Connect with us

Business

Phuket Business: A mortgage in the UK

Published

 on 

PHUKET: House prices in the UK have suffered a dramatic fall over the past few years and banks have made it harder for first-time buyers. To put it bluntly, banks have made it harder for any buyer getting on the housing ladder when prices are low.

Although UK house prices are expected to make a steady recovery over the next few years and investors who dipped their toes at the right time to make a healthy profit from this, there is a threat.

Interest rates in the UK have remained at an historic low, but some major banks are beginning to increase lending rates, and this is bad news for many UK home owners.

The Bank of England (BoE) Base Rate hasn’t changed. It’s still at 0.5%. In fact, the central bank’s most recent move was to loosen monetary policy with another round of quantitative easing. There are no indications that the BoE will raise interest rates anytime soon, so why are the private sector banks starting the raise mortgage rates?

Halifax is raising its standard variable rate (SVR) to 3.99% from 3.5% on May 1. That doesn’t sound like much, and in the big scheme of things it isn’t. It’s about £40 per month extra on a £150,000 repayment mortgage.

According to the website thisismoney.co.uk, roughly 850,000 borrowers will see their payments rise.

Santander and RBS/Natwest have raised some of their rates, too. And what’s significant here – for now, at least – isn’t the amount of money: It’s the direction of the rate change.

We have to remember that the BoE Base rate is incidental. What matters is how much banks charge to lend money. It has become more expensive for banks to raise money in the wholesale markets in recent months, although it has eased off in recent weeks. It’s also getting more expensive to raise money from savers. Fed up with inflation eating their cash savings, people are increasingly investing, rather than saving.

That’s risky of course, but it’s a direct result of BoE policy. People are doing what the Bank wants them to do. The trouble is, once savers have made that psychological jump, it means banks have to work harder to attract them back.

One particular line that banks like to use in situations like this is, “We are just passing the costs on.” Rubbish. Banks have to make a profit, too. As Halifax had one of the lower SVRs, this move merely brought it more in line with its rivals. So it makes sense, from the bank’s point of view, to improve its margins where the market will bear it.

This makes life a little harder for marginal customers. Many customers would have stayed on the marginal rates, pretty much because they can’t afford to go anywhere else.

Some reports suggest that as many as one in six borrowers regularly have problems meeting their payments. So this could be the final straw for some, especially if unemployment continues to rise. House repossessions in the UK in 2011 were just above 36,000 and I expect this number to rise.

Over the longer term, property seems to be a good investment as mortgages become more expensive and those all important first steps on the housing ladder become harder and harder. This all bodes well for the rental market.

If you own a home in the UK and you are on a standard variable rate, don’t be shocked if your mortgage payments become a little bit more expensive.

Anthony Lyman is a Senior Financial Consultant for the Montpelier Group, for more information Alyman@MontpelierGroup.com.

— Anthony Lyman

 

Get more from The Thaiger

Join the conversation and have your say on Thailand news published on The Thaiger.

Thaiger Talk is our new Thaiger Community where you can join the discussion on everything happening in Thailand right now.

Please note that articles are not posted to the forum instantly and can take up to 20 min before being visible. Click for more information and the Thaiger Talk Guidelines.

Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

Follow Thaiger by email:

World21 mins ago

Europeans arrested in Iran

Thailand22 mins ago

Thai woman charged for selling fake discount vouchers

Crime40 mins ago

Expressway killer reveals 3 month plan to murder girlfriend in remorseless confession

Thailand2 hours ago

Prayut plans to contact citizens hit by power cuts via radio

Thailand2 hours ago

Submarine purchases could sink over engine debate

Guides2 hours ago

Best IB schools in Thailand

Join the conversation on the Thaiger Talk forums today!
Bangkok2 hours ago

VIDEO: Paramedics push patient through Bangkok floods on stretcher

Coronavirus (Covid-19)3 hours ago

Schools no longer need to close for Covid outbreaks

Thailand3 hours ago

Thai industries want to produce energy to combat rising costs

Crime3 hours ago

Clumsy burglar injures himself after trying to steal in Chon Buri

Thailand3 hours ago

Mountain B nightclub fire claims 24th life

Thailand4 hours ago

Thailand & Australia pledge to stamp out trafficking

Thailand4 hours ago

Jail Term for Carrying Crops & Repossessing the wrong house | GMT

Phuket4 hours ago

Girl sustains head injuries while surfing in Phuket

Press Room18 hours ago

Best island boat tours from Phuket – must-visit islands and unforgettable experiences you should not miss out on

Thailand1 year ago

Morning Top Stories Thailand | Police to end protests, Human Trafficking | September 14

Thailand2 years ago

Thailand News Today | Thai Airways in rehab, All go for Songkran | March 4

Tourism2 years ago

Phuket’s nightlife. Yes, bars and clubs are still open | VIDEO

Phuket2 years ago

Thailand News Today | Covid passport talks, Thai Airways heads to court | March 2

Tourism2 years ago

Phuket Thai food treats you need to try | VIDEO

Thailand2 years ago

Thailand News Today | Bars, pubs and restaurants ‘sort of’ back to normal | Feb 23

Tourism2 years ago

In search of Cat & Dog Cafés in Phuket Town | VIDEO

Thailand2 years ago

Thailand News Today | Gambling crackdown, Seafood market to reopen, Vlogger challenge | Jan 21

Thailand2 years ago

Thailand News Today | Covid testing for visas, Business impact, Vaccine approval | January 19

Thailand2 years ago

Thailand News Today | Weekend Bangkok bombs, Thailand fires, Covid update | January 18

Thailand2 years ago

Thailand News Today | Stray car on runway, Indonesian quake, 300 baht tourist fee | January 15

Thailand2 years ago

Thailand News Today | Governor off respirator, sex-trafficking arrest, condo prices falling | January 14

Thailand2 years ago

Thailand News Today | Chinese vaccine, Thailand ‘drug hub’, Covid update | January 13

Thailand2 years ago

Thailand News Today | Bangkok may ease restrictions, Phuket bar curfew, Vaccine roll out | January 12

Thailand2 years ago

Thailand News Today | Covid latest, Cockfights closed down, Bryde’s Whale beached | January 11

Trending