Mortgage lending fall undermines recovery hopes

Really2

Net new morgages is more relevent to the housing market not Gross.

As stated by many why take out a new fixed rate at the moment.

JayScottGreenspan

Harry_Powell wrote: »

From what I could make out, this article is more about the recovery in the mortgage lending market than in the housing market. I must admit that if I had a mortgage I'd be happy to stay put on SVR with rates being so low. There are a lot of articles in the press on how BoE rates will be staying at 0.5% for the forseeable future, so unless people are looking at long term fixes (which are now a pretty poor deal) they're going to stay on their current deals.

Yeah, exactly. Stay on the SVR of pay all the fees and remortgage onto a higher rate? Tough choice.

No remortgaging => low gross lending. Net lending would be much more interesting.

One more thing, FWIW those in the media predicting base rate at 0.5% for the foreseeable future are at odds with the markets:
http://www.bankofengland.co.uk/publications/inflationreport/conditioning_path.htm

Harry_Powell

JayScottGreenspan wrote: »

Yeah, exactly. Stay on the SVR of pay all the fees and remortgage onto a higher rate? Tough choice.

No remortgaging => low gross lending. Net lending would be much more interesting.

One more thing, FWIW those in the media predicting base rate at 0.5% for the foreseeable future are at odds with the markets:
http://www.bankofengland.co.uk/publications/inflationreport/conditioning_path.htm

I've never understood why people get mortgage deals that only last a couple of years or so, especially when arrangement fees are getting so expensive. Surely when people make such a significant purchase as a house, they ensure that it's going to suit their requirements for a few years (I know people have life altering events such as deaths/divorces, but this isn't the norm) and as such should arrange a deal that lasts at least 5 years or more.

I wonder if anyone has ever calculated whether it's cheaper to stay on a decent lender's SVR than to be paying arrangement fees, valuation fees, admin fees and sometimes redemption fees on the mortgage 'merry go round'?

Lotus-eater

Harry_Powell wrote: »

I've never understood why people get mortgage deals that only last a couple of years or so, especially when arrangement fees are getting so expensive. Surely when people make such a significant purchase as a house, they ensure that it's going to suit their requirements for a few years (I know people have life altering events such as deaths/divorces, but this isn't the norm) and as such should arrange a deal that lasts at least 5 years or more.

Because people remember other times very well. I got caught out on my first 2 year fixed mortgage and it cost me a fortune instead of going on a tracker. Going on a 5 year fixed (ok at anything but the 0.5% rates we are on now) would for me be silly. The banks make a living at it, do I want to gamble against them?
I have done trackers since the first fixed one. Also the fees are much less, indeed I've never paid a fee. Although I may have to now, but I think Nationwide still does fee free ones.

Harry_Powell

Lotus-eater wrote: »

Because people remember other times very well. I got caught out on my first 2 year fixed mortgage and it cost me a fortune instead of going on a tracker. Going on a 5 year fixed (ok at anything but the 0.5% rates we are on now) would for me be silly. The banks make a living at it, do I want to gamble against them?
I have done trackers since the first fixed one. Also the fees are much less, indeed I've never paid a fee. Although I may have to now, but I think Nationwide still does fee free ones.

I'm not disagreeing with you, but surely people should put a little more thought into what is their largest ever purchase and largest single investment?

If they're the sort of person who are concerned about the changing mortgage rate, and is afraid that they will pay 'over the odds' for it, then they should not get a fixed rate. If they're the sort of person who just wants to pay a fixed amount for their mortgage each month, no matter what, then they should get a fixed rate.

From my (admittedly brief) research into the mortgage market, the fee free ones are not much better than being on the SVR rate, especially if you factor in the flexibility you have when on SVR.

It seems that the banks always have the upper hand with mortgages and it's unlikely you will ever get one over them, so it just seems to me to be better not to play their game at all.

Thrugelmir

Really2 wrote: »

Net new morgages is more relevent to the housing market not Gross.

As stated by many why take out a new fixed rate at the moment.

Fixed does not equate to cheap necessarily. It allows people to budget. The bigger ones mortgage the more fixing makes sense. The lower ones mortgage use overpayments to reduce capital asap.

Variable rates could fly upwards very quickly over consecutive months. Fixed rates will be hard to come by if that happens.

Really2

Thrugelmir wrote: »

Fixed does not equate to cheap necessarily. It allows people to budget. The bigger ones mortgage the more fixing makes sense. The lower ones mortgage use overpayments to reduce capital asap.

Variable rates could fly upwards very quickly over consecutive months. Fixed rates will be hard to come by if that happens.

I was saying why gross lending was down.
i think it is fairly simple to see why it is.

Thrugelmir

Harry_Powell wrote: »

I'm not disagreeing with you, but surely people should put a little more thought into what is their largest ever purchase and largest single investment?

If they're the sort of person who are concerned about the changing mortgage rate, and is afraid that they will pay 'over the odds' for it, then they should not get a fixed rate. If they're the sort of person who just wants to pay a fixed amount for their mortgage each month, no matter what, then they should get a fixed rate.

From my (admittedly brief) research into the mortgage market, the fee free ones are not much better than being on the SVR rate, especially if you factor in the flexibility you have when on SVR.

It seems that the banks always have the upper hand with mortgages and it's unlikely you will ever get one over them, so it just seems to me to be better not to play their game at all.

The mortgage market seems to have changed recently. For many years SVR was normally around 2% above BOE base. Fixed rates were above normally this. When rates were 10% plus. Knowing what your cash outgoing was gave one peace of mind. Base rates changed frequently up and down. It was down as now to personal preference.

During more recent years. As wholesale money reduced the cost of borrowing money. Rates dropped to even under BOE base. These deals are now gone for ever. Those lucky enough are locked in for life though they are in the minority.

SVR's are great if you are already a customer of Lloyds or HBOS for example. However custmers of NR 4.79%, Chelsea BS 5.79%, Barclays 4.99%, West Brom 5.84%, Bradford & Bingley 4.59% aren't going to be so happy. With miminal equity the choices for remortgaging are limited.

What happens if these SVR's track base rate changes? We could soon be looking at SVR mortgage rates of 10% in a couple of years time. Makes current fixed rates look quite attractive.

Forget recent mortgage rates as the cost of money will increase. Depositors (savers) will have a choice of where to invest it.

Thrugelmir

Really2 wrote: »

I was saying why gross lending was down.
i think it is fairly simple to see why it is.

I was responding to why fix......

Has the analysis of gross lending been published yet?

Harry_Powell

Thrugelmir wrote: »

What happens if these SVR's track base rate changes? We could soon be looking at SVR mortgage rates of 10% in a couple of years time. Makes current fixed rates look quite attractive.

Forget recent mortgage rates as the cost of money will increase. Depositors (savers) will have a choice of where to invest it.

But what happens if rates don't hit 10%? If you fix for 5 years at 6% and rates stay below 4% for the next 3 years, then you will have overpaid. Perhaps it's just because I'm an FTB and don't have 60% equity, but the mortgage products I'm seeing have an arrangement fee & valuation fee combo that amounts to about a thousand pounds. That's a lot of money to find for most people, especially if they're just buying. Many will simply add it to the mortgage and end up paying the fee for 25 years!

If people remortgage every 2 or 3 years with arrangement/valuation fees around the £1000 mark AND they keep adding them to the mortgage, it makes you wonder if they'll ever manage to repay the damned thing?