Mortgages Direct

A price comparison website and David Kuo, the head of personal finance for Motley Fool, warned homeowners that any base rate cuts may not mean lower mortgage payments.

Despite efforts by Chancellor Darling, the Monetary Policy Committee (MPC) decided to hold any changes to the base rate in January, added Mr. Kuo.

With many lenders trying to rebuild “their battered business,” says Mr. Kuo, borrowers may not see relief even if the base rate cut is passed in the future. Lenders are not obligated to pass base rate changes on to consumers and they may be less likely to do so now with recent changes in the economy and rising inflation eating into profits.

Mr Kuo added: “Therefore, many homeowners are unlikely to reap the benefits, even though there are indications that the Bank of England may continue to cut interest rates to stimulate the flagging British economy.”

Although the credit crunch was greatly created by large banking institutions lending monies to individuals who were barely qualified to repay their loans - often in the form of sub-prime mortgages – many banks now seek to recover much of the losses they originally designed for the fast money that was pouring in while the over-lending went unchecked.

With lenders unlikely to lower mortgage repayments and pass some relief to borrowers, the level of personal debt and insolvency is expected to rise this year, according to James Falla, director of advice service Thomas Charles.

Recent upheavals in the lending market have failed to tarnish self-cert mortgage availability, much to the relief of many self-employed business owners in Britain.

For many years the self-employed have depended upon self-cert mortgages to purchase property and homes. The Economic and Social Research Council reported that of the 29 million people employed in Britain, 13% are self-employed and eligible for self-cert mortgages.

Fortunately for this group of financial pioneers, the self-cert mortgage market has remained unaffected by the tightening of lending criteria in the mortgage industry, noted Andy Pratt, a spokesperson for Alexander Hall.

Mr. Pratt added that nonconforming lenders have been hit hardest by changes in financial markets but this has not affected the subprime industry.

Self-cert mortgages are generally backed by more established lenders, which allow them to adapt to changing conditions more favourably. Mainstream lenders that have been unaffected could give borrowers with good credit records the best chances of being approved for loans, the broker representative offered.

“All those clients who would have got a self-cert mortgage before have been able to get them even with the credit crunch,” he maintains. This is good news to self-employed Britons who are often unable to qualify for more conventional mortgage loans.

During 2007 people selling their homes in Northern Ireland enjoyed a boom in price growth. However the Royal Institute of Chartered Surveyors (RICS) has noted that both sales and prices are now dropping in steady beat with the global economy.

Tom McClelland, housing spokesperson for RICS Northern Ireland, said, “The market changed considerably during the course of 2007 and the new reality is a market where agents have to work harder to achieve sales and sellers have to be more realistic about asking prices.”

With sales expected to pick up during next year, those selling their houses will experience changes in both competition and price ranges that are significantly different from those in the recent past. They will no longer see the fast price growth they experienced last year in the UK where sales increased to 24.2%, or £150 a day.

Mr. McClelland added that first time buyers “could benefit from the change in the market” as there is “less competition for properties in the sector of the market within the first time buyer’s price range.”

When housing bubbles such as the one seen in 2007 burst, it is often the best time for well positioned purchasers to take advantage of the downturn, and thus will also begin assisting the eventual recovery of the economy.