Mortgage approvals are down, but it's not deterring the big banks, who are snapping up as much as much business as possible right now…

Whilst the banks are taking market share from traditional building societies, the overall number of mortgages approved for house purchases dropped sharply last month to the lowest level since records began back in 1993, new figures have shown. 

The Bank of England (BoE) said 42,000 mortgages were approved for purchases during the month, down from 58,000 in April and 63,000 in March. This is the thirteenth month running that approval rates have fallen and the figure for May is 64% below that for the same period in 2007.

Remortgaging, which has been making up the bulk of lending, was also down over the month, with the number of of you switching mortgages down 10% on April's figure.

A total of 90,000 remortgages worth £12.1 billion were approved in May, accounting for almost 60% of the £18.5billion of mortgages approved overall.

Looking to remortgage? Speak to an impartial adviser who can help.

Philip Shaw, chief economist at Investec was succinct about the figures saying they were:

"Terrible. There is no other way of describing them. It is really symptomatic of what is going on the housing market. The real danger is there is a knock-on effect to consumer activity."

Just £5.8 billion was advanced to those of us wishing to buy houses last month; this compares to 16.9 billion a year ago.

However, the interesting thing that has emerged is that the main high street banks have increased their share of the new mortgages despite lending us less money!

Their market share has grown from 56% in October 2007 to 77% in May 2008.  Two years ago, during the market boom, the new mortgage market was fairer when banks had about half of the market.

David Kuo, Head of Personal Finance at impartial website Fool.co.uk, says:

“The increasing dominance of banks in the market for new mortgages is a worry for anyone looking to step onto the housing ladder.

“The once level playing field that borrowers could count on for competitive rates has been tilted in favour of banks. Even worse, banks are offering unattractive deals knowing that customers are faced with little option but to accept them. 

“Fool.co.uk urges banks to treat customers fairly at this difficult time. The pendulum of power has swung in their direction, but they need to remember that a pendulum swings both ways. If they exploit their privileged position now, then they need to be ready to duck for cover when the pendulum swings back the other way.”

So, as banks expand into the mortgage market, are they playing fair when they provide our mortgages, especially when we are left with little choice?

Even if you don’t think they are, what can we do about it?

Let us know your comments.

Information © Fool.co.uk 2008

It seems that every day someone comes out with yet another portent of doom about the British property market.

Buy to let has had its fair share of detractors over the last year or so, and it wasn’t that long ago we were asking whether or not it was bye bye to buy to let?

This was due to the fact that buy to let mortgages had dropped by 85% in the last year but despite this, a good percentage of buy-to-let (BTL) landlords are still feeling bullish.

But should they be?

• Strong optimism

In a recent survey 41% of buy to let landlords said they felt optimistic about the UK’s private rental sector. Meanwhile, 54% thought that property still had the potential to offer better growth than other forms of investment.

In addition 44% said that while letting wasn’t currently their main source of income, they expected it to be in the future.

Oh dear.

• Property ownership pessimism

Even those landlords who are pessimistic have mainly become disillusioned because of the day-to-day aspects of property ownership. About 50% had experienced a void (when the property doesn’t generate rent), which sounds low. More than half had had trouble with tenants; the key issue unsurprisingly being property damage. 

Hmm, the landlords apparent lack of concern appears a bit complacent…

This is because rising interest rates have pushed rental profitability to its lowest level since the survey began; average gross rent was £30,140 a year, and the average “portfolio size” was £697,670; so even rental yields before deductions averaged just 4.3%; that is well below the cost of borrowing.

So how can so many still be optimistic?

• BTL still affordable

The main reason seems to be that the average BTL position is still affordable. But that’s only because the average loan is £282,950, making the average loan-to-value (LTV) 40.5%.

This explains why 41% are still bullish!

If they had larger loans, their worsening cash-flow position would by now be more clearly reflecting the deterioration in the financial argument. By being less leveraged, BTL investors think they can ride out the storm, saying they’re “in it for the long-term”.

Even if variable mortgage rates have now risen above 7%, your average BTL investor will still have outgoings of no more than £20,000 against a gross income of £30,140. It would have to be an very unfortunate landlord who suffers £10,000 of damage, maintenance and other costs in a year, so we are assuming most must still be cash-flow positive.

But this is a double-edged sword. If the average BTL investor was instead 100% leveraged, outgoings would be nearly £20,000 higher than gross income. 

Would so many be as complacent if that were the case? 

• BTL landlords missing mortgage payments

Already, those who do have significant leverage can’t afford any voids at all now. A full 17% say they have already missed a mortgage payment; what is shocking is that this is up 8% in the three months since December.

That means that in the first quarter there was an annualised 32% rise in delinquent BTL borrowers. Earlier this month, Bradford & Bingley confirmed as much when they revealed that in the first four months of 2008, the number of buy to let mortgages that were at least 90 days in arrears had risen by 52% to over 3,000. 

These more-leveraged BTL investors already realise how hostile the market has become and its only the under-leveraged, complacent people who’ve been in the game longer who believe they can survive and ride out the current financial storm. 

