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Interest rate decision welcomed

2008-05-09 00:00:00

The Bank of England's decision to hold the interest rate at five per cent this month has been received warmly by one financial expert.

According to the head of strategy at Aegon Asset Management, William Dinning, the Bank's monetary policy committee (MPC) was sensible in its avoidance of a rate cut.

"With food and energy prices rising as they are, and with some signs of unrest in the labour market, the BoE [Bank of England] can't afford to drop its vigilance against rising inflation expectations," he said.

Furthermore, Mr Dinning noted that the Bank has stated that it believes the worst part of the credit crunch is now over.

If the interest rate had been reduced then some homeowners may have seen their monthly mortgage payments reduced.

The publication of the MPC's two-day meeting will be published on the May 21st.

Affordable remortgage deals are 'hard to find'

2008-05-09 00:00:00

Homeowners are finding it increasingly difficult to agree a remortgage deal that they can afford, one expert has suggested.

Commenting on the release of repossession figures from the Ministry of Justice, David Stubbs, a senior economist at the Royal Institution of Chartered Surveyors, said that the problems with securing credit has contributed to the figures.

"This difficulty may be exacerbated over coming quarters if people who want to remortgage find it hard to secure an affordable rate on their new deal. We continue to believe that repossession themselves will increase to around 43,000 in 2008," he said.

Mr Stubbs noted that some homeowners are struggling to meet their monthly mortgage payments and called for more support from the government.

The Ministry of Justice figures revealed that mortgage possession claims increased by 16 per cent over the first quarter of 2008, compared to the same period last year.

Optimism expressed by building societies

2008-05-09 00:00:00

Building societies are remaining positive in the face of global economic slowdown, the Building Societies Association (BSA) has said.

According to the BSA, 70 per cent of building society bosses are optimistic about the year ahead.

And there has been a record amount of money being squirreled away in these financial institutions in the past eight months, the body declared.

Director general of the BSA Adrian Coles said that building societies have not been as strongly affected by the US subprime mortgage market problems, nor do they rely upon international money markets as much as banks.

"The housing market is going to see a slowdown but CEOs [chief executive officers] still have confidence in areas such as buy-to-let although they see house prices as likely to fall in 2008," he said.

He added that bosses are "confident" in the face of a "tough" correction in the housing market.

Earlier this week, development director at iammoving.com Peter Beckett advised first-time buyers to wait and see how the housing market will settle.

Credit card lenders have 'limited funds'

2008-05-08 00:00:00

Credit card lenders are restricting the number of people they lend to because they are short of funds, one expert has said.

Head of personal finance at Fool.co.uk David Kuo has explained that the reason some people are declined for their applications for plastic loans is because credit card lenders do not have endless amounts of cash.

“I think the problem that we have at the moment is that credit card companies do want to issue credit cards but they only have so much money to lend," he said.

This has meant that companies are selecting people that are the most sensible individuals with which to agree credit deal.

According to MoneyExpert, 18,000 people a day were refused credit card deals during April.

And one in 14 people have failed to secure a credit card deal in the last six months, the company found.

June could herald rate cut

2008-05-08 00:00:00

The next cut to the base rate of interest could happen as soon as June, one expert has suggested.

Commenting on today's decision by the Bank of England's monetary policy committee (MPC) to hold the rate at five per cent, chief economist at Abbey Barry Naisbitt claimed that a rate cut may be an option in next month's two-day meeting.

"If the slowing in economic activity is interpreted as supporting lower inflation in the medium term, a further rate cut could be on the cards, possibly as soon as next month," he said.

However, the publication of the Bank's Inflation Report later in the month would give a clearer indication of the situation.

Rate cuts were made by the MPC in December, February and April, with another rate reduction likely to affect some homeowners, as monthly mortgage repayments could be reduced.

The minutes of May's MPC meeting, published on May 21st, could also indicate when if a rate cut is likely in June.

Interest rate held

2008-05-08 00:00:00

The Bank of England's monetary policy committee (MPC) has voted to hold the base rate of interest at five per cent for the month of May.

This follows last month's decision to make a quarter-point cut to the interest rate.

A hold decision was widely expected, with an Adfero poll of economists all agreeing that this was the most likely outcome of this month's two-day meeting by the MPC.

Furthermore, Simon Ward of New Star Asset Management stated yesterday that a cut was possible, but not likely.

"My MPC-ometer suggests a 6-3 vote for unchanged rates this week," he predicted.

The publication of the minutes of the MPC meeting on May 21st will indicate whether Mr Ward's forecast is in fact true.

Previous quarter-point cuts were made by the MPC in February and December, with the Bank rarely changing the base rate in two consecutive months.

Any further reductions to the base rate could mean that some homeowners' monthly mortgage repayments become cheaper.

Rate cut is possible, but not likely, says expert

2008-05-07 00:00:00

A reduction of the base rate of interest for May could be a possibility, but a hold is a more likely outcome, one expert has remarked.

Simon Ward of New Star Asset Management has suggested that the Bank of England's monetary policy committee (MPC) will vote to hold interest rates at five per cent.

Mr Ward stated that May's inflation data and the new liquidity scheme from the Bank will lead the MPC to reach this decision.

"Weighing up these factors, my MPC-ometer suggests a 6-3 vote for unchanged rates this week. A cut is certainly possible but would be dangerous given current inflationary risks," he said.

The MPC will announce its decision tomorrow and a rate cut could affect the cost of repayments for some mortgage holders.

However, the MPC does not usually make changes to the base rate in two consecutive months, with the last cut being in April.

Houses prices drop for first-time buyers

2008-05-07 00:00:00

House prices for first-time buyers have dropped considerably from March to April, new figures have revealed.

According to research by Moneyextra, the average value of a property being considered by a first-time buyer was £170,559 last month - a drop of 5.75 per cent compared to March.

And this is £20,000 less than the average property price considered by first-time buyers in December 2007.

Senior editor of Moneyextra Robin Amlot commented that the housing market is currently more favourable for buyers rather than sellers.

"While it may be getting tougher to get a mortgage now, it would appear that those first-time buyers who are in a position to buy are driving much harder bargains with sellers," he said.

However, first-time buyers were advised to wait and see what happens to the housing market by business development director at iammoving.com Peter Beckett, as buyers could end up in a negative equity session.

Expert: Failed credit card applications count against credit records

2008-05-07 00:00:00

Consumers should ensure they will be certain of securing a credit card with a lender before applying for the product, one financial expert has warned.

According to David Kuo, head of personal finance at Fool.co.uk, every failed plastic loan application counts against an individual's credit record.

Mr Kuo advised those who want a new credit card to view their financial situation objectively.

