Newspapers are full of stories about how hard it is to get a reasonably priced mortgage. Rates are going up by the day. Nationwide recently followed the general trend by putting up its fixed rates by another 0.3% to 6.45%.
Then the chaos at Bradford & Bingley really got going, making it clear to the market that their rates are soon likely go up across the board. Given that Bradford & Bingley is not only the tenth-largest mortgage lender in Britain, but also one of the very few still offering mortgages to first-time buyers with small deposits, that’s not helpful.
Nor is the fact that if you want a good deal you can no longer rely on getting it through a broker. Instead, lenders, looking to monitor their borrowers more intensely, are offering all their best deals direct in their branches, or over the internet. This means that you have to do all your own legwork. If you want a new loan, says The Independent, brace yourself “for a lengthy trudge down the high street”. No wonder the numbers for this April showed that lending is down 40% on the same month last year.
But the real question here has to be why anyone wants to take out a new mortgage at all. Remortgaging is one thing, but taking out a mortgage to buy a new house – why would you want to do that? House prices are now falling fast and there’s no reason to think they won’t continue to. Estate agents are reporting the widest house-price falls since 1978, says the BBC.
More importantly, despite the fact that rents have been rising, a new report from Hometrack shows that across the country private rents for two and three bedroom properties are only 68% of mortgage costs for a similar sized property. So why not skip the uncertainty over interest rates, the huge upfront fees you have to pay to get anything approaching a decent rate these days, and the stress of negative equity and just rent your dream home?
Is this the end for buying property?
Far from it. The current shortage of housing in the UK, coupled with year-on-year population growth, means there will always be demand for housing. Whilst the credit crunch has made it difficult for new buyers to get their foot on the ladder, it has also meant that there is a steady supply of tenants for buy-to-let investors. This could see a resurgence for that area, which has been in the doldrums lately. That demand could help pick up investment in new developments, which in turn would bolster sectors such as construction.
