UK Debt and the Mortgage Industry

Many homeowners in the UK have decided to remortgage in the last few months. They realise that the mortgage companies and lenders are being to take away some of the better offers for remortgaging. Credit card debt has also increased by 350 million pounds in the last month. Bank loans and overdrafts have increased by 2 billion pounds as of February. These changes have demanded that consumers take advantage where they can in order to help save them from further issues.

A study has shown that these increases are a record high, since they began tracking numbers in 1987. The figures were published by the Bank of England. Economists have looked at the jump in borrowing as a bit bizarre. They found of course that a lot of the jump was due to the remortgaging of consumers because they were afraid of the deals going away during the global credit crunch of the last year. Consumers are reportedly just grabbing what they can.

First Direct and other banks have been accessing as many cheap deals as they can. Co- op bank is one bank that actually withdrew their two year mortgage range. Co-op said they had to remove their products as they were being hit by consumers looking for great deals. Other banks that already removed their products caused an influx of consumers seeking cheap deals that Co-op just can’t afford to offer any more.

Banks and Building Societies are showing a drastic change in the products they are willing to offer. In fact they have lowered their mortgage approvals by 40 percent in the last year in which they have only offered 74,000 loans in February. This is the second time levels have been so low. The last time such things were seen was in the 90’s when the housing market crashed. With the reduction in remortgage options the home equity mortgages have also been reduces. The banks simply don’t have the funds to offer the greatest deals needed.

Consumers are discovering that they are not able to spend their equity in their homes, which leaves families needing a little extra income searching for the higher interest rate methods like credit cards.

One of the greatest fears at the moment is that consumers have exhausted their credit sources. This will lead to insolvency as well as foreclosures of homes. There has been a pattern in the US of exactly this problem. The subprime market collapsed last year in the US in which many homes were foreclosed and others were forced to sell their homes for cheap.

Along with the reduction in products on the market there will be an increase in mortgage costs for 1.4 million borrowers in the UK this year. Thos who had fixed mortgages for the short term need to either remortgage or they will be paying a higher payment as the adjustable rate kicks in. In London a mortgage for 200,000 pounds could increase in monthly payments by 150 pounds.

Howard Archer is a UK economist that was surprised by the amount of mortgage applications in February and the increased borrowing. He believes it is due to the fear that mortgage options are going to vanish and that consumers need to take advantage now.

This new period follows after many UK consumers have paid off expensive bank loans and credit card debt. Most of these loans have been paid off with mortgages on their homes. The debt has also been able to explain the high street spending in the last few months.

Richard Snook, another economist said that when consumers are happy they tend to spend more and have a good time, but during the bad times they will reduce their spending. Most consumers do not want to tighten their spending though, which is why debt can get quickly out of hand.

Statistics from First Direct showed that there has been a decrease in mortgage approvals for new borrowers because of the high number of applicants. It is of course also due to the turn in the mortgage market and the products available. There has been a turn in the London property market that is affected due to the mortgage restraints. The property market dropped .4% in the last few months.

The Liberal Democrat Vince Cable believes the housing market turn is more than just a small issue. He believes that the current state of things is showing the credit crunch has affected the mortgage lending, consumers and that the drop was inevitable with the tightening on lending requirements.

The housing prices have to fall as the mortgage costs rise or as they are taken off the market. The fact is that no one can afford a mortgage unless they have a down payment. Talk of recession and other negative impacts are only fuelling the downturn.

Back To Financial News April 2008
Travel Rewards With Your Credit Card
APS and Prepaid Gold MasterCard
The Figures On Credit Card Balance Transfers
Pointers for Balance Transfers
Credit Card Interest
Credit Offers Limited
Executive’s Life Ruined by ID Theft
Getting Around Life’s Obstacles
How To Borrow A Grand
Paying for a Good Credit Rating
UK Debt and the Mortgage Industry
Abuse of Government Credit Cards
Asian Growth Helps UK
Banks Raising Funds Offers Hope
Darling and UK Banks Going Head to Head
Estate Agents and Card Fraud
Government to Help UK Banks
Insuring UK Gardens
Interest Rates Rising with Underhanded Techniques
Lost Luggage Insurance Removed
Overdraft Charges Increase Credit Card Balances
Prediction: 10 Percent Drop in Insurance Market
Rise in the Housing Market Prices
The Scams With Telephone Calls and Security Codes
UK Insurance Costs Rising