It’s official, UK inflation is falling and in October the rate fell to 4.5% having hit 5.2% in October.

We have seen that oil prices have been falling dramatically, with Nymex Crude sitting at just over $52 a barrel despite Opec reducing production to try to keep the price high. The fall in oil price has been filtering through to the economy lowering transport costs and with food prices falling too inflation has fallen.

There is however talk about the possibility of “deflation”, however, this is probably a bit premature with inflation still about 4%. The Bank of England has hinted at further interest rate cuts and there is a possibility that rates could fall to 2% by early next year.

The UK is not the only country with falling inflation and lower consumer confidence, the US has seen record falls in consumer prices when it dropped by 1% in October. This compares to a lower than expected fall in the UK where retail sales fell by just 0.1% in October, which is lower than the expected 1%. Retailers are having a hard time and are competing by discounting their prices!

The latest slow-down figures have again hit world stock markets with the Dow Jones falling by just over 5% and Japan’s Nikkei falling by just under 6.9%! The London FTSE is presently trading with a fall of just over 2%.

Better news for the property market

According to the Council of Mortgage Lenders (CML) mortgages in October picked up slightly, up by 7% over September.

“CML data shows that gross mortgage lending totalled an estimated £18.7 billion in October, almost 7% higher than what was an admittedly weak £17.5 billion lent in September. The monthly total was 44% lower than gross mortgage lending of £33.4 billion in October 2007″ Per the CML

Trying to predict the short term course of house prices is “futile” at the moment, says the Council of Mortgage Lenders (CML).

In its latest fortnightly review, the CML admits that its prediction of a 7% fall this year, made in May, has become rapidly outdated.

It says the property market is unlikely to recover from its current slump before 2010.

Both the Halifax and Nationwide say prices have fallen 11% this past year.

“Our May prediction of a 7% correction now looks wide of the mark, but trying to update that is now futile,” said Bernard Clarke of the CML.

Volatile conditions

The outlook of many participants in the property market has changed rapidly this year, as they have been caught out by the most sudden downturn in sales and prices in the past 60 years.

At the start of 2007 many experts were forecasting that prices this year would stabilise or possibly rise very slightly.

But the mortgage drought, brought on by the worsening international credit crunch, has made even updated forecasts look rapidly out of date.

At the start of this month Andy Hornby, the head of HBOS, which owns the UK’s largest mortgage lender the Halifax, said he thought that sales and prices would not recover until 2010.

And Graham Beale, the chief executive of the Nationwide, revealed that he thought prices might eventually fall by 25% from their peak a year ago to their eventual trough.

Mr Clarke of the CML said that expectations of such a large drop in prices now appeared to be an industry consensus for the course of 2008 and 2009.

“In current volatile conditions we need greater clarity before updating our forecast,” he said.

News reported by The BBC

Mortgage lending continued its downward spiral in August, according to the latest figures from the Council of Mortgage Lenders (CML).

The total value of new lending was £21.8bn, down by 12% from July and 36% lower than in August last year.

The CML said it was the lowest monthly figure since April 2005 and the lowest August figure since 2002.

It blamed the continued fall in mortgage lending on “exceptionally low housing market turnover.”

The CML’s director general, Michael Coogan, warned that lending would remain low in the months ahead.

“In some areas, you could count the number of property transactions in August on one hand” Andrew Montlake, Cobalt Capital mortgage brokers

“These figures reflect the heightened uncertainty for both lenders and consumers in the mortgage market at present,” he said.

“Lenders are uncertain about future sources of funding and the cost of funding, while consumers are unsure about how much further and for how long house prices will continue to decline.”

Gloomy prospects

There seems little doubt that sales and prices will fall further in the next few months.

Sales are already down by a half over the past year, while mortgages approved but not yet lent have fallen by 71% on the levels of a year ago.

This suggests that actual sales may soon drop even more.

Andrew Montlake, of mortgage brokers Cobalt Capital, said the latest CML figures were grim, but not surprising.

“They are a reflection of the near standstill the property market now finds itself in,” he said.

“In some areas, you could count the number of property transactions in August on one hand.

“And although August is always a fairly quiet month, it could be a few months before things start to pick up given the events of the past few days,” he added.

All surveys of house prices now suggest that on average they are lower than they were a year ago, with the most widely followed surveys published by the Nationwide and Halifax both showing a drop in prices of 11% during the past 12 months.

The latest crises in the financial markets, and the sudden takeover of the Halifax bank – the UK’s biggest mortgage lender – may make more people less confident about borrowing, which could extend the current sharp downturn in the property market.

News reported by The BBC

Buy-to-let investors have been hit by the mortgage squeeze alongside other homeowners, according to new figures from UK lenders.

New buy-to-let loans fell to 144,600 in the first half of 2008, an 18% dip compared with the previous six months, and the first fall for three years.