"What people need to do is to have a look at their own credit record and look at it from the eyes of a banker or whoever is providing the credit card," he said.

He urged people to look at how many credit cards they own and what the outstanding balance is of all these cards.

Recent research from MoneyExpert revealed that one in 20 people have seen their credit card limit cut in 2008, with the average reduction being £1,600.

First-time buyers advised to 'sit tight'

2008-05-06 00:00:00

First-time buyers should wait for the housing market to settle before buying a property, it has been suggested.

As the economy is currently uncertain, it is advisable for first-time buyers to gauge what the market it doing before they sign a mortgage, business development director at iammoving.com Peter Beckett stated.

He noted until the housing market settles, first-time buyers may have to sit tight.

"If you rush into something now, you could find yourself in a negative equity position, having borrowed in order to be able to afford to secure the property in the first place," he warned.

Mr Beckett also suggested that "savings, inheritance or a loan" are the best ways to purchase a property, as well as relying on "parental support".

Research by the firm has found that 17 per cent of first-time buyers are borrowing money from their friends and family in order to afford a house.

More consumers ' should change their spending habits'

2008-05-06 00:00:00

More people may want to consider making changes to their lifestyle following the recent economic problems, one finance expert has stated.

Director at Fairinvestment.co.uk David Doulton made the comments following the release of a poll by his company that revealed only 26 per cent of consumers are to make changes to their spending habits.

"I am surprised by the percentage of people who do not intend to make any changes," he said.

Mr Doulton remarked that the other 74 per cent of respondents may still be enjoying a fixed-rate mortgage.

"As we have seen over the past few weeks, the housing market has, so far, been the worst hit by the credit crisis," he commented.

According to the results of the Fairinvestment poll, overall, consumers are trying to avoid getting into more debt, Mr Doulton added.

Mortgage holders may be affected by the next interest rate decision, which will be announced later this week.

Consumers advised to readdress finances

2008-05-06 00:00:00

Consumers who have been turned down for a credit card application should be addressing the state of their finances, one expert has said.

According to David Kuo, head of personal finance at Fool.co.uk, people who struggling to secure credit, perhaps in the form of loans or credit cards, may have excess amounts of debt in comparison to what they earn.

He said: "People need to re-evaluate their own lifestyles at the moment, have a look at their own finances and if someone turns you down for a credit card then ask yourself: Why?"

Mr Kuo noted that these consumers should check their credit reports to understand why lenders are wary of them.

Defaulting on credit card payments and other similar bills are likely to negatively affect a person's credit application, he added.

The number of people seeking advice on debt has increased this year, figures from Citizens Advice stated.

Consumers 'must tackle debt problems'

2008-05-02 00:00:00

Consumers must ensure they deal with the state of their finances if they are worried about debt problems, a personal finance writer has advised.

Cliff D'Arcy urged those burdened with debt to address their financial problems sooner rather than later, stating: "The earlier you tackle it, the better it will be.

"Don't just bury your head in the sand and hope the problem goes away, get in touch with your bank."

Furthermore, Mr D'Arcy advised credit card users to contact their lenders if they are struggling to cope with the repayments on the plastic loan.

He added that 22 per cent of credit card users across the UK are struggling with their monthly repayments.

There are also free debt counselling charities available to those who may be depressed by their financial situation, Mr D'Arcy concluded.

According to research by Monilink, 21 per cent of Britons would prefer to treat themselves to something nice rather than save money each month.

Bankruptcy will increase in 2008, says expert

2008-05-02 00:00:00

The number of people who declare themselves bankrupt will increase this year compared with 2007, one financial expert has stated.

According to Anna Sofat, founder of ADDIDI Wealth, 2007 figures showed a "substantial" increase in the number of people who became bankrupt, which is a trend that is likely to be repeated in the coming months.

"Last year there were already more people declaring themselves bankrupt or having voluntary arrangements with their debtors and I think that will increase this year," she warned.

Ms Sofat called for credit to become more readily available to help those who are struggling financially.

She added that food prices, fuel bills and mortgage repayments have all increased in recent months.

A report published last month by TDX Group revealed that the number of people who suffer debt problems could double in 2008.

And there are also fewer refinancing options - such as remortgaging and homeowner loans - to help out debt-burdened consumers.

Interest rate forecast to stay at 5%

2008-05-02 00:00:00

The Bank of England is unlikely to change the base rate of interest this month, a new poll has revealed.

Conducted by Adfero, the survey questioned nine economists and financial institutions and found that all are in agreement that the interest rate will remain the same in May.

April's two-day monetary policy committee (MPC) meeting resulted in a quarter-point cut, taking the base rate to its current level of five per cent - which may have meant some homeowners are paying cheaper monthly mortgage repayments.

Previous 0.25 per cent cuts were also made in December 2007 and February this year.

Trevor Williams, chief economist for Lloyds TSB corporate markets, explained why a hold decision is the most likely by the MPC.

"Growth hasn't significantly disappointed, inflation is under more upward pressure; that combination implies rates will remain on hold, given that there has been a cut [last month]," he said.

The last base rate rise was made in July 2007, before the current global economic problems surfaced.

First-time buyers 'still struggling'

2008-05-01 00:00:00

First-time buyers are not finding it any easier to purchase property, one expert has claimed, despite news this week that house prices are falling.

Chief economist of Royal Institution of Chartered Surveyors (Rics) Simon Rubinsohn stated that turnover in the mortgage market is being depressed by the reduction of loan-to-value ratios.

Mr Rubinsohn noted that it was not all bad news for the property market, remarking: "The level of buyer enquiries is still more consistent with the 2004-05 experience rather than the collapse in the market in the early 1990s."

A "modest pick up" in activity may be experienced in the second half of 2008, he added, as the Bank of England Special Liquidity Scheme comes into effect and the credit crunch is more likely to ease.

In other news, the Intermediary Mortgage Lenders Association echoed this positive prediction from Rics by suggesting most mortgage lender are confident about the future of the economy.

Mortgage lenders are 'optimistic'

2008-05-01 00:00:00

Although the economy is experiencing a period of uncertainty, mortgage lenders are optimistic about the future, it has been suggested.

According to a survey by the Intermediary Mortgage Lenders Association (IMLA), found that no company is expecting the UK to hit a recession.

However, 44 per cent of IMLA members did predict two quarters of negative growth during 2008.

The most positive forecast was given by IMLA members in the south-east, with 22 per cent of respondents expecting no change to the current market.

IMLA's executive director Peter Williams stated that the industry has a robust outlook.

"Times are tough in the mortgage market, but key participants in industry remain confident that we can steer clear of an all-out recession. There are also pockets of greater optimism - surprisingly enough, in the south-east, for example," he said.

