Equity release demand increasing

Wednesday, April 30, 2008

The demand for equity release products has been increasing steadily over the last 12 months.

Equity release can be defined as the transfer of an interest in your property to a third party in exchange for a cash sum or a monthly income. You receive the cash but continue to live in the property.

The Equity release lender will recover the money it has lent you either by selling your property after your death or if you sell your property - for example to move into a care home.

There had been a slight drop in sales of the product recently due to the initial shock for the consumers of the credit crunch. However this is likely to be a temporary blip. Demand is now rising again as the benefits of equity release are understood by potential consumers.

Following the changes that have occurred in the wider mortgage market over the last 6 months, equity release business has performed well and have been much more resilient than the mainstream market. This is a pointer to the increased focus lenders and intermediaries will place on equity release going forward.

The demand for equity release is likely to grow significantly further over the coming years as all the hallmarks are in place for this type of lending to flourish. We have an ageing population, a decline in pension provisions and a great deal of consumers wealth tied up in property. Equity release will fair well moving forward regardless of what the mainstream mortgage market does.

If you have any questions on this article or others like it, please feel free to contact Solution Mortgages on 0845 123 1260 or visit us online at www.solution-mortgages.co.uk

Home reversion plans

Tuesday, April 29, 2008

A home reversion plan is an arrangement where the following conditions are met::-

The plan provider buys all or part of a qualifying interest in land (other than time share accommodation) in the UK from an individual or trustees
The seller is entitled to occupy at least 40% of the land as a dwelling
The arrangement specifies one or more qualifying termination event at which point the arrangement will end.

A qualifying termination event is where:-

· The person becomes a resident of a care home
· The person dies
· The end of a specified period of at least 20 years, beginning with the day the seller entered into the arrangement

A home reversion plan is different than a life time mortgage. The differences are as follows:-

The homeowner transfers ownership of some or all of the property to a company in exchange for a cash sum or an income
No interest is paid to the company
The original owner retains the right to live in the house until death
On death, the property (or part of it) reverts to the company which is where the term ‘home reversion’ comes from.

If you have any questions regarding this article or others like it, please feel free to contact Solution Mortgages on 0845 123 1260 or visit us online at www.solution-mortgages.co.uk

Lifetime mortgages

Monday, April 28, 2008

A lifetime mortgage is a regulated mortgage contract and therefore comes under the supervision of the Financial Services Authority. They are secured on a property by means of a first charge.

Lifetime mortgages are:-

• Available only to older borrowers over a certain age

Lenders may or nor may not specify a term for the mortgage, but cannot seek full repayment of the loan until one of the following events occurs:-

• Death
• The borrower moves to live elsewhere i.e. residential care
• The borrower moves to another residence
• The borrower sells the property
• The lender exercises its legal right to take possession under the mortgage contract

While the borrower occupies the property as a main residence, the arrangement can be on the basis that:-

• No regular payment of interest or capital is required, although interest can be charged and rolled up to be repaid at the end of the mortgage; or
• Payment of interest will be required but the capital is not repaid until the end of the mortgage; or
• Payment of interest and partial repayment of the capital may be required, but full repayment of the capital is not required until the end of the mortgage.

The majority of lifetime mortgages are on an interest roll up basis, although some are arranged on a straightforward interest only basis.

If you have any questions on this article or others like it, please feel free to contact Solution Mortgages on 0845 123 1260, or visit us at www.solution-mortgages.co.uk

Housebuilder's feeling the crunch

Friday, April 25, 2008

The construction industry is now feeling the pain of the liquidity crisis as Persimmon the UK's largest house builder announced this week that it intends to stop building new sites until the outlook for the economy improves.

This is likely to be the tip of the iceberg as more builders follow suite. This is likely to cause problems for the UK government who pledged to build 3 million new homes by 2020. This over ambitious target now looks more and more less likely to be achieved than when it was announced.

This is likely to only support house prices and lead to renewed growth in due course. The injection of £50 bn into the mortgage market will take time to feed through and it is unlikely that the UK mortgage market will return to normality any time soon.