The Council of Mortgage Lenders (CML) said landlords faced the same issues as homeowners during the credit crunch.

Rents are unlikely to fall as demand for homes to let remains high, it said.

“We expect the rental market to remain underpinned by strong demand, partly because some people who would like to buy a home are being forced to carry on renting for now,” said CML director general Michael Coogan.

Wholesale

Many buy-to-let investors rely on the wholesale markets, which have dried up during the credit crunch as banks have scaled back on lending to one another.

As a result, the number of new buy-to-let mortgages in the first half of the year fell.

But the decline was not as steep as in the wider mortgage market – which saw a 28% drop in home loans in the first half of 2008 compared with the previous six months.

Buy-to-let mortgages borrowers also had to find a slightly bigger deposit for their homes, in the same fashion as other borrowers.

The average loan was an 83% loan-to-value offer during the first six months of the year.

The CML data shows that Birmingham Midshires maintained its position as the highest gross lender in the UK market.

Some landlords have been unable to raise rents in the short-term as mortgage costs have risen, pushing more into the position where they are having homes repossessed.

Some 0.16% – or 1,800 out of more than one million – buy-to-let homes were repossessed during the first six months of the year, up from 0.11% during the previous six months.

News reported by The BBC

A mortgage rescue scheme, and local authorities being allowed to buy unused land are featured in a Liberal Democrat plan to revive the UK housing market.

Treasury spokesman Vince Cable said that changes were needed to stop the “downward spiral” of the market.

Among the proposals are plans for councils to buy empty properties and developers’ land-banks to increase the amount of social housing.

The Council of Mortgage lenders said any plan needs to be properly targeted.

Social housing

The housing market has seen annual price falls of more than 8%, a squeeze on the number of mortgages, especially for first-time buyers, and a slowdown in the number of homes being built.

Faced with these problems, Mr Cable told the BBC that there should not be an opportunity for easy repossessions by certain “trigger happy” lenders during a tough patch for borrowers.

Instead, he said that the housing trough offered opportunities for the social housing stock to be boosted.

Mr Cable has been outlining the Liberal Democrats housing plans

Mr Cable said that the Liberal Democrat plan would assist the struggling housebuilders who were looking for cash to stabilise their positions.

He said councils could buy unused land owned by developers at a discount rate for use as social housing.

Mr Cable also called for lenders to go through the full and proper court process to repossess homes.

A proposal for a new, regulated mortgage rescue plan would allow those who were unable to make repayments on their home loan to stay in their property as tenants. The rent would be paid to social landlords.

‘Rescue’

The Council of Mortgage Lenders said that mortgage rescue plans were being considered in Wales, Scotland and Northern Ireland, with a handful of local authorities in England offering schemes.

“Help should be available for those who can’t pay, not those who won’t pay” Council of Mortgage Lenders

Typically, a social landlord takes a share in the property, with the borrower paying a smaller mortgage for their share of the home and rent for the part of the property they no longer own.

But the CML wants a standardised scheme across the UK, leaving repossession as a final resort and reducing the numbers going to unregulated private offers of sale and lease back.

“It is important that mortgage rescue is properly targeted at borrowers in circumstances for whom it is appropriate. Help should be available for those who can’t pay, not those who won’t pay,” said a CML report.

But the lenders’ group said that if councils became more hands-on, even going as far as operating as mortgage lenders themselves, then they should be fully regulated in the same way as lenders in the private sector.

Credit crunch

A spokesman for the Department of Communities and Local Government said that they were studying various options to support the housing market during the current climate.

“We are determined to do everything possible to promote long-term stability and fairness in the housing market. The international credit crunch has created significant challenges not just for the UK housing market, but in other parts of Europe and the United States,” he said.

He added that the government was providing cash for social landlords to buy unsold homes, as well as providing debt and repossession advice to struggling homeowners.

The Conservatives declined to comment on the Liberal Democrat proposals.

Housing charity Shelter said that the Liberal Democrat proposals included some good ideas, but more funding was required for them to work.

News reported by The BBC

The Financial Services Authority (FSA) has been accused by mortgage lenders of being “unfair” in its recent criticism of their repossession policies.

Last week the regulator warned it would take action against lenders who were too aggressive to customers in arrears.

But the Council of Mortgage Lenders (CML) said the FSA was wrong to suggest the whole industry was at fault.

The FSA replied that potential problems with repossession policies were found with all types of lender.

“There were issues discovered across the piece with all lenders which is why the warning was addressed to the whole market place,” said an FSA spokeswoman.

Unhappy

The unusual public spat between the two bodies hinges around a press release published on 5 August.

“In tarnishing the whole industry with the same dirty brush, is the regulator treating lenders fairly?” CML

In it, the FSA published the findings of a “thematic review” of how lenders deal with customers who are behind with their mortgage repayments and thus are in danger of losing their homes.

