The Bank of England meet this Thursday as they do every month. But the economic climate is still blowing up storm. Bad credit mortgages crisis is still hanging heavily in the wind. There is so much talk about house prices and people struggling to make ends meet never mind the increase in mortgage payments when they come of those fixed rates.
Remortgages are big business in 2008 “What will be the deal i can get” you will hear people cry. Location – location – location will be replaced with remortgage -remortgage remortgage!
New mortgage approvals have dropped again to 83′000 down from 89,000 in October which was the lowest since the start of 2005. House prices finished anywhere between 5-8% up depending on who statistics you agree with.
Although the Bank of England cut rates last month they are widely expected to cut them again this month due to the housing market slow down and the increased cost in borrowing due to the money markets feeling the effects the credit crunch.
The Fed is under pressure to ensure they help borrowers with poor credit sub prime loans. The downturn in the housing market has triggered a downturn in the US housing economy. People with bad credit mortgage loans will struggle when there rate is reset to the new present rates.
The Bush administration acted earlier this month to help bad credit mortgage borrowers amid fears the spiralling housing market could erode consumer confidence and push the US into recession. It announced a five-year freeze on interest payments for certain bad credit mortgages.
According to research from the Mortgage Bankers Association, the number of foreclosures on sub-prime adjustable loans hit record levels between July and September.
Hear are some of the new proposals which could come into force next year;
- Lenders could not agree loans without proof of income
- Borrowers must set aside money for taxes and insurance
- Lenders would have to make financial disclosures earlier
- Certain forms of advertising would be banned
- All loan rates must be displayed prominently, not just introductory or so-called “teaser rates”
Tough market conditions have triggered the fall in house prices. Many first time buyers who in recent times have opted for a 100% mortgage are finding it difficult to secure a mortgage. 100% mortgages criteria have tightened to the point where some lenders don’t want your business.
Asking prices were down 3.2% from November. London suffered the biggest drop of 6.8%. Recent indicators have suggested the housing market is cooling, with the Halifax recently reporting sale prices falling in each of the past three months.
The average house price has dropped more than £7000 now to £232′396. “The substantial drops in asking prices are further confirmation of the underlying trend of more sellers re-adjusting their prices downwards to try and tempt buyers in deteriorating market conditions,” said Rightmove’s commercial director Miles Shipside.
Now the bad credit mortgages crisis has taken it’s effect on house prices. With inflation set to slow even further, credit will be harder to get and putting it past most peoples affordability levels.
Bank across the world are joining forces to prevent a global recession. The Bank of England the U.S. Federal Reserve and European Central Bank and their counterparts have pumped £55 billion into the money markets.
100% mortgages lender Northern Rock was the first victim of the bad credit mortgages crisis. This new move goes to show that the banks are worried that other lenders might go the same way as the Rock.
The banks are working together to prevent any prospective sharp tightening in credit conditions. Experts estimate the record defaults on bad credit mortgages to Americans with poor credit histories could lead up to £200 billion of losses at global banks.
Following the decision by the Bank of England’s monetary policy committee to cut Bank rate from 5.75% to 5.5% on Thursday, analysts are convinced further reductions are in the pipeline. This will help towards reset rates of bad credit mortgages borrowers.
The analysis, by Citigroup, suggests spending will rise just over 1% in 2008, after an increase of more than 3% this year.
US Federal Reserve, has cut its key Federal Funds rate by a quarter-point to 4.25% today. This is another move to counter act the bad credit mortgages crisis.
Weak growth and high inflation is highly likely next year. It calculates the probability of UK growth of less than 1% in 2008.
