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

The Halifax has said it is to close 53 of its estate agency branches in a move that will lead to the loss of 100 jobs.

The firm said the closures followed the “significant decline” in the number of house sales over the past year.

Following the changes, the Halifax said it would focus on its core markets in the Midlands and North where it would operate 151 branches.

Estate agents have been hit hard by the recent housing downturn, that has seen the number of transactions plunge.

The number of sales is down by a half compared with last year, and the lack of transactions has hit estate agents’ earnings.

Banks and building societies have cut back mortgage lending dramatically because the credit crunch has dried up the supply of funds available to them.

The latest figures from the Council of Mortgage Lenders showed total mortgage lending in July was down by 27% on a year ago to £24.8bn.

The Halifax said that about 550 people would be affected by the branch closures, but about 450 of these would be transferred to similar roles in bank branches.

It added that of the 100 jobs to be cut, it would aim to achieve the reduction through voluntary redundancy and natural turnover.

News reported by The BBC

Abbey, one of the biggest mortgage lenders in UK, has announced another round of cuts in mortgage interest rates for new borrowers.

The cost of two- and three-year fixed and tracker rates is coming down by up to 0.1% after similar cuts last Friday.

The past month has seen a series of rate reductions from major lenders as well as some smaller ones.

This week the Halifax cut the cost of many of its deals again, by up to 0.38% in the case of a two-year fixed rate.

The bank reduced the rates on 30 different mortgages deals, with one two-year fixed rate deal coming down to 6.19%.

The Bank of Scotland, which is part of the HBOS group that also owns the Halifax, also cut rates on 36 deals by up to 0.7%.

“There are increased signs of competition in the market and the big lenders are starting to slug it out a bit” Ray Boulger, John Charcol mortgage brokers

A Halifax spokesman said the latest rounds of cuts was intended to ensure that the bank met its target of lending 20% of all new mortgages.

“It’s down to competitor activity, we are aiming for a one-in-five market share,” he said.

Competition returns

Nationwide, Abbey, the Halifax and others have cut their rates in response to a reduction in the cost of borrowing wholesale funds on the financial markets.

Ray Boulger of the mortgage brokers John Charcol said this was good news for borrowers, who have found it much harder to borrow money this year in the wake of the credit crunch.

And he said it was clear that competition was returning to the mortgage market.

“Two-year swap rates [the cost of lending between banks] are now 1% down from their peak in the middle of June,” he said

“So there are increased signs of competition in the market and the big lenders are starting to slug it out a bit,” he added.

Abbey recently said it had become the UK’s biggest lender of new mortgages, accounting for 26% of all new home loans in the first half of the year.

By contrast, the Halifax accounted for only 7% of new lending in the same period.

Fees

With house prices falling rapidly, banks and building societies have become much warier about making larger loans in case borrowers run into financial trouble.

It is generally expected that house prices may fall by between 15% and 20% in the course of this year and next.

So the best rates continue to be available only to those borrowers who can raise a deposit of 25% or more.

However Darren Cook of the financial information service Moneyfacts said some rate reductions were not as good as they seemed.

“The average rate on a two-year fixed rate mortgage has dropped from 7.08% at its peak on 11 July to 6.90% today, but typically there is a sting in the tail,” he said.

“During the last month the average fee has increased by nearly £100, meaning that borrowers have not benefited as much from a reduction as expected.

“On a £150,000 repayment mortgage, a £100 increase in fee equates to an additional 0.06% increase in the rate,” he added.

In the case of Abbey, its best rate for two-year tracker mortgages is now 5.89% while its lowest rate for a two-year fix is 6.19%.

The standard up-front fee amounts to just under £1,000 in both cases.

But, in another sign of renewed competition, borrowers wishing to take out a fixed-rate loan of £150,000 or less will be charged a reduced fee of £549.

News reported by The BBC

Halifax, the UK’s largest lender, on Friday brought momentum to the trend of falling mortgage rates as it cut the cost of a number of deals for the second time in a week.

The bank reduced its two- and five-year fixed rates by up to 15 basis points. Other brands within the HBOS group – BM Solutions, Bank of Scotland (BoS) and Intelligent Finance – also cut a number of rates, including on some buy-to-let and self-certification loans.

