Tough times ahead - April 2008
Apr 2nd, 2008 | By admin | Category: financeA 2.5% house price fall in March has fuelled serious worries that the property market could be in much worse shape than expected this year.
So the question is, are we going to see a property crash reminiscent of the early 90’s? Not according to some experts. According to them employment rates are higher, interest rates are lower and economic growth is better than the last time we experienced such bleak times.
It seems we are seeing an adjustment in the property market and our homes could lose more value than they may have already. Even though the Bank of England has reduced the interest rate down to 5%, is this enough? I’ve heard that due to the poor liquidity in the money markets a lot of lenders are ignoring these rate cuts and in some cases increasing their own rates to curb demand. So if this is the case what use is another cut?
Well, some good news has come of the interest rate cut. The UK’s largest lenders such as Nationwide, Halifax, Bank of Scotland, Lloyds TSB, Cheltenham & Gloucester, First Direct, Royal Bank of Scotland, NatWest and Woolwich have stated that they will reduce their standard variable rate mortgage so their borrowers can take advantage.
In contrast many lenders are raising the borrowing rates on their fixed rate products as well as reducing the loan amounts that borrower’s can have. This is adversely affecting demand and putting more pressure on first time buyers. This is highlighted by the fact that in February of this year, there has been a 33% drop in home loans, compared to the same time last year with only 49,000 mortgages made.
Mortgage rate cuts
So back to the rate cut, what does this mean for me and you? Well, if you have an SVR (standard variable rate) mortgage and your lender has been kind enough to pass the reduction on to you, this means if you have a £250,000 loan, your monthly repayments will fall to £1,767 saving you £40 a month.
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