Mortgage Deposits at an average of £31.500 for first time buyers

The typical deposit stood at £12,700 at the start of 2007, but rose to £31,500 by the second half of 2010, the Council of Mortgage Lenders has said. The average age of a first-time buyer now stands at 37.

The figures were released as housing and lending bodies faced government calls to help first-time buyers.

And the misery is likely to continue. There was no "magic bullet" that would fix the mortgage market and remove the problems faced by first-time buyers, the head of a lending trade body said.

Michael Coogan, the CML's director-general, said that while mortgage insurance, shared ownership and product innovation could all potentially play a part in improving the mortgage market, there was no "magic bullet" that would normalise it.

Instead, he said returning to a normal market was likely to be a gradual process, as confidence in funding markets and lending decisions was gradually restored.

Total mortgage advances during 2011 were expected to be just £135 billion, less than half the £363 billion advanced in 2007 before the full impact of the credit crunch was felt.

Inflation hits 4pc, Double the Target!

Inflation surged to double the Bank of England's target in January, increasing pressure on the central bank to raise interest rates.

 

The increase in VAT to 20pc and rising oil prices were behind a jump in inflation in January 

The official measure of how fast prices are rising, the consumer prices index (CPI), climbed 4pc in the year to January, up from 3.7pc the previous month.

The jump, which was driven by higher oil prices and the recent increase in value added tax (VAT), is the biggest in more than two years, according to the Office for National Statistics.The rise - correcly forecast by economists - means CPI inflation has been at least a percentage point above the Bank of England's 2pc target for more than a year.

"This is another kick in the teeth on the inflation front for the Bank of England, albeit slightly less hard than some had feared," said Howard Archer, UK economist at IHS Global Insight. "It maintains pressure on the Bank to retaliate by raising interest rates sooner rather than later.

Mervyn King, the Bank of England's governor, continued to blame the "temporary effects" of factors such as the increase in VAT at the start of the month, the fall in the pound and soaring commodity prices.

Financial Crisis has hit those aged 50 to 60 the most

The report, published by the Saga group, found that the generation coming up to retirement have been effected badly by the rising cost of living, unemployment and a fall in savings.

While many of those who have already retired are enjoying decent pensions and have paid off their mortgages, those in their 50s are enjoying no such peace of mind, the report makes clear.

The study included a survey of 13,000 people over the age of 50 as well as a detailed analysis of Office for National Statistics data, undertaken by the Centre for Economic and Business Research, a think tank. It laid clear the concerns and problems facing the so-called baby boomer generation born between the end of the war and Harold McMillan declaring that Britain had never had it so good.

The study found that the annual real disposable income – taking into account inflation – had fallen from £34,366 a year ago to £33,900, or those between 50 and 64, an annual fall of more than £450.

Ros Altmann, the director general of Saga, and former government pensions adviser, said: "Inflation has really hit those who have yet to retire. They tend to still drive a lot, they still need to heat their homes, and they may still have a mortgage.

Mortgage Rates 'becoming more expensive'

 Fixed rate mortgages have become more expensive in recent months as the markets "overreact" to potential interest rate rises, brokers say.

The cost of borrowing for mortgage lenders - known as the swap rate - has risen, which has pushed up fixed-rate deal costs in recent months.
This swap rate has risen because of an expectation of UK interest rate rises later in the year.
The Bank of England has again frozen the Bank rate at 0.5%.
The rate has remained at this level since March 2009.

There are two key factors to the prices of home loans, according to Ray Boulger, of mortgage broker John Charcol.
The Bank rate - currently at a record low of 0.5% - dictates short-term costs of rates.
However, the swap rate is more significant for longer term fixed-rate mortgages as it is based on where interest rates are expected to move in the future, Mr Boulger says

There is widespread expectation of a Bank rate rise later in the year, and this is pushing up the cost of fixed-rate deals.

But Mr Boulger said that this rise in home loan costs might not last if it turns out that the markets have overstepped any forthcoming changes.
"If the Bank rate fever dies down a bit, the costs [of fixed-rate deals] could come down later in the year," he said.
Melanie Bien, of mortgage broker Private Finance, said that the markets had been "overreacting" to potential rate rises and this had been reflected in the growing costs of fixed-rate mortgages.
The movements of the swap rate were difficult for borrowers to understand when the Bank rate remained steady, she said.
But she stressed that there were still very competitive deals available, with some five-year fixed-rate deals starting at 4%.

Late payments of bills is at three years high

Payments in the final quarter of 2010 bucked the slowly improving trend for the year by rocketing 16pc to an average of 25.7 days late, the information services company said.

Payments are "timely" indicators of company health and banks will scrutinise the data to inform lending decisions. They may respond by tightening credit conditions for small companies further.

Jason Mills, from Experian, said: "More businesses – even financially strong ones – struggled with short-term cash flow issues towards the end of last year. These businesses are likely to have been affected to some degree by the bad weather, with many companies unable to operate at full efficiency as employees struggled to get into their offices."

Large companies turned the screws on suppliers, paying their bills 36.7 days later than agreed terms, up from 35.9 days in the final quarter last year. But small companies recorded the largest increase in their late payments, taking on average more than 22 days to settle invoices – three days longer than the same period last year.

Andrew Cave, spokesman for the Federation of Small Businesses, said: "Late payment is the elephant in the room and it's why so many businesses are forced to go to the banks for funding, in forms of overdrafts, Loans or credit cards. It is used as a safety valve by businesses in trouble. The first thing they will do is delay payments. If it's building up that's a concern."

Debt Problems

The record number of personal insolvencies for the whole of 2010, which was double the number in 2005, came despite a drop in the final quarter of the year when 30,729 individuals were declared insolvent.
Experts suggested this fall at the end of the year was the result of fewer people being able to attend court proceedings owing to the weather, a more sympathetic attitude from lenders, and people putting off insolvency until the new year.
Insolvencies throughout 2010 were driven by a 6.5% rise in Individual Voluntary Arrangements (IVAs) - which allow an official deal to be struck between the debtor and creditors - to 50,716. One of  the Debt Management Solutions.

There were also 25,179 Debt Relief Orders - a relatively new style of insolvency for relatively low debts.

However, the number of people taking the more traditional bankruptcy route fell by 20.7% compared with 2009 to 59,194

Homeowners cannot be able to benefit from low rates despite base rates of 0.5%

Millions of hard-pressed homeowners are failing to benefit from low interest rates as banks and building societies charge mortgage rates of up 12 times Bank of England base rate.

This has left many borrowers paying standard variable rates (SVRs) of up to 6%, even though base rates have been slashed to just 0.5%.

Instead of cutting their SVRs, lenders have been lifting them instead. High street giant Halifax recently hiked its SVR for new customers to 3.99%, up from the 3.5% paid by existing borrowers.

It isn’t the first major lender to punish borrowers in this way. Last year, Lloyds TSB and C&G hiked their SVRs for new customers to 3.99%, way above the 2.5% paid by existing customers, as Nationwide had done earlier.

Skipton building society was last year’s worst offender, lifting its SVR from 3.5% to 4.95% for all mortgage customers. This cost a borrower with a £100,000 mortgage an extra £121 a month.