At the beginning of the week, the latest Nationwide house price index revealed a drop in property values of one per cent over the last year.

Property price fall will affect 'debt burdened homeowners'

2008-05-01 00:00:00

Debt-burdened house hunters and homeowners will be affected by house price falls more than others, one expert has warned.

Katie Tucker, the technical manager of mortgage advice company John Charcol, made the comments following the release of Nationwide's house price index.

The index revealed that property values are one per cent lower than at the same time 12 months ago.

"New house purchase mortgage approvals specifically are down a daunting 44 per cent year-on-year and these lost movers are the first-time buyers with small deposits, the borrowers with previous credit problems and the buy -to-let landlords with minimal rental income," she said.

Ms Tucker added that consumers have also been hit by the rise in the cost of living.

Earlier this week, Michael Coogan, director general of the Council of Mortgage Lenders, predicted that the number of property purchases in 2008 will fall compared to the amount of transactions in 2007.

Warning for remortgagers

2008-04-30 00:00:00

Remortgage figures from the Bank of England (BoE) show that the property market boom is over, according to a finance expert.

David Kuo from advice and information website The Motley Fool said people looking to remortgage were facing competition from other borrowers because mortgage lending resources would be so scarce.

His comments came after Nationwide confirmed a one per cent decrease in house prices over the last year.

Banks were partly to blame and the situation would not get better "until banks get their own houses in order", he added.

Mr Kuo also noted recent figures from Nationwide that showed house prices fell for the sixth consecutive month in April.

"We urge borrowers to be aware that when they remortgage … they will be judged on merit and no one should take approval for granted," he said.

Nationwide's chief economist Fionnuala Earley said the BoE's special measures, aimed at restoring liquidity to the lending market, could "ultimately bring about a more stable market".

Bling 'brings Britons to brink of bankruptcy'

2008-04-30 00:00:00

An obsession with the latest fashion has left many young people in Britain spending too much and getting themselves into debt as a result, it has been suggested.

Personal finance writer Cliff D'Arcy said a survey by UK mobile banking network Monilink had shown a quarter of young people aged between 16 and 34 revealing that they actively competed in the fashion stakes with their friends, a phenomenon it termed bling-itis.

He observed: "Two-thirds of these young people have admitted that they are still trying to clear credit card debts that they built up two years ago. This 'Bling-itis' is edging them towards bankruptcy."

The fact that some would take loans or card debt to service this approach was revealed by details in the survey such as 56 per cent believing people are judged on their appearance and possessions, that 22 per cent had built up so much debt they found repayments difficult and 21 per cent stating they would rather spend their money on treating themselves than saving it.

Mortgages 'not about to be boosted' by Bank action

2008-04-30 00:00:00

Suggestions that the recent Bank of England issue of £50 billion in bonds to help create more liquidity for banks would quickly lead to an improvement in the mortgage market have been dismissed.

Speaking yesterday, Council of Mortgage Lenders (CML) director general Michael Coogan said that the move was "not an intervention specifically intended to re-invigorate the housing or mortgage markets".

He stated that the CML still hoped the move would help loosen the mortgage market eventually, but predicted it would take "some months for this to happen".

Mr Coogan's words were echoed today by Bank of England governor Mervyn King in Westminster as he addressed a committee of MPs, who then heard Mr Coogan repeat his views directly to them.

The mortgage market has been curtailed as lenders have raised rates, required higher deposits and made lending criteria stricter.

In a further example of this today, Chelsea Building Society has withdrawn its fixed rate mortgages and will relaunch them tomorrow (May 1st) at rates up to 0.4 per cent higher, Citywire reports.

Debt management 'good for short term'

2008-04-29 00:00:00

Consumers struggling with repayments may well benefit from debt management in the short term, it has been stated.

Debt Management Today reports figures from Chiltern that the national average of personal debt for those involved in informal management - which could include debt management loans - has dropped to £25,945 since the start of the year.

The charity called for individuals owing money to consider a range of methods of debt management and to be more frugal in their spending.

Nathan Gladwell from the company said: "Options like debt management can offer a valuable short-term solution whilst debts are brought under control."

He added that debt management ensures the prioritisation of money owed, so that mortgages, rent and utility bills are paid first.

Credit Action recently revealed that total UK personal debt at the end of December 2007 was measured at £1,409 billion, OnlyFinance reports.

Warning over holiday debt risks

2008-04-29 00:00:00

Families have been urged to keep an eye on their debt levels and to not overspend during the May bank holiday weekend.

The Co-operative Bank notes that children in the UK are treated to around 72 outings a year, from the cinema and fast food restaurants to swimming and holidays, while parents also shell out on DVDs, games and books.

It puts the price of two annual holidays per year for the family at £2,190.

Scott McPhail, savings manager at the Co-operative Bank, said: "These findings clearly demonstrate that many parents can vastly underestimate the cost of keeping their children entertained during school breaks over the course of a year."

He added that it is never too late for families to start putting some money aside to let them save for their children's futures and also keep them entertained in the holidays.

Research from CreditExpert published earlier this month revealed that one in ten people take out loans or borrow money to enable them to buy new gadgets or eat out.

Lending falls as mortgage screws tighten

2008-04-29 00:00:00

The increase in net lending to individuals for last month was below that seen in February, it has emerged.

Figures from the Bank of England put the total net lending during March at £8.2 billion, with the 12 month growth rate slowing to 8.7 per cent and the three-month annualised growth rate falling by 0.1 per cent to 7.7 per cent.

In total 64,000 loans were approved for mortgages, 98,000 for remortgages and 57,000 for other purposes, all lower than in February.

Michael Coogan, director general of the Council of Mortgage Lenders, said: "It comes as no surprise that approvals for house purchase have continued to decline.

"This will result in a substantially lower level of housing transactions in 2008 than we saw last year."

He added that mortgage lending volumes were likely to fall before they improve as a result of a £30 million funding gap.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors told the BBC that the drop in mortgage approvals is not surprising considering the "aggressive" scaling back on finance provision to those looking to purchase a home.

Nationwide raises deposits

2008-04-28 00:00:00

Nationwide has said that new borrowers will be required to pay larger deposits on almost all of its mortgage products.

From May 1st, borrowers will have to find at least ten per cent of a property's value on all but two of its fixed and tracker loans.

At the same time, customers who want a variable-rate deal must come up with a 25 per cent deposit.

Matthew Carter, Nationwide's divisional director for mortgages, said: "These changes will allow us to maintain control of the volume of business the society is attracting.

"[It also enables] us to continue offering our full range of mortgages to our existing members in a controlled and prudent way."

The UK's second-largest mortgage lender also said it no longer intends to offer new borrowers loans of more than £500,000.