Lenders are slashing staff levels so obviously do not see any upturn any time soon. It is likely to be the last quarter of this year before we can even assess the situation properly and start talking about better times. Hopefully interest rates will have come down a little further by then, but as stated in previous articles the Bank of England still have the worry of inflation getting out of control which could of course curtail any interest rate cuts.

The big question is whether if the demand for home ownership is waning then surely the demand for rented accommodation will rise. This would mean that buy to let would still be an attractive option especially for professional landlords.

If you have any questions on this article or others like it, please feel free to contact Solution Mortgages on 0845 123 1260 or visit us at www.solution-mortgages.co.uk

The threat of inflation

Thursday, April 24, 2008

With the threat of rising inflation looming over the UK at the moment, now is a good time to get an understanding of the problems facing the Bank of England.

Firstly what is inflation?

Inflation is a rise in the general level of prices over time. It may also refer to a rise in the prices of a specific set of goods or services. In either case, it is measured as the percentage rate of change of a price index.

Inflation is not a simple phenomenon. If it is due to excessive domestic demand, this can be controlled by tightening money supply - higher interest rates, tighter lending rules. Asset inflation - the housing market falls into this category.

But we should not count asset values as inflation anyway. Inflation should be applied to the cost of consumables as this is what really erodes the value of money savings which is saving for future consumption.

Will this affect the price of housing?

As a society we value more people to get on the housing ladder so the bank could in fact fine tune its policy by having a two tier interest rate structure it offers to mortgage lenders - one based on the value of mortgages on its books to first time buyers and smaller mortgages, another for buy to let and larger mortgages.

If your currency falls in relation to overseas ones, you get imported inflation as imports are more expensive. You can only control this by increasing the value of your currency or by reducing the proportion of imports in the basket you purchase.

Higher interest rates will push up currency values. But higher prices may reduce consumption. If overseas prices are going up because of demand and supply issues, then nothing you can do will decrease those prices. But belt tightening can be induced by tighter money policy. This may not be required if the price effect reduces consumption anyway.

If inflation is not due to booming domestic demand (and asset inflation contributes to this so perhaps house prices should be allowed to come down somewhat) then since you cant influence overseas prices or your currency easily, perhaps it is time to think outside the box and look at increasing efficiency in usage, cutting waste, increasing local production, substitution etc.

That would be a long term achievement and would have benefits lasting well into the future. But this requires microeconomic policies which are far more thought and attention consuming and no one seems to have an appetite for that.

If you have any questions on this article or others like it, please feel free to contact Solution Mortgages on 0845 123 1260 or visit us online at http://www.solution-mortgages.co.uk/

Calls for changes on state aid for mortgage debt

Wednesday, April 23, 2008

The Council of Mortgage Lenders (CML) has called on the government to change the way the state helps those who incur mortgage arrears on their mortgage due to unemployment.

With the current economic situation there is a possibility we will see rising unemployment over the next 12 months. The CML say hat the current situation is unacceptable as it takes to long for state aid to be granted.

The current DSS rules give the borrower no financial assistance for the first 9 months in the event of involuntary unemployment, assist only the interest element of the monthly payment after 9 months and give very limited assistance in the event of accident or sickness.

When you have such a large loan as a mortgage not being repaid a lender can not wait 9 months for the borrower to start making payments and have to start taking proceedings.

The lender will start repossession proceedings within that period so it is likely that the borrower would have lost their home before any state aid becomes available

The CML is wanting a system that pays more quickly and is not capped at £100,000 mortgages as this is out dated.

The CML added that the aid does not need to ultimately cost the taxpayer as the money can be repaid once the property has been sold.

If you have any questions on this article, please feel free to contact Solution Mortgages on 0845 123 1260 or visit us online at www.solution-mortgages.co.uk

Mortgage lenders to help people in arrears

Tuesday, April 22, 2008

Further to a meeting which took place today between the chancellor of the exchequer and UK mortgage lenders there could be help going forward for families struggling with their mortgage payments.

