* The Bank of England has cut interest rates to 0.5% – a fresh all-time low – and says it will now boost the money supply to help revive the economy.

Interest rates have now been reduced six times since October, and the latest cut from February’s 1% was expected.

The Bank said it would expand the amount of money in the system by £75bn – a policy called quantitative easing – in an attempt to boost bank lending.

Bank Governor Mervyn King said the policy would “eventually work”.

* Source: the BBC

Well, this was probably expected due to the actions taken by the UK Government and Bank of England over the last few months and the speculation by the media.

What this generally means for you and I, is that house prices are at their lowest for more than a decade, interest rates are at an all time low and the majority of monthly mortgage payments here in the UK are nearly at rock bottom, with some people paying less than £100.00 a month.

So right now in the housing market, although there is a lot of fear out in the general public and things are still a bit slow, this is absolutely the BEST time to go looking for bargains in the housing market.

House prices are low, Banks are being leaned on to lend again and if you can get a mortgage, you can get a really great lending rate.

Unfortunate and heartless as it may be for some, the recession has created an upturn in repossessions, which in turn has created opportunity for those cash buyers who can afford to take a risk and buy at the drop of the hammer.

Plus if you’re a tenant looking to move or renew your existing tenancy agreement, you currently have the upper hand as you know that your Landlord could probably drop the monthly rental price and still make good money over and above their mortgage payments.

However, my heart goes out to those who did not see the downturn coming and took out a fixed rate mortgage just a couple of years ago, and are now caught short with a higher interest rate mortgage, fixed for 3 – 5 years. Unfortunately you will just have to bite your lip and learn from your mistake.

But if you want to get on the property ladder and bag yourself a real bargain, get in with the real property investors who concentrate on Below Market Value Investments (BMV) and generally get at least 25% – 40% off the asking price still.

BoE: No quick fix for mortgage misery

Wednesday, July 30, 2008

The Bank of England has released some sobering statistics about UK mortgage approvals.

According to the BoE, mortgage approvals have dived by almost 70% in the past year. Just 36,000 new loans arranged for people moving home during June – that is 69% fewer than in the same month last year and 12% lower than May’s figure, according to the Bank of England.

Mortgage lending also dropped steeply during the month, with net advances hitting a near eight-year low of £3.1bn.

The number of home loans approved has now fallen for 14 consecutive months and is at its lowest since the Bank of England first issued figures in 1993.

Lenders have tightened their criteria because of the credit crunch, reducing the availability of mortgages, especially to would-be buyers with small deposits.

The BoE figures come as a report for the Treasury warned there is no quick fix for the problems in the mortgage market.

The Crosby Review, which is being carried out by the former head of the Halifax Bank of Scotland Group (HBOS), Sir James Crosby, says funding of home loans should be left to the market.

Sir James says Britain should avoid setting up US-style government-backed agencies to tackle the funding crisis.

But his independent report stops short of making recommendations on how to tackle the problems caused by the credit crunch.

It moots the idea of possible further support from the Treasury to help kick-start mortgage lending

The Bank of England data shows a fall in all types of mortgage approval, with just 165,000 new loans agreed during June, down from 214,000 just three months earlier.

Howard Archer, chief UK and European economist at Global Insight, said it “heightens concerns over the potential depth and length of the housing market correction”.

“The Bank of England data graphically highlights that housing market activity continues to be throttled by stretched affordability and tight lending conditions.”

Nick Leeming added: “36,000 new mortgages in July is almost a quarter of the peak level in the autumn of 2006. The dearth of mortgage finance is the main sticking point for the housing market. With demand stifled, prices are falling, but that cannot stimulate transactions until the mortgage market is brought out of deep freeze.

“The Crosby report offers a chink of light at the end of the tunnel but this is not a time to delay or be timid. Waiting until the autumn makes no sense at all. The Treasury and the Bank of England should bring new mortgages into the special liquidity scheme straight away to get the market back on its feet”.

Special Thanks to The Move Channel for the article