Meanwhile, Abbey has reorganised its mortgage offerings. It now only has one product for borrowers with a five per cent deposit - a five-year fixed-rate deal at 6.99 per cent interest.

Loan costs 'also rising'

2008-04-28 00:00:00

Reports on the credit crisis have often focused on rising mortgage rates but personal loan rates have also been affected by the liquidity crunch.

According to Moneyfacts, Barclaycard, Lombard Direct, NatWest and Tesco Personal Finance have all pushed up interest rates on personal loans in the past two weeks.

Since the start of the year, Black Horse has increased rates on loans by 11.0 per cent, thereby adding £52 in additional interest over a period of 12 months.

At the same time, NatWest has increased rates on the largest loans by 1.5 per cent, which would require borrowers to pay a further £1,015 over the course of a year.

"Since the beginning of the year more than half of lenders offering personal loans have made changes to their rates," said a spokesperson for Moneyfacts.

According to Loans4, a number of banks and others lenders are increasingly concerned that borrowers are unable to repay loans.

To deal with this they are applying to the courts for charging orders that effectively convert unsecured debt into secured debt.

Payment holidays a useful feature of mortgages, says expert

2008-04-28 00:00:00

Homeowners are being urged to check the small print of their mortgages to see if they are entitled to take a break from their payments.

According to MoneyExpert, 58 per cent of the 2,058 fixed, discounted and variable products on the mortgage market feature a useful payment holiday facility.

The price comparison site said that lenders are increasingly aware of the need to be flexible at a time when borrowers are worried about money and the cost of lending.

But MoneyExpert spokesman Sean Gardner warned that just because there is a mortgage holiday facility, it "doesn't mean your bank will let you off repayments easily".

He added: "It's worth remembering that a break from paying monthly doesn't mean a break from paying interest - that'll continue to roll onto your debt until you repay it in full."

According to the Financial Times, if house prices fall 15 per cent, one in 20 mortgage holders would be in negative equity.

Children 'concerned' about mortgages and debt

2008-04-25 00:00:00

Around one in four children aged between 11 and 15 are worried about falling into debt and poverty when they are older, according to Abbey.

In addition, nine per cent of the children it surveyed were concerned that they would not be able to afford a mortgage for a house.

Financial worries came ahead of fears about falling out with friends, but behind exam stress which troubled 32 per cent of respondents.

In terms of location, children in the north of England and the south-east were the most likely to be concerned about debt, while those in the midlands were the most worried about house prices.

Steve Shore, director of Abbey Banking, said: "Kids should also be taught about products such as current accounts as this will hold them in good stead for later years."

In related news, Abbey announced earlier this week that it will reduce rates on its tracker and flexible mortgage deals by 0.1 per cent, following the Bank of England's decision to introduce a £50 billion mortgage bond scheme.

Government mortgage plan offers 'slow relief'

2008-04-25 00:00:00

Independent mortgage experts John Charcol have predicted that the Bank of England's decision to introduce a £50 billion mortgage bond scheme to help the property market get back on its feet will take a long time to have an impact.

It notes that so far, lender's cost of borrowing has only dropped a "negligible" 0.04 per cent, while the spread between LIBOR and Bank rates remains at 0.88 per cent.

Katie Tucker, a spokesperson for the firm, stated: "Mortgage rates may stop rising but they won't return to the exceptionally low levels of last year, because the lenders were not pricing at cost in 2007; they were pricing at a loss to attract market share of borrowers."

She also noted that lenders are "cherry-picking the juiciest borrowers", with Abbey, Halifax and Nationwide upping their rates for people borrowing more than 75 per cent.

Overall, estimated gross lending for the first quarter of this year was down eight per cent from the first quarter of 2007, to £77.2 billion, according to data from the Council of Mortgage Lenders.

Speedy rate cuts now less likely, says economist

2008-04-25 00:00:00

A three-way split within the Bank of England's (BoE's) monetary policy committee (MPC) may dash hopes of a more rapid process of interest rate cutting, an expert has said.

Royal Bank of Scotland economist Ross Walker said April's MPC minutes showed differences of opinion that were "significant".

"I didn't expect this sort of a split vote so soon," he said. "I think the consensus is beginning to break down."

This could potentially affect mortgage holders and people with debt.

The minutes from April's MPC meeting show that six members, including BoE governor Mervyn King, voted for a quarter-point rate cut to five per cent.

Two members voted to keep rates the same and a third member voted for a 0.5 per cent rate reduction to 4.75 per cent.

"I don't think this is going to prevent further rate cuts but the idea of easing at an accelerated pace is looking pretty unlikely," Mr Walker continued.

The last MPC three-way split was in May 2006.

First-time buyers struggling without parental help, says CML

2008-04-25 00:00:00

First-time buyers (FTBs) cannot easily get a mortgage without financial help from their parents, according to the Council of Mortgage Lenders (CML).

The withdrawal of 100 per cent mortgage products from the market means that FTBs are turning to family members to help them out with deposits, spokesperson Bernard Clarke said.

Parents could often afford to lend or gift mortgage deposits to their children as they had a good amount of equity tied up in their own property, he added.

However, he commented: "That's great for those who are in the fortunate position of having relatives who are able to and willing to do that - but not everybody's in that position."

Earlier this month Abbey withdrew its remaining 100 per cent mortgage product, which was also the last available product of that type on the market.

Mr Clarke said that personal unsecured loans were an option for FTBs eager to get on the housing ladder if they did not have savings, though he added that this was adding to their debts.

OFT welcomes ruling on debt charges

2008-04-25 00:00:00

The High Court ruling on unauthorised overdraft charges has been welcomed by the Office of Fair Trading (OFT).

Its ruling concluded that the fairness of these charges, applied to an overdraft debt when the agreed limit is exceeded by the customer, should be reviewed.

The OFT stated it was looking at the implications of the judgement and suggested there would need to be further hearings.

"It is important to note that this judgment only covers points of legal principle and does not determine whether the relevant charges are actually unfair," a spokesperson said.

The OFT plans to work with eight major banks and other parties "to ensure this market works well for consumers".

It brought the case to the High Court with the agreement of these banks under the premise that unarranged overdraft charges are not penalties at common law.

Chiltern's Nathan Gladwell said that charging people excessively for going over their overdraft limit only added to the burden of debt and it was a victory for customers.

HSBC cuts standard mortgage rate

2008-04-24 00:00:00

Following the Bank of England's decision to reduce the base rate by 0.25 per cent earlier this month, HSBC announced yesterday that it will cut its standard mortgage rate by the same amount.

Its standard rate now stands at 6.25 per cent, although the bank has a number of other mortgage products available which offer better rates.

HSBC's five-year fixed-rate mortgage, for example, has a rate of 5.39 per cent with a £999 fee.