The topic of conversation was to talk about ways of minimising the effect of the liquidity crisis on already hard hit borrowers.

The lenders have committed to review their current guidelines for the treatment of customers who incur mortgage arrears.

The UK mortgage market is under pressure from problems created in the US sub prime market.

The government, the Financial Services Authority, the Council of Mortgage Lenders and lenders themselves are all now liaising with each other to ensure a fair and functioning mortgage market returns, which can only be good news for consumers.

The lenders will review their guidelines and look for ways they can improve treatment of borrowers and try and meet voluntary arrangements and avoid repossessions wherever possible.

The Bank of England's agreement to allow mortgage lenders to swap mortgage backed securities for government bonds should also help to improve the situation.

The advice to borrowers who face falling behind with their mortgage payments and incurring mortgage arrears is to talk to your current mortgage lender as early as possible and do not ignore the situation. Your lender cannot help you if you are unwilling to speak to them!

If you have any questions on this article or others like it, please feel free to contact Solution Mortgages on 0845 123 1260 or visit us online at www.solution-mortgages.co.uk

Are you finding it difficult to raise finance?

Monday, April 21, 2008

Are you finding difficult to raise finance in the current climate?

It has become increasingly difficult for consumers to take out mortgages, unsecured loans and credit cards. This is having an effect on the housing market as first time buyers are also unable to access mortgages.

The credit crunch is also having an effect on the average family, pushing up the cost of remortgaging. This having a knock on effect on high st spending. Many retailers are predicting a gloomy 2008.

What is anybody doing about it?

Well the Bank of England is set to launch a plan which it hopes will start to ease the credit crisis. The bank has announced plans to allow UK banks the ability to swap mortgage assets for government bonds. The bank expects around £50 billion of the bonds to be handed out.

This scheme should allow the mortgage market to free up liquidity and get banks lending to each other again.

If you have any questions on this article or others like it, please feel free to contact Solution Mortgages on 0845 123 1260 or visit us online at www.solution-mortgages.co.uk

Commercial Lending

Friday, April 18, 2008

The commercial mortgage market has changed significantly since the beginning of this year. This is mainly due to the ongoing liquidity crisis in the global market which is having an effect on the confidence of lenders and investors.

Many of the large commercial lenders in the UK relied on the wholesale and securitisation markets to obtain funding for new business. The effect of the collapse in the sub prime market in the US has meant that the securitisation markets are now effectively closed. The last securitisation that took place by a commercial lender was in November 2007.

Commercial lenders have a limited supply of funds at the moment and fresh funding lines are unavailable to many. This means that many commercial lenders have had to stop lending until the securitisation markets reopen.

There are considerable pressure on the government to clear the blockage in the money markets and they finally seem to be addressing the situation with the announcement that the Bank of England will swap government bonds for mortgage backed securities. This obviously will not help lenders who need to securitise their books now.

There are still commercial lenders that are less dependant on securitisation and lend off their balance sheet but they are understandably being stricter at the underwriting stage. With a large influx of business and limited funds they are being more selective about the deals they offer and who they give them to.

This is why it is so important to choose the right commercial mortgage broker to help you navigate these murky waters. Commercial Lending have access to balance sheet commercial lenders and have good working relationships with these companies. We also have extensive experience in working in the commercial mortgage market.

If you need to raise finance or buy a commercial property, please feel free to contact Drew Mitchell at Commercial Lending on 0845 123 8900 or visit us online at www.commlending.co.uk

Commercial Lending is the specialist commercial finance arm of Solution Mortgages Limited.

Plan to ease the credit crunch

Thursday, April 17, 2008

The final stages of a plan to ease the credit crunch are being worked on by the Bank of England. The details will need to be backed by the treasury but it is believed that this will not be an issue.

The plan is to allow banks to swap their mortgage assets for government bonds for a period of time. This should give banks more confidence to lend to each other and in turn have more money to lend to consumers. The credit crunch has stemmed from the reluctance of banks to lend to each other as they are wary of each others financial position and exposure to sub prime losses in the US.