But if the more highly leveraged Johnny-come-­latelys are forced to bail out, the whole market will be swept out from under their feet.

It’s time for the 'long-termers' to get their calculators out and try to see it from the other guy’s perspective. With some investors so close to the wire already, repossessions are looking a distinct possibility.

So, do you think buy to let had had its day or is it something still worth investing in?

Why not let us know in the comments?

You have to have reflexes like a cheetah to keep up with what is happening in the mortgage market right now.

With mortgage arrangement fees on the up, various lenders increasing their rates and fixed rate mortgages reaching a 10 year high, it’s mortgage mayhem wherever you look.

And as if that wasn’t enough, the mortgage market continues to throw up more uncertainty when one mortgage lender was forced to pull nearly 25% of its mortgages just a day after it launched a new range of deals!

Bristol & West last Friday removed 7 of its 29 types of mortgage; mostly fixed-rate and buy-to-let deals that it launched last Tuesday.  It said it it had to take the decision in response to "unprecedented volumes of business received during the past week".

Then just to throw another spanner in the mortgage works, First Direct has now raised the cost of what had been Britain's cheapest 2 year fixed-rate mortgage.

First Direct said its rate would rise from 5.49% to 5.99%; although you will still have to fork out a 20% deposit and a £1,499 fee.

These moves do not help may of you who are desperately trying to find a reasonably priced mortgage. Mortgage prices are changing so fast, that those of you who bother to stop and check rates are now finding the best deals have gone already!

Still hunting for a good mortgage deal?  You should use an impartial adviser who can search all mortgage lenders, some you may never have heard of, to find the best deal for your situation.

Ray Boulger of the mortgage broker John Charcol commented on the mortgage mayhem saying:

“It's all a bit crazy out there. Some of these changes have been a delayed reaction to the big increase in swap rates that led both the Nationwide and Woolwich to re-price their rates upwards at the start of the week."

He said that despite recent predictions of a higher bank rate, he considered it was in no way a "done deal".

He said: "I can't see rates rising by more than a quarter point; if at all. I'm predicting they will fall away quite considerably next year, making tracker rates probably the way to go for those who don't need the security offered by a fixed-rate deal."

Also last week, the Council of Mortgage Lenders (CML) said that mortgages remained "slow" in May, with total lending down 19% over the year.

So,do you think there is mayhem in the mortgage market right now?

Have you been finding the best deals disappearing almost as fast as they appear?

(Please note that articles on Money Hospital do not constitute regulated financial advice. The articles are intended to provide general personal financial information. We urge you to consult an Independent Financial Adviser (IFA) before making any important decisions about your finances!  All rates are correct at time of printing but are subject to change without notice.) 

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Money is a bit tight for most of us right now.

It’s especially hard if you have a family to take care of.

The dramatic impact of the economic squeeze on ordinary families is shown by the fact that more than 4 million families have used a credit card to pay their mortgage or rent in the last year.

This worrying trend was something we first mentioned last year when we asked Is your credit card paying your mortgage?

How bad is the situation?

The disturbing level of desperation on the part of many homeowners is shown in a report from the homeless charity Shelter, which lists a number of alarming statistics showing the gloom that is gathering around everyone’s household finances:

• Growing numbers of you have taken to paying off your debts by withdrawing cash on your credit card. This is probably the most expensive way possible as this type of transaction carries an interest rate of 28%.
• 1 in 6 of you fears losing your home after failing to keep up with payments.
• 3 million of you with families have had to borrow money from friends or relatives, or take out a personal loan, just to pay your mortgage or the rent.
• 1 in 4 of you with families say that difficulties meeting your monthly housing costs is causing you stress or depression.
• Nearly 400,00 of you with families say you have fallen behind with your mortgage or rent payments.
• Nearly 2.2 million of you spend more than 50% of your income on your housing costs.
• 25% of you are now spending less on food.
• 1 in 9 of you has sold possessions to help pay the bills.

A serious struggle

The report carried out by Shelter (called ‘Breaking Point’ ) surveyed people from all backgrounds and levels of affluence.

Experts described Shelter’s findings as 'stark' and said it showed how finding the money to keep a roof over their head was becoming a serious struggle for many people.

It was also revealed that 1 in 10 of you has taken on another job or is working overtime because your main job does not pay enough money to keep your finances afloat.

Some of you said you had cut the amount you spend on buying clothes for your children. 

Nearly 15 % of those surveyed, said they were living in a home which is 'too small for their needs'.  The same amount said that  the money for essential repairs to their home. 

If you are already in debt and are having problems keeping up your payments, then you should speak to a debt specialist who can help.

Adam Sampson, chief executive of Shelter, said:

'Our report shows just how difficult it is for ordinary people to cope with spiraling housing costs, and how desperately unaffordable housing has become.

'People are going to extraordinary lengths to ensure they pay their rent or mortgage, but the affects of stress or depression, having to sell possessions or deprive the kids of treats can be devastating to family life.' 

