The Bank of England has kept interest rates on hold at 0.5% and frozen its quantitative easing programme for the time being.

Analysts widely expected the Bank’s Monetary Policy Committee (MPC) would keep quantitative easing at £200bn after the economy grew slightly in the final quarter of last year.

Office for National Statistics  data showed the economy grew by 0.1% in the last 3 months of 2009.
Some economists say quantitative easing has done all it can to help the economy, and want the MPC to turn its focus to controlling inflation.
Interest rates will remain at 0.5% for the 11th consecutive month. However, rates are widely expected to rise later this year, after inflation hit almost 3% last month due to rising fuel prices and the increased rate of VAT.

Standard Variable Rates Mortgages have also been very low over the the last 12 months, but despite Bank Base Rate remaining at 0.5%, a number of mortgage lenders have been increasing their SVRs - pushing up mortgage payments for thousands of borrowers. As this trend continues, more and more borrowers should consider switching their mortgage to a new deal.

Although SVRs tend to follow the Bank Rate, lenders can change their own rate at their discretion. Lenders such as C&G and Nationwide have rules in place which guarantee that their SVRs can be no more than 2% above the Bank’s base rate, but other lenders have no such rules in place.

While the SVRs of both C&G and Nationwide remain at 2.5%, a number of lenders have recently increased their rates and some are now charging more than twice that rate.

Marsden Building Society recently announced an increase in SVR from 5.49% to 5.95% effective this month and Kent Reliance increased theirs by 0.3% to a huge 6.08% from 1st December.

Others have increased by even bigger margins. Accord (part of Yorkshire Building Society), last month raised its SVR by 0.65% and Cambridge Building Society went up by 0.59%.

Most recently, Mansfield Building Society announced that it was increasing its SVR by 0.35% to 5.59% - effective from the 11th January for existing borrowers.

David Hollingworth, Head of Communications for L&C, said, “Following these rises, the gap between the lowest and highest SVRs is now more than 3.5%, so depending on which lender you’re with, paying the Standard Variable Rate could prove costly.
“If you’ve been paying your lender’s SVR, don’t just assume that it’s the best rate for you at the moment - you could be paying more than you have to and you could see you monthly mortgage payments increase out of the blue.”

Abbey has launched some new mortgages with a two-year tracker at 2.49% up to 70% LTV and a £995 fee, and a two-year fixed rate deal at 3.44% at up to 70% LTV with a £995 fee The lender is also launching an exclusive two-year fixed rate deal for its Key Account brokers at 3.69%, a 0.3% cut on the previous mortgage

The mortgage is from Abbey’s Homebuyer Plus range and is available up to 70% LTV and comes with a £995 fee Abbey has also cut its three-year fixed rate Homebuyer deal by 0.09% to 4.75%, available up to 75% LTV with a £995 fee. The five-year fixed rate Homebuyer deal has also been cut by 0.05% to 5.44%, available at up to 75% and with a £799 fee. Ricky Okey, managing director at Abbey for Intermediaries, says:  “This is a mortgage range designed to pack a punch. There have been a number of changes and additions within the range, all of which aimed at giving brokers access to market leading fixed and tracker rates across a range of LTVs.”

Mortgages approvals dropped last month from 60,045 in November to 59,023 in December which is the first fall in a year. City analysts expected December mortgage approvals to increase to 62,000 although we also saw a drop in mortgage lending which fell from £1.551 billion in November to £1.165 billion in December. We do have to remember that it is a seasonally quiet time of the year for new business. It will be interesting to see how the UK property market performs in the opening 3 months of 2010, a period of time which has analysts split on their forecasts. There is an interesting mix of higher inflation and subdued economic activity under the surface which will prompt a number of difficult decisions for the UK government and the Bank of England to take.

The need to keep UK mortgage rates as low as possible to give the sector time to recover is overshadowed by the need to reduce credit lines to the public and business arena in order to subdue inflation. It will be interesting to see how these two elements pan out in the first quarter of 2010.