In the past mortgage assets were used as the security on an inter-bank loan but following the collapse of the US markets, banks do not trust these assets.

This has caused the inter-bank rate to rise to an unsustainable level and makes lending rates to high. This has led to mortgage products being withdrawn and rates rising.

The government plans to allow the Bank of England to issue bonds backed by it, in exchange for mortgage backed securities. The plan is expected to be only weeks away from launching and it is hoped that it will free up liquidity in the money markets.

This has drawn criticism from certain areas as it could be seen as allowing banks to privatise their profits and nationalise their losses. The mortgage backed securities will inevitably be of inferior quality and higher risk than the government bonds they are replacing and there is concern that it could be the taxpayer again taking risks.

The exchange needs to be at a discount so that the banks are still taking any potential losses and not the taxpayer.

It is believed that in exchange for the government bailing out the banks there will be an orderly programme for identifying losses, making sure those losses are covered and paying for those losses by stopping dividends and raising money through shareholders.

If you have any questions on this article or others like it, please feel free to contact Solution Mortgages on 0845 123 1260 or visit us online at www.solution-mortgages.co.uk

Bank of England to act on mortgage crisis

Wednesday, April 16, 2008

The Bank of England is waiting for the government approval to take over mortgage loans that are sat on lenders' balance sheets, in order to increase liquidity in the money markets.

The Bank of England would grant government bonds in exchange for securities backed by UK mortgages. This move would be welcomed as it would address the reluctance among mortgage lenders to lend money in the wake of the liquidity crisis.

The prime minister has flown to the US today to meet Wall St bankers to discuss the global crisis further. He met the CEO of UK banks yesterday and confirmed that the government will remain in contact with the Bank of England to find a way to resolve the crisis.

The government has come under fierce criticism of the way the credit crunch has been handled and rightly so. It only now seems that they are sitting up and taking notice of the carnage. Thousands of jobs have already been lost in the financial services sector already and many more are likely to follow. This crisis seems to have been underestimated.

Lenders hope that further intervention from the Bank of England will help the inter bank rate (LIBOR), which is currently languishing unchanged at 5.93% which is a full percentage point higher than the Bank of England base rate. Until the LIBOR rate is reduced it is unlikely that the cost of mortgages will come down significantly.

If you have any questions on this article or others like it, please feel free to contact Solution Mortgages on 0845 123 1260 or visit us online at http://www.solution-mortgages.co.uk/

Government meet lenders to try and resolve crisis

Tuesday, April 15, 2008

The chief executives of the major high st banks as well as senior investment bankers have been invited to Downing St today to meet Gordon Brown and discuss possible solutions to the current credit crisis.

The banks will be asking the prime minister to free up the money markets to ease the liquidity crisis and stave off any further damage to the economy. This will be no mean feat.

The talks are likely to be around reviving demand for the securitisation process and mortgage backed securities. There is also a real need to lower the inter-bank lending rate, which is the interest rate that banks lend at between themselves.

Other more extreme measures such as the central bank buying up mortgage backed securities and then holding on to them when demand picks up again, will be discussed.

The chancellor Alistair Darling has set an emergency meeting next week between mortgage lenders to discuss the effects of the credit crunch on the mortgage industry.

The government has criticised mortgage lenders for not passing on the recent interest rate cuts to borrowers but this could be seen as hypocritical as Northern Rock which is now owned by the government (or rather UK taxpayers) has also failed to do so. If you where a lender I am sure you would expect everyone to be singing from the same hymn sheet!

Again the emergency meeting will likely discuss the status of mortgage backed securities and how a stable model can restore a healthy market again.

If you have any questions on this article, please feel free to contact Solution Mortgages on 0845 123 1260 or visit us online at www.solution-mortgages.co.uk

The Mortgage Finance Working Group

Monday, April 14, 2008

At long last there seems to be an effort to resolve the current credit crisis. This is a bold statement and perhaps comes 8 months to late but nevertheless would seem to be good news.

A permanent cloud has been hanging over the mortgage market since August last year and it now looks like there are signs the government have realised the severity of the situation and are looking to address the liquidity issues.

