Residential Mortgages

Bank of EnglandUK interest rates held at record low of 0.5% for another month

UK interest rates have been at 0.5% for five years. However, in June, Mr Carney said that interest rates could start to rise sooner than financial markets expected.

The size of the Bank’s economic stimulus programme – quantitative easing – was also unchanged at £375bn.

Debate over the timing of a rate rise has intensified, with Bank governor Mark Carney hinting recently that it could come by the end of this year.

In the minutes of the previous MPC meeting in July, all nine members of the committee voted to keep rates on hold.

Details of why the Bank’s Monetary Policy Committee (MPC) held rates will be published later this month.

The minutes for the latest MPC meeting are not due to be released until 20 August. If they reveal that some policymakers voted in favour of a rate rise it will be the first time the committee has been split since July 2011.

BOEThe Bank of England has held UK interest rates at a record low of 0.5% for another month

The size of the Bank’s economic stimulus programme, known as quantitative easing, was also kept unchanged at £375bn.

Last month, Bank governor Mark Carney hinted that rates could increase later this year as the UK’s economic recovery becomes more secure.

When it comes, any rise in rates is expected to be small.

Speaking last month, Mr Carney said “we expect that eventual increases in Bank rate will be gradual and limited”. He has also talked of rates hitting a “new normal” of 2.5% by 2017.

The number of people out of work is also falling, with the unemployment rate down to 6.6% in the three months to May.

On the other hand, there is little pressure to raise rates to keep prices in check – the inflation rate fell to 1.5% in May, down from 1.8% in the previous month. The Bank’s inflation rate target is 2%.

Interest rates have been at their record low of 0.5% since March 2009.

BOEThe Bank of England’s Monetary Policy Committee has once again voted to keep base rate at 0.5 per cent, the 61st month of record-low rates. The MPC also voted to keep its programme of quantitative easing at £375bn.

The previous change in Bank Rate was a reduction of 0.5 percentage points to 0.5% on 5 March 2009. A programme of asset purchases financed by the issuance of central bank reserves was initiated on 5 March 2009. The previous change in the size of that programme was an increase of £50 billion to a total of £375 billion on 5 July 2012.

Help to BuyEquity loans taken out under the Help to Buy scheme since its inception have reached a total value of £600m, government figures have revealed.

Since the scheme launched in April 2013 14,823 equity loans have completed to the end of January, 89% of which were for first-time buyers.

Leeds topped the table as the council which completed the most purchases with 268.

The Help to Buy equity loan scheme can be used to purchase a new build property up to the value of £600,000 with a 20% equity loan up to a maximum of £120,000.

The government has set aside a pot of £3.5bn to service the equity loan scheme.

The availability of a government loan to purchase a new build home helped to drive up house building activity last year.

Planning permissions granted in 2013 reached their highest level since 2007 climbing to 174,471, a report from the House Builders Federation showed.

The report revealed the scheme was delivering around 2500 reservations a month.

But despite the upward trend, the 2013 total figure is still short of meeting the country’s annual housing demands.

The Office of National Statistics predicted that 232,000 households are projected to form each year.

Stewart Baseley, executive chairman of the HBF, said: “Help to Buy equity loan is increasing demand for new homes and the industry is increasing its output as a result.

House prices rising at fastest rate for four years

House prices rose by 0.6% in February, a 9.4% increase on the same month in 2013, according to the Nationwide Building Society.

The annual rate of growth is the fastest for almost four years.

It puts the average price of a UK home at £177,846, which is still almost 5% below the 2007 peak.

The Nationwide said sales and prices were being driven by record low interest rates, higher employment and the easier availability of mortgages.

The lender’s chief economist, Robert Gardner, acknowledged that prices could accelerate even faster in the coming months, as more people took the plunge to buy for the first time or move. But he denied a house price “bubble” was being created.

“If you look at prices relative to earnings then housing does look relatively expensive by historic standards,” Mr Gardner told BBC News.

“But if you look at how much it costs to service a typical mortgage, that suggests that housing isn’t overly expensive at this point… because interest rates are at such low levels.”

The Nationwide pointed out that prices were also being driven higher by a continued lack of new homes.

“Price growth is being supported by the fact that the supply of housing remains constrained, with housing completions still well below their pre-crisis levels,” said Mr Gardner.

He added that just 109,500 new homes were built in England in 2013, which was 38% below the level recorded in 2007, and about half the projected number of new households expected to form each year.

