Part of the reason for a future dip in the housing market could be new buyers unable to secure a cheap mortgage.

This is according to Kate Barker, policymaker and housing market expert at the Bank of England, who said she has been surprised at how the market has bounced back following the recession, Reuters reports.

According to the news provider, she told lawmakers that levels of mortgage availability are unlikely to return to pre-recession levels.

She stated, “I was rather surprised by the strength of prices in the housing market through last year and it’s possible some people delayed decisions to move or put houses on the market.”

“In some sense that can’t continue.”

The housing market has come back to nearly half of the drop it experienced in the period between August 2007 and April 2009, meaning that a relatively large number of people are securing cheap mortgages.

Earlier this month, the government’s latest house price survey revealed that house prices rose by 2.9 per cent during 2009.

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The Post Office has announced a new range of 75 per cent loan-to-value LTV mortgages launching soon, aimed at enabling more first-time buyers get a foot on the property ladder.

The new range includes a tracker mortgage with a rate of 3.19 per cent, alongside a number of fixed-rate deals, including two, three and five-year deals with rates starting at 3.89 per cent. These will be made available at Post Office branches across the UK.

At the same time, the lender has also confirmed that it has cut the rates on both its fixed and tracker mortgages, with these to take immediate effect on its 60 and 80 per cent LTV products.

Announcing the news, Post Office mortgage manager Alistair Watts said: “With speculation that we could see a rise in the bank base rate soon, we’ve acted early and improved the rates on our fixed rate mortgages to allow customers to lock into a great rate now.

“For existing homeowners, staying on their current SVR may seem like the best thing, but even ahead of any rises in the base rate we’d encourage them to look around to see if there’s a better deal available elsewhere.”

This comes just days after fellow lender Santander reduced the rates on its five-year fixed mortgages by as much as 0.25 per cent, while also re-launching its own 70 per cent LTV product.

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A number of lenders have cut their rates over the last few weeks. In fact, it is becoming easier to get a competitive rate with a smaller deposit.
David Hollingworth at L&C is cautiously optimistic about the market: “In terms of new deals, I would say a greater stability in the market is breeding more competition. As house prices stabilize, lenders are starting to show more appetite to lend, so they’re finally starting to compete for customers.” David continued: “Up until recently, the only competition has really only been at the low-risk end of the market with a number of lenders fighting over homebuyers with large deposits or significant equity in their property, but it’s beginning to filter down and we’re seeing a greater willingness to lend up to higher LVTs. The signs are definitely encouraging. We’re obviously not back to boom times, but the mortgage market is better than it was a year ago.”
The top deals are still for those with a large deposit, but there are cuts.
If you have a deposit of 45% or more, Coventry Building Society has just launched a two-year fixed rate of 3.45% – plus fees of £999. Its two-year fix is at 3.45%, again with fees of £999.
From Saturday January 16, the market leader will be a two-year fix from Principality, which is offering rates of 3.44% for loans of up to 65% with fees of £999.

It’s not only fixed rates that are coming down. Some lenders have also cut their tracker rates. If you are happy to take a bit more risk and opt for a variable rate mortgage, you can benefit from some even lower rates.
For example, HSBC is reducing its tracker rate from 2.59% to 2.49%, again for those with a 40% deposit and fees for £999.

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The Co-operative Financial Services announced it has reduced mortgage rates up to 0.55 per cent.

From Wednesday February 10th, customers of both Britannia and The Co-operative Bank will be able to access a new range of cheaper mortgage rates.

Among the new products is a ten-year fixed rate at 5.29 per cent, with an arrangement fee of £999.

John Hughes, business leader for retail products at the Co-operative Financial Services, said the firm continued to offer borrowers a choice of rates and fees, meaning borrowers can choose the product which best suits their needs.

He added: “As these rates are aligned across Britannia and The Co-operative Bank, it also means that borrowers have even more access to our market-leading rates, which are available in more than 300 branches, online and on the telephone.”

Last week, the Centre for Economic and Business Research warned consumers seeking cheap mortgage rates that house prices are set to rise by more than six per cent this year.

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It has been suggested that those homeowners considering remortgaging may find they can get a better deal if they wait until next year.
Gary Styles, Hometrack’s strategy, risk and economics director, said that lenders have appeared less interested in recruiting new remortgage customers recently and that the situation probably will not change until 2011, when the Bank of England’s base rate of interest is expected to begin rising.
“When that happens, then clearly the competitiveness of individual mortgage deals will come to the fore and that’s when lenders will start to potentially offer more competitive remortgage products,” he explained.

Mr Styles’s comments were made in response to the latest figures from the Council of Mortgage Lenders, which were published on Thursday (January 14th).

The statistics showed that 31,000 remortgage loans were taken out during the month of November, six per cent less than in October and 39 per cent less than 12 months before.

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Santander has announced two new 70 per cent loan-to-value LTV mortgages.

Two-year tracker and two-year fixed rate deals are now available at all branches, offering rates of 2.49 and 3.44 per cent respectively.

If you are a consumer seeking cheap mortgage rates, you should also note that the bank is reducing the rate on its five-year fixed-rate deal, which is available for purchase only and includes the Homebuyer Solution.

The Homebuyer Solution consists of a free valuation and £250 cashback on completion, in addition to the competitive 5.44 per cent rate at up to 75 per cent LTV.

Phil Cliff, mortgage director for Santander, said: “Now is a great time to take advantage of the low mortgage rates available, whether customers are looking to fix or for a tracker, we have a variety of market-leading deals available.”