The bank also offers a two-year discount mortgage of 5.43 per cent, which is set to fall to 5.18 per cent from May 9th, also with a £999 fee.

Where it really stands out from the rest of the market is with its Rate Matcher deal, which offers to match the old rate of borrowers coming off fixed-rate mortgages between now and the 18th May if they switch to HSBC.

Earlier this week, Abbey announced that it will reduce rates on its tracker and flexible deals by 0.1 per cent.

Mortgage lending 'falls'

2008-04-23 00:00:00

Net mortgage lending and mortgage approvals fell in March, according to the British Bankers' Association (BBA).

The latest figures also showed that credit card lending rose slightly as other unsecured lending levels fell.

BBA statistics director David Brooks said the March data highlighted the "consequences of low banking liquidity" with fewer mortgage choices and tighter lending criteria.

Howard Archer, chief UK economist at the consultancy Global Insight, said: "Mortgage activity is being pummelled by a toxic combination of stretched affordability and very tight lending conditions."

A spokesperson for the Royal Institution of Chartered Surveyors (Rics) said the decline in mortgage approvals indicated the credit crunch was affecting the residential property market.

Commenting on the BBA figures, the Rics statement added that moves by the Bank of England could help but it "is not going to turnaround the current challenging environment overnight".

It went on to say that signs the commercial real estate industry was starting to revive was good news.

Base rate 'affecting rates on mortgages'

2008-04-23 00:00:00

The recent decision by the Bank of England's monetary policy committee to slash the base rate of interest has affected the rates on mortgages, according to Moneyfacts.

However, the financial information provider explained that not all lenders were behaving the same way.

For example, 38 per cent have decided to reduce their SVR; however five of these have cut this rate by less than 0.25 per cent.

Additionally, Moneyfacts points out that a surprisingly high number of lenders are offering products that carry rates higher than their SVR.

"Today 21 lenders offer at least one full status residential product higher than their SVR, including three of the top ten lenders," it said.

The firm also found that the number of mortgage products available is decreasing, from 7,931 at the beginning of the year to the 3,906 currently on offer.

Recently, Moneyfacts published research suggesting that the market for personal loans had also been affected by the credit crunch.

First-time buyers 'saving less'

2008-04-22 00:00:00

The rising cost of living has meant that some Britons aged 25-34 are saving less than they were a year ago, according to new figures.

Research from Sainsbury's Finance indicates that 16 per cent of respondents in this age group are saving less, while fewer than one in ten (nine per cent) are saving more and 36 per cent are not putting any money away for the future.

Neil Cameron, savings manager at Sainsbury's Finance, suggested that first-time buyers should think about putting more away for a deposit, as lenders offering mortgages are requiring more money upfront.

"First-time buyers need to have a larger deposit than they did a year ago - in some cases as much as 25 per cent," he remarked.

Mr Cameron recommended that these borrowers make sure their savings accounts offer "a consistently attractive rate" to help towards this end.

Earlier this month, a study by Sainsbury's Bank found that UK adults are saving an average of 5.9 per cent of their gross income every month.

Borrowers 'should seek advice from lenders'

2008-04-22 00:00:00

Borrowers who are struggling with debt should approach their lenders and ask for possible solutions, it has been claimed.

David Kuo, head of personal finance at Fool.co.uk, warned consumers who have large amounts of debt against ignoring their problems.

At the same time, Mr Kuo advised people not to tackle all of their financial issues on their own, saying: "One of the dangers that people have is they think they can solve the problems themselves."

Instead, he recommended that people turn to the financial institutions that lent them the money in the first place.

These lenders should be able to offer people options for reducing their debts, which could include extending the length of their loans to reduce outgoings and repayments, Mr Kuo said.

According to an April report by the TDX Group, around 400,000 people took out new solutions for unsecured debt last year, with more than half opting to refinance or remortgage.

Government 'must rescue' homeowners

2008-04-21 00:00:00

There have been calls from housing charity Shelter for more support to be given to struggling homeowners as mortgage costs and energy prices increase.

According to the charity, figures from the Council of Mortgage Lenders (CML) predicting the number of repossessions in the UK may be 20 per cent lower than in reality.

The CML has forecast that 45,000 homes will be repossessed this year.

Shelter chief executive Adam Sampson described the "human misery" of repossession as "devastating".

"The government has made billions of pounds from stamp duty and the lenders billions from mortgages. It's now time to plough some of this money into helping save people from repossession," he said.

Shelter is urging the government to solve the crisis when it meets the CML tomorrow.

Joe Wiggins, the public relations manager for protection at Legal & General, recently suggested that mortgage payment insurance could provide homeowners with peace of mind should they lose their job or fall ill.

A range of mortgages are available, says expert

2008-04-21 00:00:00

There is still a range of different mortgages available to house buyers, despite worries about the availability of credit, one expert has said.

According to Neil Johnson, public relations and policy manager at the Building Societies Association, a number of "competitively-priced products" are available from building societies.

"Whilst the range of mortgages has decreased over the last 12 months, customers still have a very wide choice and it is still a very competitive market," he remarked.

Furthermore, HSBC is unlikely to dominate the market, although the latest mortgage offer from the bank is "very competitive", Mr Johnson stated.

HSBC is offering consumers finishing fixed-rate deals before June 2008 a two-year mortgage offer that promises to track the Bank of England's base rate.

A recent report from the Financial Services Authority warned that 1.4 million homeowners are due to finish special fixed-rate deals during the forthcoming year.

Lenders offer 'innovative' mortgage products

2008-04-21 00:00:00

Some lenders are being forced to offer innovative mortgage products due to the pressures in the financial market, one expert has said.

Sarah Robson, press officer at the Council of Mortgage Lenders (CML), commented on the announcement from HSBC that it will match the interest rate for two years for homeowners who are about to finish their special fixed-rate deals.

"The HSBC offer is a good example of market innovation and shows that there is still competition in the market despite the obvious spending pressures going on as a result of the credit crunch," she said.

HSBC is offering the product to mortgage holders whose current fixed-rate deal finishes by June 2008.

Ms Robson noted that lenders are being cautious in the current economic climate, creating products that match their funding.

Last week, David Kuo, head of personal finance at Fool.co.uk, warned consumers that the availability of credit will not improve in the near future.

Expert: Mortgage rates increase, despite Bank of England cut

2008-04-18 00:00:00

The Bank of England's monetary policy committee may have slashed the base rate of interest this month by a quarter-point to five per cent, but it has had little effect on the mortgage market, one expert has claimed.

According to Katie Tucker from John Charcol, credit agreements will not be as cheap as they have been in the past, but the market may "regain health".

