Mortgage approvals reach a record low
The Bank of England yesterday released figures confirming the slowdown in the UK mortgage market continues. It said the number of new mortgages approved for house purchases in March fell to a record low of 64,000, down from 72,000 the previous month.
This was the lowest level since current records began in January 1999, and was down 44% on the figure for the same month in 2007. However, credit card and other lending increased in March from February.
The weakening market due to the global credit crunch has caused lenders to put up prices on mortgages and withdraw mortgage deals, especially for those unable to put down a significant deposit, in recent months due to them being more cautious.
Mortgage brokers are warning significant number of lenders have just pulled out of the market completely including some of the big lender groups that have actually got access to funds,
Off the mortgages that are being two-thirds now to the top five lenders compared with 56% this time last year which will likely lead to higher cost to customers due to lack of competition.
House prices
In the UK, property prices have also started to dip during 2008, according to various housing surveys some warning they could drop by as much as 30%.
“The news that mortgage approvals dropped to a record low of 64,000 is hardly surprising given that lenders have been aggressively scaling back on the provision of finance to home buyers,” said Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (Rics).
The Bank of England also reported a drop in loans approved for re-mortgaging, down 11,000 in March from the previous month at 98,000, and for other purposes such as buy-to-let, down 6,000 at 57,000.
Net lending secured on homes was £6.9bn and led to another monthly fall in the annual growth rate, down from 9.4% in February to 9.1% in March.
Lenders much more cautious
The figures come a week after the British Bankers’ Association (BBA) said mortgage approvals for house purchases in March were down 46% on the same period in 2007, the lowest monthly figure since September 1997.
In an attempt to ease banking concerns and help them operate during a global credit squeeze, the Bank of England announced a plan that would let lenders swap potentially risky mortgage debts for secure government bonds.
Lenders how ever have continued to withdraw mortgage offers for new customers, with Nationwide the latest to do so as it announced that, from 1 May, all but two mortgages would require a 10% deposit.
The Bank of England’s Special Liquidity Scheme, if it works, might stop things getting much worse. But many lenders will remain cautious until the situation improves
However the Royal Bank of Scotland (RBS), including NatWest, has moved to buck the trend. From Wednesday, it will cut all its fixed and tracker rate mortgages by between 0.1% and 0.3% for new customers buying directly from the bank’s branches, and for existing customers switching deals.
The bigger rate cuts are for those who offer a bigger deposit, but RBS is also launching a cash back deal for first-time buyers as it tries to increase its share in the mortgage market.
With mortgage deals being so tight if your planing on getting a mortgage or re-mortgage it’s more important than ever to ensure your credit file is completely accurate as the tiniest error could lead in an application being turned or an increased APR costing thousands or even tens of thousands over the term of the loan.
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Why you should obtain a copy of your credit report
It’s a simple fact some credit reports will contain errors due to the sheer amount of data now held about us all.
You may already be one thousands of us who in the past have found errors in our bank and credit card and other financial statements, some lenders do make mistakes from time to time due to simple human error.
When they report your balances and limits to the credit agencies each month, these errors can be transferred as the agencies have no way of checking the accuracy of each record - the data belongs to lenders, not them, they simply hold it and report it errors included.
For this reason you have a statutory right to have credit report errors corrected quickly and free of charge, so it makes sense to check your credit report regularly especially in the period of financial instability. Unless the information held about you is correct, you may be declined credit altogether or may pay more in interest on credit card’s loans and mortgages and as you know a higher interest rate can cost you thousands even tens of thousands over the term of your mortgage.
Checking your credit report regularly is also important tool in the fight against identity theft Britain’s fastest growing white collar crime. You can see if there are any searches or accounts that you don’t recognise as yours, and identify quickly if someone has been applying for credit in your name.
If you’ve already been declined credit you can check your credit report to see the information that a lender would see. Your credit report and the application form you submit are the main sources of information that a lender will base their decision upon.
Credit checks are also regularly performed when you apply to rent a house, flat and, in some cases, by employers when it’s required by law before giving you a new job.
Services like the Credit Expert from Experian will monitor your file and alert you of any suspicious activity that may arise, you can sign up to a 30 Day Free Trial of Credit Expert today by clicking here.