The Mortgage Finance Working Group has been set up which will draw on the experience and expertise of lenders, investors and the Tripartite Authorities (the Treasury; the Bank of England; and the Financial Services Authority. It is headed up by former HBOS chief executive Sir James Crosby. The remit for the group is to restore confidence in the securitisation market, help improve the availability of funding and sustaining confidence in the mortgage and housing markets.

It will be a tough job which is made tougher by the fact that the government is only starting the task now, 8 months after the horse has bolted!

The current crisis is the biggest economic shock since the Great Depression. This opinion was voiced last week by the chancellor Alistair Darling.

A lot of criticism has been placed on lenders for changing criteria, putting rates up and effectively looking for reasons not to lend but it is understandable. As businesses they are fearful of the fact that they will not be able to access future funding and are desperately trying to manage their pipelines so they can continue lending for as long as possible.

It is good to finally see some positive news against a back drop of such negativity.

If you have any questions on this article or others like it, please feel free to contact Solution Mortgages on 0845 123 1260 or visit us at www.solution-mortgages.co.uk

Sub prime lending

Friday, April 11, 2008

The current market conditions, particularly in the sub prime area have been triggered by events in the US where an entirely different set of circumstances has led to a liquidity crisis, a slump in the housing market and real fears about the health of the overall economy.

The conditions in the UK sub prime market are fundamentally different. Some UK sub prime lenders did relax their criteria and price for volume rather than always risk. However the extent at which this was done added to sound underwriting practices and the relative stability of the UK housing market, means we are significantly different to the US.

It now seems that everyone has become an expert in sub prime lending ranging from the government and more over the media. The media still do not understand what sub prime means! Everyone is quick to jump to conclusions and throw out pessimistic views on the market place.

Yes, current circumstances are difficult and largely beyond our control. But it is how we react which is in our control.

At Solution Mortgages we have taken action, adapted and bolstered our operation and are confident of navigating our clients through these difficult times. We have more underwriters from lenders based in our office than ever before, we are receiving more traffic to our website than ever before and we have completed a profitable first quarter to 2008. Our completion times for mortgages in March from initial application to completion was 26 days and the number of completed cases is more than satisfactory.

If brokers know their criteria and have good links with their lenders there are still good mortgage deals out there for clients and as a company we try to ignore the constant barrage of negativity that is being banded about at the moment and concentrate on the job.

If you are looking to remortgage and have adverse credit, please feel free to contact Solution Mortgages on 0845 123 1260 or apply online at www.solution-mortgages.co.uk

Interest rates lowered to 5%

Thursday, April 10, 2008

Interest rates in the UK have been cut by 0.25% to 5% by the Bank of England's Monetary Policy Committee (MPC) today.

It is an attempt to stave off the threat of recession in the UK economy and to try and offset the ongoing credit crunch.

It is the 3rd cut in interest rates that the bank has made since December 2007.

The problems in the credit markets are obviously overshadowing the threat of inflation as the governments 2% target on inflation has already been breached. However, the lack of funding for mortgages, the possibility of house prices falling and further deterioration in the wider economy was enough to make the MPC cut rates.

We are hopeful that the rate cut will be passed on to borrowers but it cannot be certain. Lenders are reeling from sub prime losses in the US and the lack of liquidity in the money markets means that the amount of funds available are finite. This means that lenders are doing far less business and therefore need to maximise their margins and so are unwilling to follow the Bank of England's lead.

Many businesses have called for further cuts to shore up economic growth. It is very important that problems in the finance sector do not damage the wider economy. Consumer confidence is also likely to be waining with all the negative press around at the moment. We still believe the press want to talk us all into a recession.

If you have any questions on this article, please feel free to contact Solution Mortgages on 0845 123 1260 or visit us online at www.solution-mortgages.co.uk

Innovative solutions needed for funding crisis

Wednesday, April 9, 2008

It has taken only 9 months for the once thriving mortgage lending sector to be brought to it's knees by global investors losing confidence in mortgage backed securities.

