Category: Mortgage (23)

The London Evening Standard reports that the announcement in America that interest rates are expected to be held at their current level until 2015 is reassuring for mortgage borrowers in the UK. If the US keeps rates low, the Bank of England will have to follow. Read more here.

The average rate of a five-year fixed mortgage has decreased over the past year, from 5.59% to 4.86%. The last time they were this low was April 2010. The falls will trigger interest from home owners because many lenders will increase their Standard Variable Rates from May 1.

More here

The RBS have revised their forecast for BoE Bank Rates and are now forecasting a 25bp hike in May. A May hike would mark a turning point in the monetary policy cycle but RBS expects the process of Bank Rate normalisation to be incremental and policy to remain accommodative for several years. By end-2011 RBS forecasts the Bank Rate to stand at 1%, with rates edging up to 1.5% by end-2012.

Source: RBS

Following intense scrutiny of the 4.0% CPI inflation number, all eyes were on the Bank of England press conference yesterday, especially following assertions in the Financial Times and other media that Governor Mervyn King had laid the ground for future rate increases in his recent letter to Chancellor George Osbourne. However, Mervyn King roundly contradicted this view, indicating that he had not intended to lead the market into believing interest rate increases were likely. Rather, King said that “some people are running ahead of themselves”.

It is hard to see then why some commentators have interpreted the report as indicating that rate rises are now more likely. The report itself goes to some length to explain the temporary factors pushing up CPI inflation. For the first time, the MPC published a chart illustrating its view of the underlying inflation rate, excluding the temporary impact of changes in value added tax, energy and import prices. The report indicates that underlying inflation is probably below 1.5%. As Governor Mervyn King reiterated at length in yesterday’s press conference, the MPC is concerned about where the CPI inflation rate will be in the medium term, rather than the current headline rate which captures price changes over the past 12 months.

The hawks on the committee such as Andrew Sentance have argued that a potential pick-up in inflation expectations poses an upside risk to CPI inflation. Yesterday’s evidence from the labour market suggests that the likelihood of expectations led wage-price pressure has diminished. There was a rise in UK claimant count unemployment and average wage growth fell back to 1.9%. So for now, nominal wage growth remains very weak.

Nevertheless, it should be remembered that 0.5% remains an unusually low setting for the policy rate, and the Inflation Report probably reflects the governor’s view to a greater extent than other MPC members. So a rate increase in May cannot be ruled out. Hence, it will especially important to focus on the release of the minutes of the last MPC meeting to see if more than two members voted for a rate increase. However, yesterday’s report indicates that expectations for immediate rate rises have been overstated.

The Bank of England lowers its growth forecast for the British economy and signals a rise in interest rates to tame inflation – but Governor Mervyn King says no decision has been made on timing.
Average rating.

In its latest quarterly report published today, the Bank said output was likely to be weaker than expected in 2011, but a double dip recession was not expected.

Inflation is likely to continue rising this year to around 5 per cent, before falling close to the Government’s 2 per cent target in 2012 – but only if interest rates rise in the second quarter of 2011.

The Bank of England said monetary policy would need to be tightened to bring medium-term inflation back on track, confirming market expectations that interest rates would start rising in May.

In a letter to the chancellor George Osborne that was triggered by a 4 per cent increase in consumer prices last month on the back of surging food and petrol costs, Mervyn King said inflation was “likely” to return to the Bank’s official 2 per cent target on “the assumption that [the] Bank rate increases in line with market expectations”.

Click here to watch video on

Better mortgage deals are being offered to buy-to-let investors, with
one lender now providing mortgages of up to 85 per cent of a property’s
value – the highest loan to value available to landlords since the
credit crunch.

The move comes as more high street lenders look to enter the buy-to-let
market, which could see competition in the sector increase and provide
more choice for property investors.

Yorkshire Building Society said this week that it was considering
offering buy-to-let mortgages this year. Santander has also expressed an
interest in entering the market for non-professional landlords.

“Following our merger with Chelsea Building Society, we have an existing
buy-to-let mortgage book,” explains a spokeswoman for Yorkshire Building
Society. “We are currently working on the possibility of pursuing new
lending in this area.”

This has been welcomed as a positive move for a market that was badly
hit by the credit crunch, with lenders pulling out of the sector and the
number of products for landlords plummeting.

Now the availability of finance for buy-to-let properties is improving –
at a time when the prospects for buy-to-let investment look increasingly
attractive. With rents rising sharply over the past year on the back of
growing demand, experts believe this could be a good time to invest for
the long term.

But there are still very few options for buy-to-let investors with a
deposit of 20 per cent or less. According to Nigel Bedford of, only three lenders – The Mortgage Works (TMW),
Clydesdale Bank and Kensington – offer up to 80 per cent of a property’s

Kensington is only offering one product at 85 per cent loan to value: a
two-year fixed-rate mortgage at 5.99 per cent, with a 2.50 per cent fee.
It has relaxed its rental cover requirement – the annual rent as a
percentage of annual interest repayments – from 125 per cent to 120 per

“It has to be a welcome addition to the current range of buy-to-let
products on the market and opens up options for those keen to invest
without making such a big capital outlay required of many lenders,” says
David Hollingworth of London & Country, the mortgage brokers.

However, mortgage brokers warned that the new deal would not be suitable
for all buy-to-let investors.

In order for an investor to borrow the full 85 per cent, a property
would have to yield in excess of 6.1 per cent, Bedford says. Rental
properties in London are unlikely to achieve a yield as high as this.
However, experts say landlords with properties in cities such as
Nottingham, Liverpool and Manchester, where yields can be 6-9 per cent,
will find the deal very attractive.

Landlords will also need to watch out for the high reversion rate at the
end of the mortgage period, says Melanie Bien of Private Finance. Under
Kensington’s terms, borrowers will move on to a variable rate of 5 per
cent over Libor – the rate at which banks lend to each other – which
would currently give a rate of 5.75 per cent.

It’s taken a while but we finally have one lender, Kensington, who have dipped their toe into the 85% buy to let mortgage market. For a long time since the market collapsed in 2008 you needed a 25% or even 30% deposit to buy a property to let but recently deals needing just a 20% deposit have appeared and now one from Kensington which requires just a 15% deposit. It’s a two year fixed rate at 5.99% and is potentially available to both experienced and first time landlords.

Read more at Mike Jones’ invaluable mortgage blog here

HSBC is making £500m available to homebuyers who have 10% deposits.

Martijn van der Heijden, head of mortgages at HSBC, said the housing crash seemed to be over and prices were recovering.

“It is a different picture today – houses prices seem to have bottomed and rates are low – and many of those who put off their purchase last year are starting to look around again,” he said.

Figures released today by the Bank of England showed that mortgage lending continued to improve last month.

The UK housing market showed further signs of stabilising during June with a 23 per cent jump in the number of mortgages taken out by people buying a home, figures revealed today.

Around 45,000 mortgages were advanced for house purchase during the month, the fifth consecutive monthly increase and the highest level for a year, the Council of Mortgage Lenders said.

There was also a steep rise in the number of first-time buyers getting on to the property ladder, with 17,200 mortgages taken out by people buying their first home, 26 per cent more than during May.

The RICS survey showed a continuing rise in interest from potential buyers, with new inquiries increasing for the ninth month in a row during July.