The cost of the US sub-prime mortgage debacle continues to climb. The International Monetary Fund (IMF) now reckoning that total global losses from the resulting financial market crisis will hit £480bn – a significant increase on earlier estimates. Such a large figure is difficult to get into perspective, and its impact on the UK mortgage market is hard to quantify, but the indication is that conditions are not about to improve any time soon. So we can expect lenders to keep tightening their criteria – and homeowners to keep tightening their belts.
The Bank Base Rate fell last Thursday to 5 per cent, and is widely forecast to decrease further this year. But the cost of borrowing a mortgage is not necessarily heading in the same direction. For fans of fixed rates, the news is not good. The rate cut failed to impact on the interest rates at which banks lend money to each other, on which fixed rates are based. Major lenders such as Nationwide, Alliance & Leicester and Barclays Woolwich increased the rates they charge on fixed deals at the end of last week, and others are expected to follow suit.
GO FIGURE... 100%
With Abbey, the second-largest lender in the UK, withdrawing its 100 per cent mortgage products, first-time buyers without a deposit will now be hard-pressed to find a way on to the property ladder. Bristol & West's First Start mortgage allows you to buy with no deposit but your parents must take joint responsibility for the loan. Tipton & Coseley and Ipswich Building Societies offer very restricted 100 per cent deals, on a shared ownership basis for those buying with a housing association. All other lenders have scrapped their 100 per cent mortgages, and many now insist on a 25 per cent deposit for borrowers looking to access their most competitive rates.
Paula John is editor-in-chief of Your MortgageReuse content