A separate survey, from the credit firm Equifax, said about 20% of you owning a home are worried about having your homes repossessed.  The number of victims of repossession this year is expected to jump to 125 a day, compared with 75 a day in 2007.

Worried about repossession? Read our 10 steps to lower your risk of repossession

Housing Minister Caroline Flint said:

'We are taking action to support families who may be facing difficulty because of current market conditions, with £9million more for face to face debt advice, and free legal advice to all households at risk of repossession.' 

So, it’s clear that times are hard for a number of us. And though the credit crunch looks set to roll on for a while, there are things that you can do to help yourself.

If you are struggling with your some of the things mentioned above then firstly, do not panic. There is advice and support from a number of organizations:

The Consumer Credit Counselling Service (CCCS) is a debt advice charity that offers free and impartial advice. Their helpline is open from 8am to 8pm, Monday to Friday, on 0800 138 1111.

Credit Action also offers impartial and ethical advice about all things debt related.

You can also contact the National Debtline and your local Citizen's Advice Bureau.

Secondly, if things are really tough and you don’t feel there is anyone you can really talk to, remember you are not on your own.

Call the Samaritans on 08457 90 90 90 in the UK & Northern Ireland or 1850 60 90 90 in the Republic of Ireland.

Thirdly, speak free of charge to a debt adviser who can provide you with advice and solutions to help you resolve your debt and credit problems.

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There was a time when a fixed rate mortgage could provide you with more security than Arsenal’s back four.

Sadly it appears that those days are disappearing fast.

That is because the cost of fixed-rate mortgages has hit a 10-year high; and it looks like it could climb further.

Fixed rate mortgages always been popular because they give you the security of fixed monthly repayments over a certain time period. It makes your living costs easier to manage every month, although you do have to remortgage on a regular basis. 

• What has been happening?

A string of mortgage lenders have been hiking their rates in recent weeks, blaming the moves on the increase in money market rates.

Nationwide became the latest on Monday to unveil a hike in the cost of some of its fixed rate and tracker rates; by up to 0.5%. Halifax, the Woolwich and Abbey have also hiked the cost of some of their deals in the past fortnight.

All of this activity has led to the average 2 year fixed rate rising to 6.75%; the highest in a decade, according to price comparison website Moneyfacts.co.uk.

The average 5 year fixed rate mortgage is only slightly lower at 6.72%.

Darren Cook, a mortgage expert at Moneyfacts, warned that this big jump in the cost of fixed-rate mortgages would hit a lot of us:

"The curse of Friday 13 bought more pain for borrowers as swap rates reached a new high of 6.49%. With lenders having to pay such a huge price to secure funds and a lag time of a few weeks before this cost is passed on to mortgage customers, the situation is likely to get worse before it gets better," he said.

Cook warned that with the average standard variable rates (SVR) now costing 6.66%, those of you needing a mortgage were facing a stark choice.

• What happens next?

Online mortgage company mform.co.uk believes fixed rates of below 6% will disappear over the next few weeks as dramatic swings in money markets take their toll. This is because rate for mortgage lenders to secure cash on the money markets for 2, 3, and 5 year deals have gone up by 0.44% in the last month alone.

Francis Ghiloni, of mform.co.uk, said those sub-6% fixed rate mortgages that survive are likely to come with hefty arrangement fees in the future, as mortgage lenders seek to maintain their profit margins.

For example, Skipton has a 5.79% two-year fixed rate mortgage, but it comes with a £998 fee; this makes the true annual percentage rate more than 6%.

Those of you that played safe and opted for fixed-rate deals in 2006 were getting rates close to 4.5% back then (ah the good old days eh?) 

Other lenders offering competitive deals, such as Abbey, have increased their fees to £1,000 and cut the maximum amount they will lend you.

The Woolwich has already withdrawn its 2 year fixed-rate mortgages while Nationwide's increase now takes its most expensive 2 year fixed-rate deal to 7.85% for those of you borrowing between 90% and 95% of your property's value.

However, as fixed rates sore, it means that many of you are in for a shock when you come to finding a replacement deal. Many of you forced on to your lender's standard variable rate (SVR) could see your payments rise by hundreds of pounds a month.

• Unusual situation

The credit crunch has seen the unusual situation of fixed and tracker rates being much in line with standard variable rates (SVRs), which banks and building societies normally charge only when you come to the end of a special deal.

As a result, some lenders (such as Royal Bank of Scotland, Halifax, Lloyds TSB and C&G), have all stopped offering their SVRs to new customers.

So with the fixed rates reaching a high price; can you still get a good deal?

Yes you can; and you should use an impartial adviser who can search all mortgage lenders, in order to find you the the best mortgage for your current circumstances.

So, it appears that fixed rate mortgages has become popular again; its just a shame that the security it provides comes at such a high price.

(Please note that articles on Money Hospital do not constitute regulated financial advice. The articles are intended to provide general personal financial information. We urge you to consult an Independent Financial Adviser (IFA) before making any important decisions about your finances. All rates are correct at time of printing but are subject to change without notice.)

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