The regulator did acknowledge that the aggressive approach of which it disapproved was not typical of mainstream lenders, but was more usually found among specialist lenders.

It found that they were too keen to repossess at the first sign of a customer’s financial problems.

But the CML is very unhappy about the presentation of the FSA’s findings, which it said were confusing to lenders and in danger of misleading the public.

“The key message given to media and the industry was that lenders are failing to treat customers fairly,” the CML responded in its latest fortnightly newsletter.

“But in tarnishing the whole industry with the same dirty brush, is the regulator treating lenders fairly?”

“To publish a report in such ambiguous terms is unfair and confusing for the majority of lenders who are making significant efforts to comply [with industry rules],” it added.

Payment problems

Recent figures have shown that repossessions are on the rise, going up by 41% in the first half of the year, and are expected by lenders to reach 45,000 in total this year.

Although that would be a level of repossession that is far lower than in the housing recession of the early 1990s, there are many more potential problem cases in the pipeline.

The CML estimates that by the end of the year there may be 170,000 people who are more than three months behind with their repayments.

The FSA responded by repeating its earlier conclusions about mainstream mortgage lenders.

It said it had found that some of them could do more to help with their customers’ arrears; levied unfair charges on customers; and didn’t pay enough attention to the way debt recovery agencies or bailiffs acted on their behalf.

News reported by The BBC

The number of loans granted for house purchases in the UK in June fell to fewer than half the number made in the same month a year ago, figures show.

Some 47,000 home loans were granted compared with 98,000 in June 2007, and also down from 52,000 in May this year.

The figures from the Council of Mortgage Lenders (CML) indicate that the mortgage squeeze, caused by the credit crunch, is continuing.

The CML added that the slowdown in mortgage lending was likely to go on.

“The majority of lending continues to be to people with larger deposits, which is prudent for borrowers and lenders in a slowing housing market,” said CML head of research Bob Pannell.

Deposits

The figures show that the average homebuyer put down a deposit of 22% in June. These new borrowers had an average age of 35.

“Mortgage lending activity remains relatively weak and will decline further” Bob Pannell, CML

Fixed-rate mortgages get cheaper

In May this year, and in June 2007, the average deposit was 20% showing that lenders are tending to favour safer borrowers.

This is the result of banks and building societies limiting the amount they offer in loans owing to funding shortages caused by the credit crunch.

“Mortgage lending activity remains relatively weak and will decline further in the coming months as a result of funding constraints and lower consumer demand,” said Mr Pannell.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, agreed that the market would remain flat.

“Loans for house purchases remain subdued with first-time buyers under particular pressure,” he said.

“Any early relief for homebuyers in the form of a cut in interest rates is unlikely following the bigger-than-expected jump in inflation.”

Wide effect

The effect of the squeeze has been felt across the board, with an 8% decline in the number of home loans to first-time buyers and a 9% fall in loans to home movers in June compared with May, the CML said.

First-time buyers are having to find larger deposits for good deals

The average first-time buyer borrowed 3.33 times their income, with the average home mover borrowing 2.94 times their income.

With borrowers looking for certainty during a time of fluctuating mortgage rates, an increasing share of new home loans are fixed-rate mortgages.

Nearly seven in 10 new loans are fixed-rate deals and the CML believes this could increase because of the falling costs of these loans in recent weeks.

But the cost remains relatively high compared with before the credit crunch took effect, and so the number of homeowners remortgaging has fallen. Some 75,000 loans were granted for remortgaging in June, compared with 77,000 the previous month and 96,000 in June 2007.

With people looking for help in searching for a good deal in the uncertain market, there have been more mortgages obtained through an intermediary – such as a mortgage broker – in 2008 compared with previous years.

The proportion of home loans found through intermediaries in the April to June quarter was 78% for first-time buyers, 61% for home movers and 65% for people remortgaging.

These percentages were higher than the same quarter in 2007, but lower than in the first three months of 2008.

News reported by The BBC

The mortgage squeeze is continuing to tighten with a further drop in lending, according to new figures.

The fall in gross mortgage lending is accelerating, with a 3% dip from May to June, according to the Council of Mortgage Lenders (CML).

The CML said gross lending declined to an estimated £23.8bn in June, some 32% lower than the same month a year ago.

CML director general Michael Coogan said borrowers on tight budgets must plan ahead as the trend will continue.

Credit crunch

The more sturdy quarter-on-quarter figures show that lending declined by 1% from the first three months of the year to an estimated £74bn in April to July.

But spring and early summer are usually times when the housing market is more buoyant, with people more likely to look to move than in winter.

The quarterly year-on-year decline had accelerated, the CML said, with lending in the second quarter of 2008 down 21% on a year ago, after a year-on-year dip of 11% in the first quarter.