The changes will go some way to reassuring borrowers that mortgage rates should start to improve over the next few months. Other lenders, including Nationwide, Lloyds TSB, Abbey and Woolwich, have also launched cheaper deals in the past couple of weeks. Nationwide reduced some of its rates by as much as 30 basis points.

But brokers said it was still too soon to call the peak in mortgage rates.

“Certainly for the first time in 12 months we are seeing lenders jockeying for business rather than pulling away, and we are talking about major lenders through to smaller lenders,” said David Hollingworth at broker London & Country Mortgages. “But we have to be hesitant about saying all rates will continue to get better.”

Swap rates, which underpin the cost of short-term fixed lending, have fallen fairly rapidly in recent weeks, triggering the reduction in fixed mortgage rates. But any renewed rise in swap rates, if inflation continued to go up, for example, could mean lenders increase rates again.

Brokers said the fact that a number of banks were moving rates downwards, and showing more of an appetite to lend, was still good news for homeowners.

In recent months lenders that have launched reasonably competitive mortgage rates have rapidly been inundated with business and forced to pull the deals, sometimes within days. But as more banks lower rates the balance between supply and demand should even out and the best rates should be available for longer.

Nationwide is now offering a two-year fixed rate of 6.18 per cent, with a fee of £599 ($1,197), while Lloyds TSB and Halifax are offering two-year rates of 6.34 and 6.47 per cent respectively. The best deals are only available for borrowers with deposits of at least 25 per cent. Those with smaller deposits are still having to pay much higher rates, and are unlikely to see any improvement soon.

For borrowers who do not need the security of guaranteed mortgage payments, two-year tracker rates can be found from 5.49 per cent, according to Moneyfacts.co.uk.

Battle for savings ends as top fixed-rate offers pulled

The top two fixed-rate savings deals have been withdrawn just weeks after launch, in a sign that lenders are no longer battling for customers’ cash to offset the tightened credit market, writes Elaine Moore.

The Bank of Cyprus withdrew its 7.15 per cent savings bond yesterday following Birmingham Midshires’ move to end its 7.17 per cent offering on Thursday. Others are likely to follow suit and analysts said the action was likely to spell the end of 7 per cent plus short-term bonds.

Savings providers have competed fiercely to outbid each other to the top of the savings rates table in recent months in an effort to secure ever-higher levels of funding from customers. The desire for retail cash inflow is a result of the difficulties faced by banks and building societies to obtain funding from the wholesale market.

The withdrawal of the top two rates could be a sign that providers have overreached themselves, said Kevin Mountford, head of savings at price comparison site moneysupermarket.com.

“It had to happen sooner or later,” he said.

>News reported by The FT

Halifax Bank of Scotland (HBOS), the UK’s top mortgage lender, will reveal on Monday how many investors have opted to buy new shares in the business.

Media reports have suggested that shareholder support for the bank’s £4bn rights issue will be lukewarm amid concerns about its falling share price.

HBOS shares have been trading below the 275 pence per share offer price, making it unattractive for many investors.

But HBOS will still get the money as the issue is underwritten by top banks.

Share slump

This means that the underwriters – Morgan Stanley and Dresdner Bank – will end up owning a large chunk of the new shares until they can sell them on to other City institutions.

HBOS is one of the host of leading British banks to tap their shareholders for extra cash to strengthen their balance sheets as the fallout from the credit crunch continues.

The Royal Bank of Scotland has raised £12bn while Barclays has secured £4.5bn in new funding from a range of foreign investors.

But the HBOS cash call has come under particular focus because of the sharp fall in its share price in recent months.

When the bank launched its rights issue in April, HBOS shares were worth about 500p.

But its shares have fallen by more than 40% in recent weeks, making it cheaper for investors to buy existing shares in the market rather than take-up the new ones on offer.

HBOS shares rallied on Friday, closing up 5% at 282p, but could come under fresh pressure when the outcome of the rights issue is known.

The Sunday Times reported that as few as 10% of HBOS investors had subscribed for new shares by the time the offer officially closed on Friday morning.

It said most of the bank’s two million small investors had sidestepped the offer.

The gloomy outlook for the UK housing market and the economy in general has eroded investor confidence in leading banks.

But it has been claimed that HBOS has been particularly hit by the practice of “short-selling” where investors sell shares, thus forcing them down, only to buy them later for a big profit.

News reported by The BBC