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Clare Francis: Mortgage rates are continuing to fall with Alliance & Leicester the latest lender to cut its rates, and new figures from the British Bankers' Association revealed that mortgage lending actually rose slightly in July. But the new deputy governor of the Bank of England, Charlie Bean, has warned that the economic downturn is set to continue for some time, and separate figures reveal that the number of people struggling to meet their mortgage is rising. So is the mortgage market actually improving, or are we still a long way from the pre-credit crunch conditions?
Louise Cuming, whose head of mortgage services here at moneysupermarket.com, is here to enlighten us.
Q1: So Louise, is the recent spate of mortgage rate reductions a sign that the market is improving?
Louise Cuming: Well it's got to be positive news. I think any rate reduction alongside the doom and gloom that we have been seeing has to be a good sign. However, what you are seeing is that good rates are available only for the chosen borrowers and we are seeing that as lenders are tightening up their policy all these great rates are available to people who have got, say, more equity in their property - sometimes you need to have as much as 50% equity in your property or a 50% deposit before you can get these great rates.
Q2: But what does this mean if you've not got less then say 25% equity in your home. Is it still very expensive to remortgage if you've got a smaller deposit?
Louise Cuming: That's it, you're having to pay more, so in certain circumstances if you have only got 5% deposit your choice is so limited, and as in any walk of life, the less choice there is the more you have to pay for it. So coming back to the perennial question about first time buyers, it still is a very difficult picture for first time buyers and all these encouraging signs really aren't helping them an awful lot.
Q3: We're seeing a lot of people coming onto our forums who are really struggling at the moment - they have seen their mortgage payments leap and they can't afford to repay, they can't remortgage because of the tightened conditions and life is really tough for them. We had one this morning, a lady who is coming off a rate at 6.2% leaping up to 8.5% and it was adding £300 a month to her monthly repayments. Are you getting an increasing number of calls to our advisers from people within similar situations?
Louise Cuming: Absolutely, and its such a difficult dilemma for them because not only is their mortgage going up but the cost of living is going up as well so they are being squeezed from both sides. There isn't a magic wand to wave to say 'you can do this'- it just is a matter of looking at all your outgoings, to make sure you are saving money across the piece, and I know that is something that you keep majoring on. As well as that if you really are struggling - and people are, and we've seen as you have said already, arrears stats going up - to go and talk to not only your mortgage lender but if you have got any other borrowings, to just try and come to an agreement with affordable payments to tide you over in the short term.
Q4: And I suppose for some people although their payments have gone up a lot they will still be able to afford them, and if they are on their lenders standard variable rate they're probably not going to be tied in are they? So then when the mortgage market does improve, they will at least be free to remortgage onto another deal?
Louise Cuming: In fact a lot of people are choosing to do just that at the moment because they want that flexibility and they want to see what is happing to the market. The only note of caution there is, I can't see things changing in the short term, so potentially if you're waiting for that silver lining it will be a while coming.
Q5: But if you're fortunate enough to have some equity in your home, then things are at last getting better?
Louise Cuming: Absolutely!
Clare Francis: Thanks Louise.