“Market activity during a traditionally a busy time of year for mortgages has been muted by funding shortages and, more recently, dampened consumer demand,” said Mr Coogan.

Lenders are taking fewer risks with lending, leading to more expensive mortgages and a demand for bigger deposits.

But the demand from buyers has also fallen as house prices drop. Many are likely to be waiting for a sign of property prices stabilising before they choose to move.

Government plans

Mr Coogan said that net lending had been “constrained” in 2008 and this picture would to continue for the rest of the year.

“Borrowers on tight budgets will have to plan ahead to manage higher mortgage payments than they have been used to” Michael Coogan, CML

The figures came in the same week that Housing Minister Caroline Flint announced plans for a “rent now, buy later” scheme to help first-time buyers get onto the property ladder but have time to save for a deposit.

Opposition parties questioned how the scheme would be funded.

The CML welcomed the plan and proposals for housing associations to buy unsold newly-built properties, but said it would only have a “marginal impact” on the housing market.

The UK’s biggest mortgage lender, the Halifax, said on Friday that it was trimming interest rates on nearly half of its fixed-rate mortgages by up to 0.15% on 19 July – the second dip in a week.

BM Solutions, Bank of Scotland and Intelligent Finance, also owned by HBOS, are reducing some of their mortgage rates for new borrowers at the same time.

Nationwide and some smaller lenders said earlier this week that they were cutting the cost of some fixed-rate and tracker deals for new borrowers.

“The recent reduction in short-term fixed-rate mortgage costs is a small bit of welcome news for hard-pressed households facing significant pressures on their finances from the higher cost of food and fuel, in particular,” said Mr Coogan.

“However, borrowers on tight budgets will have to plan ahead to manage higher mortgage payments than they have been used to.

“‘Speak to your lender early’ remains the advice for anyone struggling to pay.”

News reported by BBC

Mortgage lenders called on the Government yesterday to adopt new mortgage funding strategies in an attempt to restart the failing market.

In a proposal submitted to the Treasury, the Council of Mortgage Lenders (CML) urged the Government to act to “break the logjam in the housing and mortgage markets and to underpin confidence” by breathing new life into mortgage funding via UK residential mortgage-backed securities and covered bonds.

The CML believes that the Bank of England should offer a repurchase or “repo” facility – whereby these securities are bought back at a later date, with the investor assuming the credit risk. This facility, the council argues, would act as a catalyst to boost investor confidence and therefore market confidence. Only those vehicles first sold to investors in a public issue would be eligible “to ensure the market itself delivered the solution”.

But Michael Coogan, director general of the CML, warned that the plan should be implemented quickly. He said: “The single biggest issue in the housing market that the authorities need to address is the lack of available funding to support new mortgage lending.

“This proposal has the virtue of being delivered through the market itself. Unlike a government guarantee, the investor keeps the credit risk. But it specifically incentivises investors, which the Bank of England’s special liquidity scheme does not. A year into the credit crunch, there is no merit at all in waiting until the autumn before taking steps that will help the housing market to remain more resilient, and so help the overall health and stability of the UK economy.”

Nicholas Leeming, director of propertyfinder.com, added: “The Government is floundering and has singularly failed to offer any leadership to get the markets moving again. The CML’s proposals could get the mortgage market on its feet so that both new lending and existing books of mortgages can be effectively financed.

“With access to new funding, lenders would have to compete with each other again – and that means they could finally bring their sky-high mortgage rates back in line with the base rates.”

News reported by The Independent

Mortgage lenders have drawn up a plan to help kick-start the mortgage market amid falling house prices and a squeeze on the availability of home loans.

The Council of Mortgage Lenders (CML) want to free up UK banks and building societies to offer new home loans.

It wants the Bank of England to guarantee a market in mortgage-backed securities and covered bonds.

This would encourage investment in the market for these products, pushing funds back into mortgage lending.

Confidence

The CML said that the biggest issue in the mortgage market was the lack of available funding to support new mortgage lending.

This has led to the number of mortgage deals on the market being squeezed and the cost of these loans rising.

The lenders’ body wants the Bank to essentially offer a form of secured lending. This would persuade investors to buy mortgage-backed securities – something that has dried up during the credit crunch.

The scheme could be set up quickly and would act as a catalyst to restore market confidence, the CML said.

Unlike the Bank of England’s Special Liquidity Scheme – which allowed banks to swap £50bn of mortgages for government bonds – it would cover new mortgages and investors would still take the credit risk.

“A year into the credit crunch, there is no merit at all in waiting until the autumn before taking steps that will help the housing market to remain more resilient,” said CML director general Michael Coogan.

The plan could receive a cool welcome from those who believe it would involve the state having to underwrite the housing market.

Others might suggest that the drought in mortgage finance would continue without any action.

News reported by BBC