ‘time bomb’ awaits some mortgage borrowers, who will be unable to repay their mortgage at the end of the term. The FSA estimates that there are 1.5 million Interest Only mortgages, totalling some £120 billion are due for repayment over the next decade.

The FSA have announced plans to crack down on lenders irresponsibly offering Interest Only mortgages and whilst many mortgage lenders have tightened up their criteria the Co-operative Bank are the first to completely pull out of Interest Only lending.

The Co-operative’s 60,000 existing Interest Only mortgages borrowers will not be affected. Although there is mounting concern that borrowers with an existing Interest Only mortgage, who are also affected by the rise in SVR, will find it hard to remortgage onto a more competitive rate as fewer lenders continue to offer an Interest Only option.

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

Your property may be repossessed if you do not keep up repayments on your mortgage.

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