She commented that lenders will not be persuaded to drop the cost of borrowing, as the problem is out of their hands.

"Pleading with lenders to pass on rate cuts can have little effect; the price of money, like anything else, is dictated by supply and demand, and currently there are too many lenders working with too little money," she stated.

Minutes of the MPC's April meeting are published on April 23rd and may indicate the outcome of the next meeting in May.

House buyers warned about 'mortgage fee dangers'

2008-04-18 00:00:00

House buyers have been advised to consider paying their mortgage fees upfront to avoid paying more interest on their home loan.

Research from uSwitch.com has revealed that adding mortgage fees to the home loan lump sum can mean a £4,094 charge could cost £8,682 after interest is added.

Director of consumer policy at uSwitch.com Ann Robinson urged consumers to consider their options when agreeing a mortgage deal.

"In order to make an informed decision, people must ask the mortgage providers to provide details of the monthly repayments both with and without the fee added on to the mortgage," she said.

Although some first-time buyers may be forced to add fees to the lump sum of the mortgage as they may be struggling with their finances, Ms Robinson said.

Yesterday, Joe Wiggins, the public relations manager for protection at Legal & General, suggested that mortgage payment insurance could provide "peace of mind", but urged house buyers to seek advice over the issue.

Consumers turn to internet for 'finance advice'

2008-04-18 00:00:00

Consumers are increasingly using the web to learn more information about financial products and services, new figures have revealed.

A survey by Fair Investment has discovered that 57 per cent of people will turn to a computer for advice on mortgages, loans and credit cards.

Only 12 per cent of respondents said their first port of call would be a bank or financial advisor.

Director at Fair Investment David Doulton suggested why the online financial advice is popular with consumers.

"The internet provides a quick and convenient way for people to become self informed in areas such as personal finance, where there is access to up to date rates, news and content," he said.

Mr Doulton added that another attraction is that consumers can access financial advice using the web at any time in any place.

Neil Munroe, the external affairs director for Equifax, recently stated that the tightening of credit by lenders would affect all areas of finance.

Mortgage protection insurance could provide "peace of mind"

2008-04-17 00:00:00

Consumers worried about the global financial crisis may want to consider taking out a fully-protected mortgage, one finance specialist has suggested.

Joe Wiggins, the public relations manager for protection at Legal & General, has advised that the option could be "ideal" for those unsure of their job security.

"Many people suffering a loss of earning would soon find that they would struggle to meet their mortgage payments, so mortgage payment insurance could make a huge difference," he said.

Mortgage payment insurance will mean homeowners who have an accident, become unemployed or suffer from illness will receive a monthly payment to cover the home loan, Mr Wiggins explained.

However, he added that house buyers should speak to a financial adviser first before agreeing any deals with lenders.

Research by the Association of British Insurers revealed that in 2006, 20 per cent of homeowners had Mortgage Payment Protection Insurance.

Disappearing balance transfer deals have "knock-on effect"

2008-04-17 00:00:00

The disappearance of balance transfer deals in the credit card market will have a "knock-on effect" for debt-burdened consumers, one expert has said.

According to debt adviser and spokesperson for National Debtline Beccy Boden-Wilks, the credit crunch means borrowers are finding it harder to agree a plastic loan with a lender.

She noted that cheap credit deals are very hard to come by in the current economic climate.

"People can't manage their large amount of debt as cheaply as they could before," she said.

Ms Boden-Wilks stated that this problem is likely to strain consumer finances and may lead to bigger debt problems.

"If people can't afford their non-priority debts anymore sometimes they'll stop paying their mortgage as well," she warned.

Sainsbury's Finance has predicted that consumers will attempt to transfer £1.1 billion of debt a month between credit cards this year.

Supply constraints 'will support housing sector in the short term'

2008-04-16 00:00:00

A lack of supply is continuing to support house prices in the current market, according to one commentator.

The Royal Institution of Chartered Surveyors (Rics) made its comments while releasing figures indicating that house prices fell for the eighth month in succession last month.

A poll of surveyors conducted by Rics showed that 78.5 per cent more experts reported a fall in house prices than identified a rise.

The proportion of surveyors reporting falls is now at its greatest since the survey was first undertaken in 1978.

Jeremy Leaf, spokesperson for Rics, said: "The slowdown in prices is directly attributable to a lack of available finance which has hit demand. However, until new supply increases dramatically a significant crash remains unlikely."

He added that for those who already own a home and anyone seeking a first-time buyer mortgage, the coming months would be crucial as larger deposits are likely to be needed.

Recently, Liberal Democrat spokesperson for communities and local government Julia Goldsworthy commented that credit crunch losers had less of a safety net than during the last recession, due to a fall in the amount of social housing available.

More people 'may be forced to take high-cost loans'

2008-04-16 00:00:00

Borrowers in the UK may be forced to opt for higher-cost loans in the current financial climate, an expert has predicted.

Neil Munroe, external affairs director for Equifax, said that as lending criteria tightens, banks are likely to reject more people who are applying for loans.

After being rejected, consumers may either choose to not borrow anything or to turn to lenders who charge higher rates, he said.

"If people need the money, they may be forced into more high-cost borrowing … in the subprime or near-prime market, whereas before they might not have considered going there," Mr Munroe stated.

He added that this trend of people paying more when borrowing money has "probably been happening for the last few months around the margins".

Figures from Credit Action reveal that the total personal debt in the UK stood at £1.421 billion at the end of February 2008.

Credit crunch 'should not affect responsible credit card use'

2008-04-16 00:00:00

Those who use their credit cards responsibly should not be negatively affected by the credit crunch, it has been suggested.

Samantha Owens, head of personal finance at Moneyfacts, explained that using credit need not be risky for those who are already successfully managing their finances.

"If you're the kind of person who's been managing their money perfectly well up until now then there's no reason why you shouldn't continue [to use credit cards]," she remarked.

However, she warned that people who were struggling to manage their money in the past will be likely to continue to face difficulties in the current economic climate.

These borrowers may find themselves in "the same situation as before the credit crunch", Ms Owens stated.

New research from Citizens Advice reveals that the number of mortgage debt problems reported by consumers rose by 35 per cent in the first two months of 2008, compared with the same period the year before.

Credit crunch impact on mortgages is 'surprising'

2008-04-15 00:00:00

The far reaching impact of the credit crunch on the mortgage market has been described as surprising by one finance specialist.

UK economist with Capital Economics Paul Dales stated that he had not expected mortgage rates to increase by as much as they have in recent months.

"I have been quite surprised at how marked the rises in mortgage lenders' rates have been, how widespread it has been and how many lenders have had to pull different mortgages," Mr Dales said.

He suggested that banks are passing on their increased costs to borrowers as they will want to continue to make good profits this year.

