Lenders cut more mortgage rates If you have the money for a large deposit, some rates are below 6% Another round of rate cuts has been announced by the Halifax, one of the UK's biggest mortgage lenders. Several of its most popular fixed or tracker-rate deals are being cut by an average of 0.25%, for borrowers who can put down a deposit of at least 25%. The changes apply to deals arranged through mortgage brokers. The new rates highlight the trend of recent weeks in which many lenders have made a succession of small reductions to cut headline rates to 6% or less. "We are simply passing on the recent cut in swap rates [the cost of borrowing between banks]," said a Halifax spokeswoman. Wider range In the past week, other lenders, such as the Newcastle building society, Yorkshire building society and the nationalised Northern Rock, have also reduced the cost of some of their deals. "Most lenders have been cutting selective rates rather than everything," said Ray Boulger of mortgage brokers John Charcol. Other lenders, such as the Bristol & West, Woolwich and the Coventry building society, have also started to widen the range of mortgage deals they offer. For instance, the Coventry, and also the Britannia building society, now offer their best deals to customers who can put down a deposit of at least 50% of a property's value. Mr Boulger said lenders now appear to have become a bit more relaxed about lending than they were earlier in the year, with the cost of loans where customers put down a 10% deposit also becoming cheaper. "More lenders will come in with cheaper fixed rates in the next week or so," he predicted.   BBC August 2008     Homeowners are far better placed to weather a house price crash than they were in the early 1990s, analysis for the BBC has suggested.    House prices would have to fall by 56% to put the average mortgage borrower in negative equity. Government figures suggest the average borrower has an outstanding mortgage worth 44% of their property's value. The analysis was done for the BBC programme the Truth About Property, by housing intelligence monitor Hometrack. According to Hometrack, the average homeowner has equity worth £167,000. Few affected Some 31% of homeowners, most of them in the older generation, have no mortgage on their house at all. For them, the threat of negative equity is non-existent. For the rest, the picture is a bit more complex. Few economists are predicting property prices will fall far enough to put the average borrower into negative equity. But some are predicting a 20% fall and that would leave borrowers at risk of negative equity if their mortgage was worth more than 80% of the current value of their home. One in 20 borrowers - about half a million - are in this position, according to research by the Bank of England.  Many of them have chosen to be in negative equity by opting for mortgages worth 100% or more of the value of their home. Among that half a million at risk of negative equity, many will be able to sit tight and wait for prices to recover. Not trapped It is when borrowers are forced to move - for example because of a change of job, sickness or divorce - that negative equity bites. Lenders are entitled to insist that borrowers redeem their loans on selling the house on which the mortgage is secured. In theory, if the mortgage is worth more than the house and the borrower cannot find the money elsewhere, they will be prevented from moving. But in practice lenders have been prepared to allow borrowers to transfer the mortgage to a new home even if it is worth less - so the fear of being "trapped" is alleviated. Richer or poorer? Do price falls damage your wealth? The assumption many homeowners make is that even if they are safe from negative equity, house price falls still make them worse off. After all - your home is your biggest asset. In fact, house price falls do not damage the wealth of most homeowners: they bring benefits. This is because wealth is not so much what you have, but more what you can buy with it. And when you change your primary residence, you are not just a seller but also a buyer. To quote Adam Smith: "Every man is rich or poor according to the degree to which he can afford to enjoy the necessaries, conveniences and amusements of human life." Just as with any other consumer product, price falls mean you can afford to buy more housing. Better buy When prices fall, you will sell your house for less. But unless you rent or leave the country, you also have to buy. If you plan to trade up to a better home, price falls work in your favour. All else being equal, the price of the place you want to buy will fall by more than the price of the place you are selling. If you never plan to move again, price falls make no difference to your wealth. You will never realise profits or losses. It is only if you plan to trade down, to take profits out of property and turn them into cash, that price falls damage your wealth. If you sell and buy somewhere smaller, you are likely to lose more on the place you are selling than you will save due to the fact that the property you want to buy is cheaper. There is another effect of falling house prices. Just as rising house prices encourage homeowners to tap the equity in their house by borrowing against the value of their home, falling house prices discourage it. Source – BBC May 2008     House prices 'to breach £300,000'

The average cost of a house in England will break through the £300,000 mark in the next five years, research suggests. The National Housing Federation (NHF) warned prices were now almost 11 times the average wage and may rise by 40% as supplies fall further behind demand. To avoid a looming crisis the NHF urged the government to act on its promise to build three million homes by 2020. Recent rising interest rates and repossessions have led other analysts to forecast falls in house prices. The NHF said a housing crash was unlikely despite first-time buyers finding it tougher to afford a home. According to the report many of those priced out of the housing market are now turning to the social housing sector - as a result housing waiting lists have grown by 57% over the past five years to 1.6 million households - or four million people. Upward march In the 10 years since Labour came to power house prices have surged by 156% while wages have risen by just 35%, research for the NHF carried out by Oxford Economics found. If such trends continue, prices will near the half a million mark in London by 2012, from the current average of £318,864. Even in regions traditionally regarded as cheaper - such as the North West and Yorkshire - average prices will break through the £200,000 level. "Our report shows that continuing house price rises and the resulting housing crisis are set to stay with us for a long time," said NHF chief executive David Orr. And while homeowners may view the surge in prices as good news, Mr Orr did warn they carried a "sting in the tail". "A growing number of parents will find themselves subsidising their sons' and daughters' mortgages," he said. "And, across the country, more and more people are going to find themselves priced out of the property market - and struggling to find a decent home." Construction drive In order to tackle the problem the government must press ahead as soon as possible with its plans to build more homes - and make sure an additional 70,000 social homes are built each year, the NHF report added. The government vowed to act to tackle the country's property problems with the publication of the Housing Green Paper last month. Among the proposals were plans for more than 70,000 affordable homes a year to be built by 2010/11. The building drive aims to tackle housing supply problems - local government figures show there is demand each year for 210,000 homes, but only 165,000 are being built. Source BBC August 2007