The specialist (sub prime) sector has been hit hardest with many lenders either constantly repricing, withdrawing products or withdrawing from the market entirely. The majority of these lenders depended on the securitising their assets, so they cannot continue to lend in the current situation.

The closing of businesses and redundancies are rising among lenders, packagers and brokers and this is having an adverse effect on the wider market. Potential mortgage customers without a sizeable deposit and those with poor credit histories are being left stranded with few lenders to turn to.

The result of all this will be unsustainable debt levels, high numbers of repossessions, growing homelessness, and problems with negative equity.

With no end to the international credit crisis in sight, the government needs to act to safeguard an industry which has been so effective and innovative in the past.

With a huge amount of demand for mortgages, healthy income streams are available for lenders with money to lend.

It is time to consider solutions to the problem and it is time the government opened dialogue with the Council of Mortgage Lenders, the Association of Mortgage Lenders, the Bank of England and the Financial Services Authority.

The difficulties that are being experienced can be resolved but need communication and action.

If you have any questions on this article, please feel free to contact Solution Mortgages on 0845 123 1260 or visit us at http://www.solution-mortgages.co.uk/

Arrears crisis is possible

Tuesday, April 8, 2008

With the liquidity squeeze showing no signs of disappearing there are strong fears this will lead to an arrears crisis.

Lenders need to restore confidence and start expanding their product ranges again. An article published recently showed that 23000 mortgage products have been withdrawn by lenders in the last 6 months from mortgage sourcing software programmes. This shows the extent of the problems mortgage and remortgage clients are facing at present.

However, there are two sides to every coin and lenders would like nothing better than to lend but neither affordable funding nor the means to sell on specialist (sub prime) assets exist in the current market. Lenders can not conjure up a market for mortgage assets out of thin air.

As borrowers 2 & 3 year fixed rates expire in 2008 and early 2009 they will revert to their lenders standard variable rate which is much higher. If they cannot refinance, the higher mortgage payments could lead to arrears.

Unless the market opens up again and lenders can expand their products ranges, clients will struggle. Where this will lead is hard to predict, but if asset performance worsens it will only serve to further delay the recovery of the securitisation market as liquidity-shy investors will be in no rush to invest in poorly performing assets.

However the game unfolds it is difficult to see a way out of the current situation without fresh liquidity being injected into the industry.

If you have any questions on this article, please feel free to contact Solution Mortgages on 0845 123 1260 or visit us at www.solution-mortgages.co.uk

Buildings and contents insurance

Monday, April 7, 2008

It is very important to both lender and the borrower that the mortgaged property is adequately insured. For the lender, the property is the prime security for the loan that has been made and it is essential that it is insured against any event that would adversely affect its value. Similarly, the borrower needs to protect his home.

From a lender's point of view, insurance of the property's contents is not so critical. The borrower, however, should insure his contents, although not all do. Combined policies have become much more common in the past few years.

Many buildings insurance policies are now index-linked. This means that the level of cover that is put in place at the outset is automatically increased annually in line with a recognised index that reflects increases in house building costs. The chance of under insurance is therefore slim.

Competitive bedroom rated buildings and contents insurance is available through Solution Mortgages. You can either get a quotation online at http://www.solution-mortgages.co.uk/ or get a quote over the phone by calling 0845 123 1260.

UK housing market and mortgage weakness

Friday, April 4, 2008

Many lenders are taking comfort from the initial assessment that the UK market will experience a soft landing for house prices in 2008.

However, the overall picture is likely to disguise a wide variation in house price growth and transaction volumes across sectors and regions. Localised sharp falls in demand could result in house prices for certain types of property falling by around 10%.

These localised and more limited falls can translate into significantly higher levels of arrears and losses for lenders.

The importance of maintaining consumer and business confidence cannot be understated as increased price volatility is inevitable as volumes slow to much lower levels.

Lenders now have a declining appetite for risk. The credit crunch has resulted in lenders reducing their overall exposure to perceived higher risk markets. In the initial phases of the credit crisis it would seem perfectly natural for banks to retreat into assets of higher quality.

