Housing round up: prices fall and mortgage fees rise

Posted on October 8th, 2011 | Categories - News

Housing & mortgage round upIn this week’s housing round up we take a look at the latest Halifax house price survey, evidence that mortgage arrangement fees are getting more expensive and research which shows fixed rate mortgages are getting cheaper.

Halifax house price survey

The latest Halifax house price survey has shown that prices fell in September by 0.5%, compared to August, this means that according to the Halifax house prices have dropped by 2.3% over the last year, with the average UK house now worth £161,132.

The Halifax said that house prices were suffering from “a lack of general direction” and that we should expect to see little change in house prices or activity in the market for the rest of the year.

The static state of the housing market was confirmed by just a 0.1% rise in prices for the three months to September.

Martin Ellis, housing economist at the Halifax, said: “Greater uncertainty about economic and personal financial circumstances, together with pressure on householders’ finances from weak earnings growth, higher inflation and increases in taxes, are likely to be constraining housing demand.”

He continued: “Despite these pressures, low interest rates and a rise in employment over the past year, have been supporting the market.”

However, a warning was given that surveys, such as the one produced by the Halifax, can mask regional differences.  Alex King, from SPF Private Clients, mortgage brokers, said: “An over-reliance on national data, such as that provided by the Halifax, masks the huge regional disparity in the UK market.”

“Within a matter of miles you can have two entirely different property markets – one fairly robust, the other in reverse,” he continued.

Mortgage fees rise

According to Moneysupermarket mortgage fees have risen by 30% over the past year, making some products with very low interest rates and high fees unsuitable for a number of borrowers.

The research showed that in September 2010 the average mortgage fees payable for a two year fixed rate was £973, but just a year later that had risen to £1,253.

Mortgages come with a number of fees but the largest rise has been in application fees which have risen from an average of £699 in September 2010 to £939 12 months later.

Experts warn that borrowers need to keep an eye out for mortgage fees as they can offset the benefits of lower interest rates, especially for smaller mortgages.

Clare Francis, mortgage spokesperson from Moneysupermarket, said: “Most people are blinded by rates when it comes to mortgages. A two-year fixed rate at 1.99% initially seems to be an amazing deal, but the two-year fix from Leeds is the perfect example of why you need to look beyond the headline rate.”

Fixed rate mortgages hit record low

Research, also by Moneysupermarket, has show that two year fixed rate mortgage deals have reached a record low, with the average interest rate being 3.82%, down from 4.01% in August.

Further evidence of falling fixed rates comes from the Leeds Building Society who have launched their lowest ever two year fixed rate at 1.99%.

However, as previously mentioned, borrowers should be careful not just to consider the interest rate but also factor in the fees payable, which could make some deals uncompetitive, especially for small loans.

The reduction in the average interest rate for two year fixed rate mortgages would seem to be part of a trend which is seeing the rate fall for all fixed rates.