Latest News


  • The Daily Telegraph

    Bank of England warns of tougher curbs on mortgage lending

    The Bank of England has warned that obtaining a mortgage is about to become even more difficult.

    by Myra Butterworth






Latest News

 

Bank of England warns of tougher curbs on mortgage lending

The Bank of England has warned that obtaining a mortgage is about to become even more difficult.

by Myra Butterworth


After tightening their criteria during the credit crisis, banks are becoming even stricter about lending.

They are imposing tougher rules because of fears that higher unemployment will result in more home owners defaulting on loans.

It will make it even harder for first-time buyers to get on to the property ladder, while those who need to renew their mortgages are likely to be offered less attractive deals.

Thousands of people could be refused a mortgage or be required to find even larger deposits than previously. It will also underline fears that Britain's household budgets will be squeezed further, increasing the chances of a "double dip" recession.

The Bank of England warned yesterday in its Credit Conditions Survey report that lenders had "tightened credit scoring criteria" over the past six months, and expect to tighten them even further during the next three months. It said lenders had told them they were adopting a more "cautious approach".

Melanie Bien, of Private Finance, an independent mortgage broker, said: "Recently, rates have improved, making mortgage repayments more affordable. But the tougher criteria will mean that people won't be able to get a mortgage at all, or will only be offered higher rates when they remortgage. It is going to get really tough for borrowers."

Financial experts yesterday said the plans were based on flawed logic, as borrowers who were considered vulnerable would be lumped with higher costs. Andrew Montlake, of Coreco, the mortgage brokers, said: "Lenders are getting nervous that unemployment is going to see a rise in the number of borrowers who will experience difficulties meeting their mortgage payments.

"However, if lending criteria tighten and people are unable to remortgage on to attractive new rates, then this will just make the problem worse."

The tougher lending criteria coincide with suggestions from the Financial Services Authority that banks should be even stricter with borrowers and should carry out regular checks to ensure that they can afford interest-only mortgages.

The Council of Mortgage Lenders said yesterday that this would mean that interest-only mortgages would "effectively vanish".

Thousands of buyers took out interest-only mortgages as house prices rose, but the authority is concerned about their ability to repay them in the economic downturn.

Michael Coogan, the director-general of the lenders' council, said: "We do not want to see measures that would effectively regulate them out of the market, and we believe it is possible to address the Financial Services Authority's concerns, without imposing costs and requirements on lenders and borrowers that are likely to prove to be unacceptable."

There are 3.57 million outstanding mortgages that are interest-only, worth £470 billion. Three quarters of them are understood not to include a planned way of paying off the loan.

Interest-only mortgages are one way borrowers can reduce their monthly mortgage repayments but they must pay off the entire loan in one lump sum at the end of a typical 25-year term.

These borrowers are considered a higher risk and banks have tightened their lending criteria much more on interest -only deals than repayment deals amid fears of defaulting.

Property experts warned that declining house prices were inevitable after Nationwide revealed its latest house price index yesterday.

It reported that typical values rose 0.1 per cent in September to £166,757. This was not enough to halt the drop in annual house price growth, which slid from 3.9 per cent in August, compared with the previous year, to 3.1 per cent in September.

Nick Hopkinson, director at Property Portfolio Rescue, said: "It seems almost inevitable that house prices will fall over the next few months."

Earlier this week Charles Bean, the deputy governor of the Bank of England suggested savers should stop complaining about poor returns and start spending to help the economy.

Analysts said his comments showed a blatant disregard for the financial reality facing households and warned this approach would build up problems for the country in the future.


01/10/10

 
 

The Guardian


House prices up by 0.1%, says Nationwide

Nationwide says property market prices edged up this month, taking average value of a home to £166,757

by Jill Insley



30/09/10

 

The Daily Telegraph


House sales halve

The number of homes changing hands has halved since August 2007.



21/09/10

 

The Daily Telegraph


Online shopping often not better for environment, report says

Shopping online, hailed as a brilliant way to cut down on trips by car to the high street, is often no better for the environment, according to a report.



17/09/10

 

The Independent


Good news for children: financial education to be taught in schools



08/02/13

 

Latest blogs

 

Skipton Scrap Mortgage Promise


The Skipton Building Society have scrapped their Mortgage Promise a move that alienates approximately 64,000 customers.


23/01/2010

First Time Buyers in 2010 is it Boom or Gloom?


Mixed reports on the plight of First Time Buyers, statistics say they have never had it so good but the practical realities tells a different story


16/01/2010

Northern Rock: Who will win the race?


A number of financial institutions appear to be gearing up to bid for the assets of the nationalised Northern Rock Bank but who will win the spoils, estimated to be in the region of £20billion?


11/01/2010

A Review of the last 12 months in the Mortgage & Saving Markets


Looking back on the year in financial terms, what happened with mortgages and savings in the last 12 months


05/01/2010

Newcastle Building Society Storm the Mortgage Best Buy Charts


Competition is returning to the UK mortgage market, Rates are getting lower and Loan to Values are getting higher. This is the first real signs that the pressure is now easing on mortgage lenders.


07/12/2009

Financial comparison websites are misleading and the newspapers help them mislead


It's official consumer finance websites do try and mislead consumers, the Daily Telegraph and BBC Radio 4 say so. The Best Best Buys can assure you that they are both right but the media also helps promote the financial websites they criticise


05/12/2009

Comparing the financial comparison websites – Watching the watchers


If you don't want to get duped by a financial comparison website, reading this article will be good for your financial health


30/11/2009

Woolworths: After a year the top executives blame the Administrators....what a pair of clowns!


It's not just bankers that are full of hot air, checkout this pair of "brilliant" business minds.


23/11/2009

Are we coming out of recession or going into a “double dip”?


It is hard to tell what is going to happen in the world of personal finance and the wider economy, hence all the speculation. At this stage either side could be right. In this blog we look at both sides without the bias towards creating yet another sensationalist story about the financial future.


12/11/2009

Proposed changes to the way credit card providers can operate


Not before time the issues of credit card debt are beginning to be addressed


29/10/2009

The Economists and the City Experts get it really wrong this time!


Why bother even paying attention to commentators on the subject of the economy?


23/10/2009

If you want an unsecured personal loan you would best pop down the shops


Only one bank appears to be interested in competing in the unsecured personal loan best buy tables


18/10/2009

When is a loan not a loan? When it is tantamount to money lending


Ripping off the poor


28/09/2009

So are we in recession or out of recession? Is the depression still looming or is it all coming up roses?


Who should we believe?


01/09/2009

The Moneysupermarket, Sainsbury’s loan saga continues


Biggest ain't always best


16/08/2009

So has mortgage lending increased or decreased?


An explanation of why we are seeing conflicting information about mortgage lending.


01/08/2009

Discount Codes & Discount Vouchers


Why on earth don’t more people use discount codes and vouchers?


01/07/2009

Why do store cards still exist?


An unbelievably bad financial product that will not die.


01/07/2009

What has the internet become?


Why you have to be cynical and mistrusting of almost every consumer finance website.


30/06/2009

So who is right about the Sainsbury's Finance Unsecured Personal Loan


A look at how the various consumer finance websites give us information


29/06/2009