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Bank survey reveals sad plight of would be borrowers

Tuesday, May 31st, 2011

A survey carried out for the High Street Bank, Halifax, reveals today just how disillusioned a generation of workers in the UK are, and how they view the prospect of purchasing homeowner insurance as an ever dwindling dream.

Generation of tenants

The report shows that a whole generation is becoming reconciled to the fact that they may never be able to afford a home of their own, as banks make the qualifying criteria for getting a mortgage more difficult. The report shows that although the vast majority of 20 to 40 year olds want to follow in their parents footsteps and possess a home of their own they are quickly coming to realise that they are trapped in a financial straightjacket.

Huge survey, huge deposits, huge disappointment

The report is more worrying because of the number of people who took part. This was no bite size sample, over 8,000 were questioned and 9 out of 10 still aspired to have their names on a mortgage deed, however, the stress of actually applying for a home loan and the damaging effect on one’s credit rating when being turned down was turning more and more people away from pursuing their dream.

Of course the main factor quoted was the huge deposits most banks are demanding before they will hand out a mortgage, the report shows that many of those questioned had tried to save the cash but realised it was beyond their reach. It seems as though we now have a generation who through no fault of their own will be buying home contents insurance on a house they rent rather than one they own. It is not only a worry for them; it should be a worry for the banks.

Impact could be far reaching

If the UK suddenly becomes a nation of tenants then the banks will be bidding goodbye to a source of revenue that has kept them wealthy for a long time, mortgages have been the lifeblood of the Halifax and other banks for a long time. To this end the Halifax has declared to take action on the report by the National Centre for Social Research immediately.

New approach from the Halifax

A spokesman for the bank said it would have new measures in place by midsummer to give prospective mortgage applicants a comprehensive insight into its lending requirements before they start the process. It will involve prospective buyers being given a promise of the amount the bank will lend to them. The process won’t show on their credit report, and if their application is rejected, the reason why, with tips on how to become more successful in the future will be given.

Tags: banks, First Time Buyers, halifax, home owner insurance, mortgages
Posted in First Time Buyers, Home Insurance, Saving Money | No Comments »

Banks prepare to cut and run

Tuesday, April 5th, 2011

Homeowners in the UK could find banking and mortgage facilities available to them may radically change in the next few years as the finance sector waits with bated breath on judgements from two sources over the next few weeks.

Unwelcome attention

It’s fair to say that most people take only a passing interest in what the finance sector is about unless it affects their mortgage, household insurance or their savings. The sector is in a state of flux at the moment, and the fact that profits are back, bonus’s are back and lending most definitely isn’t, has attracted unwelcome attention as far as the city boys are concerned.

Mortgage providers nervous

Last Friday ex Financial Services Authority (FSA) chairman, Sir Howard Davies, said that mortgage providers deserved some sort of decision sooner rather than later on how both the FSA and the European Commission (EC) will frame new legislation around the lending market. The rumours emanating from the EC on how any lender turned down for a loan via automatic processing will have to be given a personal explanation on the refusal is already giving mortgage providers nightmares as to how they will be able to afford the extra staff to manage this. The EC is expected to confirm that any costs on this cannot be directly passed on to the customer.

Protection for retail arm

At about the same time as Sir Howard was making his speech, the Treasury Select Committee were contemplating just what measures to take in ensuring retail banking was protected in future from the whims of gambling gauchos in the prime and subprime investment markets.

It is no secret that the committee feel there may be a need for more legislation to protect the public, and the constriction of the market due to the forced mergers that followed the collapse now makes them think there may be a lack of competition amongst banks. The committee feel that the retail banks who feed upon the needs of consumers to arrange their mortgage, home insurance and ISAs would benefit from a level playing field in attracting customers, who in turn would benefit from a more competitive sector.

A place overseas

The bigger fish are not at all convinced by the argument and have already started muttering in the appropriate circles that they may be forced to move elsewhere if things don’t go their way.

Tags: banks, household insurance
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Adam Posen the right questions

Tuesday, March 29th, 2011

As homeowners across the UK try and digest what the latest budget offering from George Osborne will do to their domestic economy situation, one man who could have an even greater effect on their finances has better news to offer.

Stable base rate

As homeowners nervously calculate their monthly outgoings, from home insurance to home delivered fast food, the one constant they have had over the last two years has been a steady mortgage rate. It has been, for many people the difference between hanging on to their home and applying to join a Council house waiting list. The lowest ever bank rate since its inception in 1694 of 0.05 has kept the lid on the recession, it has been the difference in keeping home repossessions down to much lower figures than they were in other downturns over the last generation.

Inflationary pressures

The rate is now under more pressure than at any time in those two years. Inflation is now racing ahead at over 4% and with the promise of even dearer fuel and energy charges still in the aptly named pipeline, the hawks in the Bank of England Finance Committee are circling and screeching ever more loudly for an increase in the base rate.

Any increase in the base rate would be seized upon by bankers and mortgage providers alike. Within minutes of an increase being announced mortgage rates will be on the way up and no-one can help the poor old homeowner then.

Cometh the hour…

Well perhaps one man can. Adam Posen is a member of the Bank of England Finance Committee and he is far from convinced that a rise in interest rates is necessary. Indeed he sees several reasons why they should stay as they are and fortunately for many he is not shy about making them public. Posen believes that once the effect of fuel and energy prices have worked there way through the system, inflation will fall below the stated target of 2% by next year.

Time will tell

He says that the wait and see approach adopted by the majority of the committee will show that an increase in wages and wage demands which would really put pressure on the inflation pedal will not materialise. He believes the job cuts coming through will weaken Trade Unions enough to quell actions from the shop floor to back up wage demands. If the banker is right then homeowners across the country can breathe just a little easier and still afford to look around for good home insurance offers and perhaps even splash out on the occasional take away meal.

Tags: banks, Base Rate, Home Insurance, property market
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