The Nationwide Buillding Society today announced that house prices fell by 1.8% in February as interest the UK property market failed to pick up.

On average the UK property prices  had fallen by 17.6% over the last year, to £147,746.

Cuts in interest rates have made mortgage payments less for some, this has yet to be seen in increased sales, it said.

But it added that “curiosity” in the market was growing.

Nationwide’s chief economist Fionnuala Earley said that falling prices and interest rates meant sales could pick up quickly once confidence returned.

But she said that this might not be for some time yet.

“Further cuts in rates will be welcome in the housing market, but the economic conditions that require them will mean that there is unlikely to be a swift turnaround in the housing market in 2009,” she said.

Figures from some of UK Biggest banks suggested that mortgage approvals rose slightly in January.

However, the British Bankers’ Association’s mortgage figure was still 43% lower than the same month a year earlier.

This shows how much weaker the housing market has become compared with a year ago, despite falling mortgage costs.

Existing borrowers on variable rate deals have seen their mortgage payments fall by about a third since the end of 2007, or £240 a month on average.

Nationwide said that borrowers in areas of the UK with the highest house prices had seen the biggest falls in their mortgage repayments.

Homeowners in London were benefiting from monthly cuts in their bills of £350 since the end of 2007, compared with about half this amount for those in the north of England.

“It is too early to say that the market has reached its trough, given the economic recession. However, falling house prices and interest rates have made the situation for borrowers today much easier than it might have been,” said Ms Earley.

She added that high up-front deposits currently being demanded by lenders were proving a “constraint” on first-time buyers entering the market, despite the lower monthly repayment costs.

Borrowers needed to put down at least 40% of their home’s value to qualify for a fifth of mortgage deals.

The expectation of further falls in house prices was leading to some potential buyers delaying any entry into the housing market.

However, she suggested that confidence in the market could begin to pick up later in the year, with consumers becoming “a little more optimistic” about the path of house prices.

“While lower interest rates alone will not lead the housing market to suddenly pick up, more affordable loans will provide support for both new and existing borrowers in the weak economic environment,” said Ms Earley.

Market experts are expecting prices to keep falling this year, probably until the economy stops shrinking, with continued restrictions on credit reducing the number of people taking out mortgages.

But David Smith, senior partner at Dreweatt Neate estate agents, suggested there was some activity for high-value purchases.

“Although there are clearly still financing issues for the first-time buyer, people who are unaffected by the broader economic turmoil, specifically those at the higher end of the market, sense an opportunity and are now making their move,” he said

The amount of home owners overpaying their mortgages has shot up by 50% in the last 12 months according to new figures released from The Co-operative Bank Mortgages. 

A low return on savings has has emrged as a major factor for borrowers overpaying into their mortgages.

Nearly 40% of home owners are making overpayments on their mortgages because of the base rate falls.

24% of borrowers are choosing to defy the credit crunch and spend excess money on holidays and clothing.

Terry Jordan, head of mortgages at The Co-operative Bank, says: “Our internal data has shown a 50% increase in our mortgage customers making overpayments.

“It would appear that with interest rates now at a historic low, customers are recognising more than ever the benefits of making overpayments.

“Providing their mortgage allows the flexibility to overpay, at the current time it can make real financial sense for customers to make even small monthly overpayments, as these can really add up to a large difference over the lifetime of the mortgage.”

Mortgage approvals for the first month of this year improved slightly to £7.6bn but fell almost 60% from the same time last year.

The figures are up from the £7.3bn recorded for approved mortgage loans in December 2008, but is down by 59.4% from 2007.

Home purchases were up marginally at £2.9bn, from £2.7bn in December.

The January figure is down 56.1% from the same time last year.

Mortgage lending remained low at £9.9bn, a decline of 45.2% from January 2007.

Net mortgage lending rose by £2.9bn in January, compared to £3.3bn for the previous month.

Despite this, annual growth for net mortgage lending is up 10%.

Personal deposits fell by £2.3bn as a result of savers seeking alternative deposit products.

David Dooks, statistics director of the BBA, says: “The high street banks’ mortgage lending is still seeing double-digit annual growth, albeit in a much slower market.

“Lower borrowing costs and falling property prices have underpinned demand at these lenders, who are providing over two-thirds of all new mortgage lending.”

He adds: “There is only limited demand from households for unsecured credit, while a fall in their deposits in January reflects a tendency to draw on cash or to move into alternative financial products.”

The Northern Rock is to reverse its post-nationalisation strategy of reducing down its mortgage book and will start to offering new loans of up to 90% of a property’s current value.

This move offers hope to the United Kingdom’s beleaguered housing market, which despite the recent rise in new buyer enquiries reported by the Royal Institution of Chartered Surveyors and major property website, Rightmove, will not see any increase in transactions until mortgage lending frees up.

In particular, the 90% loan to value (LTV) mortgage has all but virtually disappeared as lenders fear further future house price falls and an increase in negative equity.

While The Northern Rock’s new offering is not solely aimed at first-time buyers it does offer hope to those who believe propety prices have bottomed out and this would be a good time to get a foot on the property ladder.