House prices went up by 1.2% in January putting the average UK house price at £163,481, according to the latest information from Nationwides house price index. They tell us that house prices are up 8.6% compared to the same time last year. Martin Gahbauer, chief economist at Nationwide, predicts that unless property values fall next month annual house price growth will hit over 10% for the first time since May 2007 He says: “Although there may still be some upward revisions to the initial estimates of economic growth, this won’t change the fact that the rebound in the housing market - and particularly house prices - has gone some way beyond the recovery in the overall economy” But Gahbauer adds that pay cuts and pay freezes will mean any increase in house prices will make it harder for buyers to afford houses, especially since interest rates are not likely to fall any further.  He says this limits the benefits of the continued house price recovery Yet he acknowledges that pay restraint has allowed more people to stay in work and keep up with their mortgage payments He adds: “As a result, relatively few households have been under financial pressure to sell their homes into what remains a relatively weak demand environment”

Analysis by Moneysupermarket have revealed more products are now available to mortgage borrowers with lower deposits. Read the rest of this entry »

Homeowners in England and Wales saw a 20% reduction in the proportion of their take-home pay spent on monthly mortgage repayments last year, according to the latest mortgage figures released by Woolwich. In December 2008, homeowners in England and Wales were spending on average £196 of every £1000 of their take home pay each month on their mortgages. A year later this had dropped to £157. In cash terms this equates to a saving of £110 per month on average in England and Wales. The average monthly mortgage payments for homeowners now stands at £497, compared to £607 in December 2008. Andy Gray, head of mortgages at Barclays said: “For the 11 million UK households who have a mortgage there is a silver lining to the recession - a substantial reduction in mortgage payments right when they need it most. For them it’s a chance to save in a way they might not have been able to before, or to overpay their mortgage and cut years from it.

 The Woolwich Mortgage Affordability research measures the proportion of homeowners’ that is spent on mortgage repayments. It is based on data from a representative sample of nearly two million Barclays bank account holders making mortgage payments from the full range of UK lenders Regionally, the largest fall was in London where the proportion of pay spent on mortgage repayments has decreased by 23%, with the smallest decrease in the North East, at 15.5%. Of the ten regions analysed, the Welsh spend the smallest proportion of their take home pay - £143 in every £1000 - on monthly repayments. Londoners spend the most - £189 Despite Londoners spending the most, they have also experienced the biggest payment reductions [£228] while homeowners in the North East saved on average £80 a month.

Confidence is returning to the the buy-to-let market. landlords are now talking about expanding their portfolios. This is according to TBMC latest Landlord Profile Tracking Index for last quarter of 2009. The Index tracks and monitors changes in landlord demographics and identifies trends in the buy-to-let market. The index is based on data collected by TBMC’s specialist mortgage processing unit and is compiled on a quarterly basis Commenting, Andy Young, chief executive officer of TBMC, said: “The results for the last quarter show that the majority of landlords are applying for buy-to-let mortgages in order to expand their portfolios with 69% of applications being for purchases, demonstrating that confidence in the market remains strong. However, we also know that with interest rates so low, many landlords are choosing to stay on their reversionary rates rather than remortgage. Young continued: “There has been a significant change in the type of product being chosen by landlords. In Q4 2009 70% of applications were for tracker rates compared with only 45% in the previous quarter. This indicates that in Q3 2009 there was a fairly even split in the views of landlords about what would happen to interest rates, whereas now a greater proportion believe that interest rates will stay low for some time to come.”

Figures due out at 9.30am today are expected to show that the UK came out of recession in the last quarter of 2009.The UK recession began in the second quarter of 2008 and since then the economy has contracted by 6%. Many experts had been expecting us to exit the recession in the third quarter of 2009, but the quarter showed a 0.2% contraction.The UK is one of the last of the European economies to exit the recession.

Last  Friday 22nd January, Alliance & Leicester launched a number of new mortgages at 85% LTV.

Fixed rate products with fees that can be added on completion:
3 year Fixed rate Remortgage and Homebuyer products, 5.39% with a 2% fee 3 year Fixed rate Remortgage and Homebuyer products, 5.69% with a £1,495 fee 3 year Fixed rate Remortgage and Homebuyer products, 5.89% with a £495 fee

4 year Fixed rate Remortgage and Homebuyer products, 5.49% with a 2% fee4 year Fixed rate Remortgage and Homebuyer products, 5.69% with a £1,495 fee 4 year Fixed rate Remortgage and Homebuyer products, 5.85% with a £495 feeWe are also reducing the rate on our 85% LTV 4 year Fixed rate, First Time Buyer only product with no booking fee to 5.89%.