Banks have made "incredible profits" in the last decade, Mr Dales added.

The Bank of England's monetary policy committee announced a quarter-point cut to the base rate of interest last week, taking the current rate to five per cent.

Credit tightening is 'affecting all financial areas'

2008-04-15 00:00:00

Lenders of all financial products are tightening their credit lending criteria, one expert has stated.

According to Neil Munroe, external affairs director for Equifax, the credit crunch will affect all types of borrowing.

"Whether its mail order or a mobile phone, or a mortgage or a credit card or a loan, all lenders are taking action to make sure that bad debt doesn't get worse than it is at the moment," he said.

It may not affect some products as much as others, he noted, but suggested that people who were "borderline credit worthiness" will find they are no longer accepted by financial institutions.

Mr Munroe stated that he did not know to what extent "good quality customers" are being affected, but that "marginal customers" are unlikely to be able to apply for borrowing.

Figures from Credit Action reveal that the average household is £9,100 in debt (excluding mortgages), although this figure rises to £21,166 if unsecured loans are included.

Teachers 'struggle' to meet mortgage repayments

2008-04-15 00:00:00

Mortgage repayments are crippling teachers and their finances, a charity has announced.

The first quarter of this year saw a 70 per cent increase in the number of educational professionals claiming support from the Teacher Support Network charity, the BBC reports.

In the first three months of 2008, there was a dramatic increase in the number of teachers with financial difficulties, the charity reports, with £62,000 in grants given to those struggling with their finances.

According to Patrick Nash, the chief executive of the Teacher Support Network, many homeowners are coming off special fixed-rate deals and are now paying increased mortgage instalments.

Furthermore, the cost of living has also increased, he said.

"More of our callers are having to seek help simply to make ends meet, showing that the national credit crunch is having a very real effect on teachers in particular," Mr Nash remarked.

A proposed 2.45 per cent pay rise for teachers from the government earlier this year was met with criticism from the National Union of Teachers.

Consumers must use credit cards 'cautiously'

2008-04-14 00:00:00

Shoppers must be careful with their credit cards, one financial expert has warned, as the cost of borrowing these plastic loans has increased over the past half a year.

According to research by MoneyExpert, the average APR on a credit card is now 17.12 per cent, up from 16.56 per cent six months ago.

Sean Gardner of MoneyExpert explained that consumers cannot take the usual action of switching credit card lenders to take advantage of the best deals.

"Most of us would normally seek out a new zero per cent deal to tide us over the bad times, but with lenders playing a cautious game getting one of those cards is more difficult than it used to be," he said.

He urged consumers to "be careful what you spend on the plastic", as the interest could become very expensive.

Last week, head of personal finance at Fool.co.uk David Kuo noted that banks are only looking to take on customers with healthy finances.

Rate cuts 'do not make a big difference'

2008-04-14 00:00:00

Interest rate cuts by the Bank of England do not make as much difference to consumers as some people might think, one expert has claimed.

According to Vicky Redwood, UK economist at Capital Economics, further interest rate cuts are unlikely to ease credit availability over the next few months.

Ms Redwood stated that lenders have so far been slow to pass on rate reductions to their customers, so any further trimming of the base rate will not make a "huge amount of difference".

The economic situation is unlikely to improve dramatically in the coming months, she predicted, stating: "Things are likely to get a little worse before they get a little better."

Although, Ms Redwood added, the benefits of a lower base rate will eventually trickle through to customers.

The availability of unsecured credit, such as loans, for households was found by the Bank of England's quarterly Credit Conditions Survey to have reduced over recent months.

Credit conditions will 'not improve anytime soon'

2008-04-14 00:00:00

The availability of credit will not improve in the near future, one expert has warned.

David Kuo, head of personal finance at Fool.co.uk, has urged consumers to ensure their finances are in good order to weather the stormy financial conditions.

"Look at your own finances and don't expect other people to help you because there is no help available," he stated.

Consumers may find it harder to secure new loans, mortgage or credit card deals in the current economic climate, which will only recover "later rather than sooner", Mr Kuo said.

He remarked that part of the current problem was the failure of the government to address the issue.

"The government is in denial about what's going on," Mr Kuo claimed.

Recent findings from the British Bankers' Association suggested that consumers may be heeding warnings from financial experts, as the number of credit cards bearing interest fell in February.

Banks want customers with 'healthy finances'

2008-04-11 00:00:00

In today's current economic conditions, banks are looking to take on customers will healthy finances, a financial expert has warned.

Head of personal finance at Fool.co.uk David Kuo noted that many people need to reassess their financial situation.

"People really need to look very closely at how they can cut down on their spending," he advised.

Mr Kuo remarked that now is the time to start saving, as flexible loans are disappearing and credit cards are becoming harder to get.

Paycheques must last the whole month, he warned, stating: "What you have, is what you have got."

However, budgeting and saving "is becoming increasingly more difficult for financially challenged customers", he said.

Yesterday, it was forecast by the news editor of moneywise.co.uk, Rebecca Atkinson, that it is "fairly likely" other lenders will follow First Direct and the Co-operative Bank in their announcement that they have suspended mortgage sales to new customers.

Credit availability 'will continue to drop'

2008-04-11 00:00:00

The availability of credit will continue to fall in the coming months, one expert has said.

Vicky Redwood, UK economist at Capital Economics, has stated that consumers will find it increasingly difficult to secure loans and credit with lenders in the near future.

Noting the change in mortgage products and loan rates in recent months, Ms Redwood stated: "For the next few months this trend will continue, certainly, because of the continuing problems in the money market."

Interest rates on credit cards and personal loans have changed, she said.

Ms Redwood noted that mortgage products have also changed with borrowers either paying higher rates of interest or forking out a larger deposit to agree a deal with a lender.

Yesterday, the Bank of England's monetary policy committee announced that it has voted to cut the base rate this month to five per cent.

The publication of the minutes of the meeting on April 23rd may hint at whether another reduction in rates is likely in the coming months.

Credit crunch means 'cheaper student loans'

2008-04-11 00:00:00

The aftermath of the credit crunch has left most people out of pocket, but according to financial charity UNIAID students will actually benefit from some of the affects of the economic problems.

Student loan repayments will become cheaper as the interest rates on these loans track the base rate set by the Bank of England, Alistair Lomax, the executive director of UNIAID, said.

In fact, the base rate was lowered to five per cent by the Bank of England's monetary policy committee yesterday.

Furthermore, Ross Walker, an economist at Royal Bank of Scotland, has predicted that rate could go as low as 4.5 per cent by the start of 2009.

"Student finance support arrangements are pretty insulated from the rest of the economy," Mr Lomax stated.