Last week, Yorkshire Building Society bolstered its first-time buyer range with the launch of a new member-exclusive mortgage for those with a smaller deposit.

The new offering is a five-year fixed rate at 6.49 per cent, available at up to 90 per cent LTV.

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The UK witnessed a slight dip in the number of mortgages approved for home purchase during December 2009.

According to the Bank of England, approvals stood at 59,023, down from 60,045 in November – but above the average of 55,004 seen over the past six months.

Total net lending secured on dwellings increased by £1.2 billion, but this was below the revised November increase of £1.6 billion.

Howard Archer, chief UK and European economist at Global Insight, said the dip in mortgage approvals was “somewhat surprising”.

He added: “Housing market activity could have been lifted to a limited extent at the end of 2009 by buyers looking to beat the price threshold for stamp duty on house purchases moving back down to £125,000 in January.

“The dip in mortgage approvals in December reinforces our suspicion that housing prices are likely to suffer a limited relapse during the coming months.”

Last month, the Council of Mortgage Lenders reported that mortgage lending rose by 14 per cent during December 2009.

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Recent figures have revealed the annual rate of inflation leapt from 1.9% to 2.9% in December, prompting some economists to say that the Bank of England base rate – which has been slumped at 0.5% since March last year – may start to rise again, sooner than anticipated. Homeowners enjoying sustained low rates on their mortgages might need to take action sooner than they thought…
Tracker mortgages – that mirror movements in the Bank of England base rate – are by far the most popular deals, according to brokers. This is because, not only are initial rates cheaper than their fixed rate counterparts, but there has been a consensus that the base rate would not climb any time soon.
“People who have even just a little slack in the budget have been taking a calculated risk and opting for a tracker as interest rates looked set to stay low,” explained David Hollingworth at mortgage broker L&C Mortgages. “The best tracker deals are priced about 2.5% to 3.0% on a two-year term, while the cheapest fix for the same period will cost from 3.5%.”

But if base rate starts to climb, so will the monthly outgoings of those homeowners on tracker deals – and this is causing a marked shift in sentiment.
According to recent research from Santander Mortgages, of the 880,000 homeowners due to remortgage in the next six months, only 13% say they will opt for a tracker deal compared to 33% two months ago. And the number of those likely to opt for a fixed rate has increased from 20% to 23% in the last month alone.
Phil Cliff, director of mortgage marketing at Santander UK, said: “With many commentators predicting a base rate rise this year, homeowners now seem more inclined to play it safe with a fixed rate deal.”
But what’s out there for homeowners who want to fix in their rate? Some lenders have actually been edging down the prices of these deals. Santander recently slashed the rate on some of its two-year fixes by up to 0.4%. The bank now offers a deal priced at 4.99% in return for a 20% deposit and £995 fee.
Yorkshire Building Society was quick on its heels, launching a two-year fixed rate mortgage priced at 3.29% for borrowers with access to a 40% deposit. This represents the lowest two-year fix available direct to consumers, says the mutual – but be warned as the deal also comes with a hefty £1,195 arrangement fee.
And the end of last week saw Legal & General launch a range of two-year fixes in conjunction with Accord Mortgages. It includes a two-year fixed rate priced at 3.49% for those with a 25% deposit and a £995 fee. “Competitive fixed rate deals will be very attractive to anyone worried by the recent news on inflation,” said Martyn Smith, the company’s head of mortgage products.

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Yorkshire Building Society has revved up its first-time buyer mortgages with the launch of a new member-exclusive mortgage for those with a smaller deposit.

This new offering is a five-year fixed rate at 6.49 per cent, available at up to 90 per cent loan-to-value LTV with free valuation and legal fees.

Any first-time buyer who has been a Yorkshire member for over 12 months, or who has a close family member or friend who has been a member for this period of time, is entitled to apply for the deal.

Potential homeowners may also choose between a three-year fixed-rate mortgage at 5.84 per cent and a five-year fixed rate product at 5.99 per cent, at up to 85 per cent LTV.

Iain Cornish, chief executive at the building society, said: “Rewarding our existing members for their loyalty and providing attractive mortgages to help first-time buyers get a foot on the property ladder are both very important to us.”

He added that the new mortgage, along with Yorkshire’s existing range, is available from all branches, where professional advisers can support new buyers through the purchase process.

Earlier this week, Legal & General Mortgage Club launched three exclusive fixed-rate mortgage products, provided by Accord Mortgages.

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In November, house buyers used less of their household income to cover their interest payments that at any other time since 2005, latest figures have indicated.
According to the Council of Mortgage Lenders CML, home movers needed only 10.6 per cent of gross income to cover such monthly payments, down from 11.1 per cent in October.

The burden of debt on first-time buyers has also reduced, with 14.4 per cent of gross income needed in November, down from 15.1 per cent the previous month.

CML director general, Michael Coogan, commenting on the data, said it was “encouraging” to see mortgage interest payments “so affordable” for many homeowners.

“But with substantial deposits still needed to secure a mortgage, the market will continue to be relatively restrained for some time to come,” he stated.

“With refinancing still unattractive or unnecessary for many borrowers due to continuing low rates, we are now seeing a much more house purchase-focused market.”

Last week, the CML reported that overall lending increased to £13.7 billion – a 14 per cent rise on November – which potentially is good news for buyers seeking cheap mortgage rates.

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