5 year fixedWith the UK economy growing faster than expected this could push forward the first base rate hike by as much as 12 months, economic forecasters say.

Borrowers considering taking out a five-year fixed should consider this sooner rather than later as anticipation of a rate hike grows.

There is a one in five chance that unemployment could fall to 7% in the first half of next year, which is one of Bank of England governor Mark Carney’s trigger points for hiking base rates from today’s 0.5%, according to the National Institute of Economic and Social Research.

But it admits there is “considerable uncertainty” about the rate at which unemployment will fall. Its best guess is that the level could get 7.4% by the middle of next year, down from today’s 7.7%.

Some are forecasting a rise in interest rates in the second half of 2015.

For a personal quotation, please call us on 01489 580020 or contact us today where a qualified adviser can discuss your financial requirements.

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Bank of EnglandThe Bank of England’s Monetary Policy Committee voted to make no change to either the Bank Rate or quantitative easing. Therefore the Bank Rate still stands at 0.5% and the MPC opted to keep QE on hold at £375billion.

Since the May Inflation Report, market interest rates have risen sharply internationally and asset prices have been volatile. In the United Kingdom, there have been further signs that a recovery is in train, although it remains weak by historical standards and a degree of slack is expected to persist for some time. Twelve-month CPI inflation rose to 2.7% in May and is set to rise further in the near term. Further out, inflation should fall back towards the 2% target as external price pressures fade and a revival in productivity growth curbs domestic cost pressures.

http://www.bankofengland.co.uk/publications/Pages/news/2013/007.aspx

 

Mortgage funds to rise significantly, Bank of England says

The supply of mortgage funds will be increased “significantly” by the Funding for Lending Scheme (FLS), says the Bank of England.

A survey of lenders by the Bank reports that lending picked up in the last three months of 2012, and will continue to do so in the coming months.

Separately, the Nationwide building society said that house prices fell by 1% in 2012.

And it predicted little change in either prices or sales this year.

The building society said that the average UK property was valued at £162,262 at the end of 2012, following a 0.1% drop in December.

The Bank of England’s Credit Conditions Survey found that the mortgage funds for Lending Scheme, launched at the start of August 2012, was now helping to increase the flow of money to borrowers.

The aim of the scheme is to channel as much as £60bn of cheap money to lenders, on condition that they then lend it to households, and to companies outside the financial sector.

An initial report on the scheme, published by the Bank in early December, found that lending to households and businesses increased only slightly in the third quarter of the year, as the new scheme got under way.

Since then, its effect has grown stronger. To read more click on the BBC Website.

Bank of England refrains from further QE stimulus

No more quantitative easing (QE) stimulus programme, which has injected £375bn into the UK financial system.

Under QE, the Bank creates money and uses it to buy government bonds to try to stimulate the economy.

The Bank’s Monetary Policy Committee (MPC) also decided to keep interest rates at 0.5%, the record low they have been held at since March 2009.

The UK came out of recession recently, growing 1% between July and September.

The strong rebound, which was helped by tourist spending during the Summer Olympics, followed nine months of modest economic contraction.

However, recent data suggests the economy remains finely balanced between growth and recession. Retail sales were revealed last month to have fallen a faster-than-expected 0.8% in October.

Another lender closes its doors to Interest Only

RBS had stopped non-advised customers taking out interest-only policies in October, with the bank now claiming that interest-only mortgages were a ‘declining part’ of its overall mortgage book.

The lender denied last month that it would make changes to its interest-only policy, but has now taken the decision to close this type of lending to all borrowers.

It said existing customers will not be affected by the move and that both brands will continue to offer buy-to-let products on an interest only basis.

Moray McDonald, head of home lending at RBS and NatWest, commented: “Residential interest only mortgages have been a declining part of our mortgage lending, with only 4% of customers now applying on that basis.

“As a fast growing UK mortgage lender we want to focus on the products most of our customers are asking for.

“We don’t rule out offering residential interest only mortgages to niche customer groups in the future but we would do that using specialist advisers rather than our broad base of branch and telephony advisers.”

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Buildings Insurance is a requirement when you complete on a mortgage the cover is to provide security to the lender, the insurance covers the main structure of your home. It will cover you for subsidence, storm, flood, fire or smoke damage and cover the costs of rebuilding or repair.

Equity release is a way of releasing cash from your property, either through selling a percentage to the reversion company or taking a mortgage on it, while allowing you, the homeowner to continue living there as long as you wish.