According to UNIAID, currently the average student is likely to leave university with a debt of £17,500 and fees could increase to as much as £7,000 a year by 2009.

Property is 'unattainable' for graduates

2008-04-10 00:00:00

Those leaving university may be equipped with a first-class degree, but they are unlikely to be able to get a foot on the property ladder, one finance expert has stated.

According to Alistair Lomax, executive director of finance charity UNIAID, the credit crunch combined with the cost of houses in the UK means many graduates will find it difficult to secure a mortgage.

"We're concerned that students are going to find it more difficult to borrow money to get on the bottom rung of the housing ladder - which already may be out of reach," he said.

As students are often burdened with debt, lenders may be less likely to agree a mortgage with graduates as the current economic conditions have made them more risk averse, Mr Lomax explained.

Recent figures from the Council of Mortgage Lenders revealed that total mortgage lending in February dropped by 3.5 per cent compared to January's data.

Bank cuts interest rates

2008-04-10 00:00:00

The Bank of England has cut interest rates by a quarter-point.

Its monetary policy committee (MPC) announced today that the result of its two-day meeting was to reduce the base rate by 0.25 per cent.

Now standing at five per cent, the lowered base rate could mean some homeowners see cheaper mortgage repayments.

Earlier this week, an Adfero poll of eight economists and financial institutions revealed that a cut in interest rates by the MPC would be the most likely event.

Ross Walker, an economist at Royal Bank of Scotland, went as far as to say that further cuts would be made throughout the year, resulting in a base rate of 4.5 per cent by the start of 2009.

"We expect a further quarter-point cut to follow in the summer (July or August), before the expected peak in CPI [consumer price index] inflation this autumn," he said.

Other lenders are 'likely to suspend new mortgage sales'

2008-04-10 00:00:00

House buyers are likely to find that more mortgage lenders will suspend new mortgage sales, one expert has said.

News editor of moneywise.co.uk Rebecca Atkinson has stated that it is "fairly likely" other mortgage lenders will follow moves made by First Direct and the Co-operative Bank this week.

The two financial institutions have stopped sales of new mortgages amid continuing problems in the housing market following the credit crunch.

However, Ms Atkinson noted that lenders will be wary of taking this route as it can be unpopular with house buyers.

"Increasing rates is the more popular route for lenders to go because the suspending of lending can damage reputations," she said.

She added that mortgage products are "being changed on a weekly basis".

According to Ms Atkinson, Halifax has introduced a new pricing tier, an option Nationwide took a few weeks ago.

Expert: All house buyers are affected by mortgage withdrawals

2008-04-09 00:00:00

The withdrawal of mortgage products by lenders will affect all house buyers, one expert has warned.

Although first-time buyers could be worst hit buy the limited mortgage products available, buyers of all income levels will feel the strain, Rebecca Atkinson, news editor of moneywise.co.uk, has said.

First-time buyers are "natural victims" as they are unlikely to have a large deposit, she remarked.

"Rates have gone up for various reasons so even if you are well-financed and you have a large amount to put down on a house you still will have to pay more than perhaps you would have paid a few years ago," Ms Atkinson stated.

She added that borrowers with a poor credit history could see a fall in the number of lenders that will accept a mortgage deal with them.

The Bank of England's monetary policy committee will announce its decision on interest rates tomorrow, which could affect the cost of mortgage repayments for some homeowners.

Students could leave university with 'bad credit rating'

2008-04-09 00:00:00

Students have been warned by a financial expert that they must manage their loans and finances well while at university, as they could end up with a bad credit rating.

According to Alistair Lomax, the executive director of student finance charity UNIAID, graduating with a poor credit rating could limit a student's financial options later in life.

"[Students] just need to be really careful at the moment not to get a bad credit rating, because it will affect their ability to borrow later on in life," he said.

There is plenty of support available for students who are in financial difficulty, Mr Lomax added, and undergraduates should take advantage of this.

He stated: "The fun you have now could come back to haunt you."

The current average student debt is £17,500, according to UNIAID.

Furthermore, a shortage of money is the biggest concern of high education for 77 per cent of A-level students.

Fixed-rate mortgages are 'still popular'

2008-04-08 00:00:00

Many house buyers are still opting for fixed-rate mortgages, despite expectations that the interest rate will be reduced from its current rate during the course of the year, it has been suggested.

Mortgage firm John Charcol has also stated that landlords are not as keen to purchase properties.

A rate cut by the Bank of England's monetary policy committee would help ease the problems in the housing market, technical manager for John Charcol Katie Tucker remarked.

Such a move should be combined with "a medium-term cash loan of around £20 billion to ease the pressure on mortgage lenders, because sky high mortgage costs have already started to jam up the property market", she said.

Ms Tucker noted that last month saw the "most tumultuous" change in mortgage products.

Furthermore, borrowers are tending to have a more "conservative attitude", she added.

Ross Walker, a global economist for Royal Bank of Scotland, stated yesterday that the base rate could fall to 4.5 per cent by the start of 2009.

Housing market could 'seize up'

2008-04-08 00:00:00

The housing market could seize up if first-time buyers continue to struggle to purchase their first home, one expert has said.

Rebecca Atkinson, the news editor of moneywise.co.uk, stated that there is currently still a demand for mortgage products, but that this may not remain in the long term.

According to Ms Atkinson, first-time buyer confidence has been rocked by the current economic problems.

First-time buyers are struggling to secure credit as they need to have larger mortgages in the current market, she said, as lenders are more selective about who they accept for mortgages.

"At the moment [borrowers] don't want large volumes of lending, they want good quality customers," she remarked.

If these problems continue, the whole housing market could seize up, Ms Atkinson warned.

As first-time buyers are necessary to the market so that other homeowners can move up the ladder, she commented.

The Bank of England could decide to reduce the base rate at its forthcoming meeting on Thursday, which might mean some homeowners find their mortgage repayments may be cheaper.

NAEA calls for rate cut

2008-04-08 00:00:00

The Bank of England's monetary policy committee (MPC) should reduce the base rate in its forthcoming meeting, the National Association of Estate Agents (NAEA) has said.

According to the group, such a move would help secure stability in the housing market.

Chief executive of NAEA Peter Bolton King stated that the housing market is currently in a predicament.

"The housing market is in a tricky situation, people are losing confidence because they are unable to secure mortgages - especially first-time buyers, who are also being scared off by the feeling of instability," he said.

Mr Bolton King warned that the Bank needs to "take action fast".

Only a "significant move" would boost confidence in the market, he added.

Yesterday, six economists and financial institutions predicted a rate cut at the MPC meeting on Thursday, a poll by Adfero revealed.

A further two respondents to the survey forecast that the rate will hold at 5.25 per cent.