Since its nationalisation a year ago, the mortgage lender has focused on repaying its debt to the Bank of England, which it has achieved ahead of schedule.

With support from the taxpayer, it will therefore be lending around £5 billion in new mortgages during 2008 and a further £9 billion in 2009.

The Government is still considering another measure that could help return confidence to the mortgage market; as recommended by the Crosby Report, it could provide guarantees for residential mortgage-backed securities, which are currently not favourites with investors.

Last week the Council of Mortgage Lenders reported that gross mortgage lending in the UK declined to an estimated £12.4 billion in January.

The latest figures reveal that property viewings across the UK have risen suddenly in the last few weeks, with a 50% increase when compared to this time last year. Read the rest of this entry »

UK gross mortgage lending dropped in January again to less than 50% of the level it had been in the previous year figures show.

A total amount of £12.4 billion was advanced by the major mortgage lenders during the month, 8% less than in December and 52% lower than in January 2008, according to the Council of Mortgage Lenders.

The CML stated there was a slight drop in lending levels between December and January, although it added that the figure was the lowest monthly level recorded since April 2001.

The figure will disappoint analysts and mortgage brokers  who had interpreted a slight rise in the number of mortgages approved for house purchase during December as a sign that the housing market had bottomed out.

Evidence from estate agents  suggests there is increased interest in the housing market on the back of recent interest rate cuts and the steep property price falls already seen.

The Royal Institution of Chartered Surveyors has reported a rise in new buyer inquiries for three consecutive months, with demand being driven by existing homeowners looking to move.

Many buyers  are being put off  by the strict lending criteria of mortgage lenders, with nearly 25% of  all mortgages now  requiring a 40% deposit.

The CML estimates net mortgage lending, which strips out redemptions and repayments, will be minus £25 billion this year – meaning homeowners will repay £25 billion more than they borrow – as the mortgage drought continues.

Bob Pannell, CML head of research, said: “Mortgage lending activity continues to be very weak and while people are searching eagerly for some signs of recovery, it would be unrealistic to expect a meaningful revival in lending in coming months.

Clydesdale Bank’s Offer of a Fees Free Mortgage been  has extended until Friday 27th February 2009.

The Bank is waiving all arrangement fees for new customers looking to remortgage on a range of its fixed rate, offset and flexible payment mortgages until the end of February. This could mean a saving of around £999 based on the previous remortgage products.

In addition, customers remortgaging from another lender won’t have to pay any legal or valuation fees providing their mortgage is over £30,000 and they use Clydesdale Bank’s appointed solicitors.

Northern Rock which was nationalised a year ago and is now state owned, has started to look for more staff amid rumours that it is preparing to come back into the mortgage lending market.

They announced yesterday that they are looking for skilled workers and they plan  to revive its mortgage lending business.

A month ago the chancellor called on Northern Rock to expand its role in the UK mortgage market as part of a plan to boost “prudent” lending.

It’s a  move which mortgage brokers see as a sign of its first push back into the market, Northern Rock last week cut interest rates on its most popular mortgage deals. It is currently offering one of the most competitive five-year fixed-rate mortgages, at 4.69 %. 

Melanie Bien, director of Savills Private Finance, the broker, said: “Northern Rock closed the doors to lending last year but it appears to be reopening them and the new rates launched last week suggest an increased appetite to lend. If the Government wants banks to boost lending levels it needs to put its money where its mouth is and expand the role of Northern Rock in the market place.”

The Government has given the bank more time to repay £26.9 billion in taxpayer loans taken out when it was nationalised. In the period up to the end of September the lender has repaid £15.5 billion and it is estimated that by the end of the year it had only £9 billion of debt remaining.

The fastest way the Northern Rock could  repay the loan was to reduce mortgage lending over the last year .

Figures released next month are expected to show that its gross mortgage lending collapsed to only £3 billion last year, compared to £29.5 billion in 2007, when it was the fourth biggest mortgage lender.

However, Northern Rock said that its business plan is now “under review” and it confirmed that it is examining proposals to increase mortgage lending.

Vince Cable, Liberal Democrats’ Treasury spokesman, said: “It is right that one of the key requirements to revive the housing market is for lending to grow to sound borrowers. The role of Northern Rock should not just be as a bad bank, but as a good bank functioning in the market place.”

The historic drop in interest rates has left people on tracker mortgages rubbing their hands together.

But could rates rise as fast as they have dropped? Some homeowners are looking to lock themselves into fixed-rate mortgage deals as their existing arrangements come to an end. People usually go for two or three-year fixed rate mortgages but is there money to be saved by nailing a mortgage down for five or 10 years? 

Thew Bank of England base rate at its lowest level since the Bank of England was founded in the 17th century, mortgages for those who are particularly creditworthy, are pretty low. But at least one high-street bank has said it will no longer pass on further base rate reductions to customers, and many people reckon this is as low as most rates will go. What’s more, if the UK’s economic past holds any lessons, it is that huge government borrowing – as we are seeing today – leads to higher interest rates in the future.