To what extent this has accelerated the slowdown in the UK housing market is difficult to gauge.
Mortgage lending is estimated to be 5-10% lower as both reduced risk appetite and credit score tightening have taken effect.

If lenders can avoid tightening asset quality further, the mortgage market is likely to stabilise quicker and get back on a long term sustainable path.

If you have any questions on this article or others like it, please feel free to contact Solution Mortgages on 0845 123 1260 or visit us at www.solution0-mortgages.co.uk

Problems in the mortgage market

Thursday, April 3, 2008

Companies working in the mortgage market have experienced a significant series of events which completely changes how mortgage business will be done in the future.

A lot of anger has been directed at lenders for changing criteria and hiking interest rates when the UK Bank of England base rate has been going down.

The problem is that there are good reasons behind lenders decisions over the last few months. The industry has experienced an under supply of very competitive and innovative mortgage products in the last 6 months. There could now be the prospect of a shortfall of funding throughout the full range of product sectors over the next 12 months.

The situation has led to lenders no longer providing the major distributors with exclusive products, but also to the withdrawal of their product range without any reasonable notice. The reason for this is that lenders are now requested by the FSA to report their lending, saving and liquidity position on a daily basis.

Daily cash flow by all lenders is now such a crucial element of their own survival, it influences their lending policy which impacts on what and how they can lend. Lenders are now more reliant on their own deposits for lending as the money markets are still effectively shut.

Lenders are not wanting to lend less through choice, they have few options at present. This situation is unlikely to improve for some time unless the Bank of England and Government intervene to restore confidence in the wholesale markets.

If you have any questions on this article or others like it, please feel free to call Solution Mortgages on 0845 123 1260 or visit us at http://www.solution-mortgages.co.uk/

How much of a problem is world inflation?

Wednesday, April 2, 2008

In the current economic climate The Governor of the Bank of England believes the threat of inflation is a higher priority than the meltdown in the financial sector.

The Bank has recently dampened down expectations of an interest rate cut based on world inflation pressures and concerns that this could translate into spiralling wage costs.

Wage inflation does need to be watched closely as there is usually a time lag from higher goods price inflation feeding into wages and other costs.

The risk facing the world economy is that central banks will accommodate any rise in world inflation as this could lead to stagflation. For example in China inflation has now reached 7%. This is a far cry from the UK governments 2% target and will quickly affect imported costs around the world.

In light of this a reduction in interest rates next week by the Monetary Policy Committee (MPC) would be extremely welcome but is now looking less and less likely.

If you have any questions on this article or others like it, please feel free to contact Solution Mortgages on 0845 123 1260 or visit us online at http://www.solution-mortgages.co.uk/

Rate cut needed soon!

Tuesday, April 1, 2008

The Bank of England's Monetary Policy Committee (MPC) needs to cut bank base rates by 0.5% by early summer to boost the struggling mortgage market.

Interest rates need to be reduced from 5.25% to 4.75% by early summer. That would help matters. It will make things slightly easier for consumers and the housing market.

The move should reduce borrowing costs and help borrowers become more optimistic.

Confidence in the mortgage market is rapidly slowing and was dented further in the Budget, where the Chancellor failed to throw any life lines.

Indeed Solution Mortgages Sales Director Scott Morrissey said "At the current time lenders are actually putting rates up while interest rates have been coming down. Only a cut of 0.5% over the next few months should be enough to see the reduction in rates passed on to borrowers. In all my years involved in mortgage sales, I have never seen it so bad".

However Solution Mortgages are still managing to complete mortgage business for customers and even though the number of options available have dwindled, the fact that we have underwriters from the lenders we use in house, we are still able to maintain excellent service times and complete business for clients. In fact last month was our best month for completions since October 2007 and helped contribute to a profitable first quarter for us.

Despite this the problems still remain and as the housing and mortgage finance market is critical to the well being of the economy. There needs to be some action.

If you have any questions on this article or others like it, please feel free to contact Solution Mortgages on 0845 123 1260 or visit us at www.solution-mortgages.co.uk