Mortgage Market ‘Healthier’ than Reports Suggest

Posted 2008-05-6

The mortgage market is much healthier than some media reports would suggest, according to the housing intelligence and risk business organisation, Hometrack.

Contrary to the widespread reported Bank of England figures indicating a fall in mortgage approvals of 44% year-on-year, Hometrack says that in reality the fall has been only 3% from this time last year, insisting that total mortgage approval volumes are just 24% down over the same period.

Warning that the gloomy outlook generated over recent weeks could actually affect house prices and seriously impact on the property market in general, Gary Styles, strategy, risk and economics director at Hometrack, said the wide variation of performance by different lenders highlights that the overall situation is not nearly as bleak as some would have us believe.

He added that it was true lenders were struggling to maintain a supply of reasonable mortgages, but the latest figures indicate that banks are still maintaining remortgage lending volumes, and with an estimated 1.4million borrowers looking to refinance or remortgage their fixed rate deals in 2008, Styles believes competition will intensify in this section.

He further commented: “The recent decision of HSBC to match the existing borrower current deals if they remortgage to HSBC, is just one example of this.”

This more positive outlook will no doubt boost the beleaguered lenders of secured loans and homeowner loans, unable to cope with the demand for previously cut-price and fixed-rate deals as interest rates continue to climb month on month, triggered by the soaring cost of the three-month Libor rate – the established rate at which banks lend to each other to provide funding for mortgages and other financial activities.

Also looking for some relief is the insurance sector, particularly the car insurance market, with more than one in four motorists facing rising car insurance premiums and desperately looking around for ways and means of reducing this additional pressure on budgets already stretched to the limit.

As a result the traditional insurance companies themselves are losing customers at a phenomenal rate, with recently published figures from the independent financial comparison website MoneyExpert.com suggesting that up to 30% of drivers switched insurers when their existing premium quotations rose.

A measure of relief for debtors must come from the breaking news that private debt advice companies and appointed charities are to have the power to write off some of an individual’s debt, without the need for the agreement of creditors.

The debt companies will also be empowered to force creditors to accept a repayment schedule for the outstanding money owed, irrespective of gaining the lender’s consent.

Also in the Tribunals, Courts and Enforcement Act passed last year, but which is now being considered by the Ministry of Justice before the relevant clauses can be activated, is the authorisation that operators would have the power to compel creditors to ‘write off a proportion of the debts where a debtor complies with a plan, but cannot repay the full amount in time.’

The new law will empower Justice Secretary Jack Straw to issue licenses to approved debt management plan operators, which in turn will give the operators the power to force creditors to accept the debt management plans they have constructed.

The new compulsory debt management plans will be introduced along with existing forms of insolvency management, including Debt-relief orders (DROs), aimed at wiping out debts below £15,000, without the debtor needing to attend a court hearing, which will come into effect in April of next year.

Also a simplified version of Individual Voluntary Arrangements (IVAs), will be available in October, effectively reducing the power of creditors to refuse to accept a formulated arrangement.

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