It is no surprise that fixed rate mortgages are becoming more and more popular. Among the best two-year mortgages on offer just now is the 3.49 % from Royal Bank of Scotland, with a maximum loan-to-value (LTV) of 75 per cent and a fee of £799. This is slightly higher than some of the other types of mortgage available today, but the idea is that over the fixed period, rates in general will rise about that level, so ultimately you save money.

But in that case, might homeowners be missing a trick if they don’t fix for longer now that interest rates are so low? Locking yourself into a deal for a decade, for example, will make long-term budgeting far easier, with the potential for a nasty and sudden increase in your rates banished to far in the future. And with such an extended duration, you avoid having to pay out fees for remortgaging every few years. These can often be set at £1,000 or more, along with the additional legal and valuation costs.

“The advantage of a fix for five, seven or 10 years is that it will buy you peace of mind for a good length of time without tying you in for too long,” says Melanie Bien, director of mortgage broker Savills Private Finance. “And if you have a deal on a high LTV, this might be particularly useful as property prices are likely to fall further before they stabilise. If you opt for a two-year fix, you may struggle to get another attractive rate when you remortgage as your LTV could be even higher and lenders may not have returned to this market.”

Longer fixes may be well be set above the current base rate, but they are still historically very low and fees are comparable to most other mortgage deals. The best five-year deal available at the moment is from Alliance & Leicester, which is offering 4.44 % on a maximum LTV of 60 per cent, though the product comes with a restrictive maximum loan of £100,000 and a fee of £1,499. For both seven and 10-year fixes, Skipton building society offers a rate of 4.79 per cent at 60 per cent LTV and £895 in fees.

But if you’re locked into a long-term mortgage, you could have an expensive problem if your personal circumstances change and you are forced to redeem your loan early. Fees for early repayment can be set at such a level that the interest you would have saved over the years is wiped out. You could even be left out of pocket.

“Early repayment charges are certainly one of the big disadvantages of fixing for longer than two or three years,” Ms Bien warns. “Shorter deals are so popular because borrowers welcome the flexibility as they know what they will be doing during that time. This is not always the case with a longer deal so don’t fix for 10 or 15 years if there is a strong possibility that you will move house inside two years.”

In 2004 the Government commissioned a report on the mortgage market that identified selling more 25-year fixes as the key to bringing long-term stability to the housing market. Post credit crunch, this has proved a hollow aim as the number of 25-year deals has shrunk to almost zero, with lenders not willing to spend money marketing what has proved a very marginal product.

What’s more, a very long-term lock-in like this means there’s even more time for things to go wrong, warns David Hollingworth of broker London & Country Mortgages, and not just in terms of early repayment charges.

“The ‘portability’ of this type of mortgage can cause tremendous funding problems for people wanting to move house, especially for those who want to upsize,” he says. “If you need additional borrowing, you may be limited to what your existing lender is willing to advance to you, if anything.

“It could be a case of giving up the property you want to buy, or paying huge penalties to get out of your deal.”

In fact, Kent Reliance building society is the only lender still offering 25-year deals, currently 5.98 per cent for a £995 fee, and a 3 per cent early repayment charge for the full 25 years.

But Mr Hollingworth is a fan of 10-year fixes: “The premium people are being asked to pay for a 10-year deal isn’t that much and there is plenty of choice out there.”

Meanwhile, in light of the recent rate cuts, the interest on 25-year products can mean existing customers are paying well over the odds. In fact, those who took Mr Brown’s advice are down thousands of pounds after only four years, says Louise Cuming at price-comparison site Moneysupermarket.com.

By 2011, a borrower who took out a 25-year fixed-term mortgage of £100,000 in 2007 can expect to be £4,200 worse off than someone who got successive two-year fixes, according to the website’s figures. “Many of those people who listened to Gordon Brown must be crying into their porridge each morning,” adds Ms Cuming. “It underlines the danger of locking yourself in so long into the future.

“Borrowers on a 25-year deal must now be wondering whether to stick with a mortgage at around 6 per cent and watch their savings rates dwindle, or to take the unsavoury step of paying an early redemption charge of at least 3 per cent of the value of their mortgage.”

The amount of people with mortgage arrears in Northern Ireland rose to  3,628 in 2008, a rise of 64% on the figures issued in 2007.

Figures from the court service show the number of writs and summonses issued rose from 2,213 in 2007.

“Demand is already considerable,” said Nicola McCrudden of the Housing Rights Service Charity.

“With a 300% increase in demand for our specialist debt service there is no doubt that this initiative is needed,” she said.

“In essence what we aim to do is ensure that less people end up in court in the first place.”

One man who went to the Housing Rights Service said the provision of a solicitor free of charge was critical.

“The last thing that people need when they’re on the verge of losing their houses and they’re behind on repayments is to hire a solicitor for thousands of pounds,” he said.

The man, who wanted to be known only as Paul, said he got into financial difficulties when he became sick 18 months ago and could not work.

He went to court on Tuesday to continue the fight to save his home from being repossessed.

“The judge was very sympathetic. The solicitors against me were adamant the house was going to get repossessed, but the judge gave me every opportunity to try and make some sort of payment.”