Mortgage gloom for homeowners

January 4th, 2009 by admin | Filed under Daily News, Debt, Money Management, Mortgages, Recession.

Finding mortgages is tough for homebuyers despite homes falling to their most affordable since April 2003, according to the UK’s leading mortgage lender.

The Halifax reports the average home price dropped a further 2.2% in December to £159,896 – putting prices and earnings back to April 2003 levels.

The lender said prices were down 16.5% on the year – the largest annual fall since records began.

Only 27,000 mortgages were approved in November, according to the Bank of England – the lowest for nine years.

Despite pressure from the Bank of England, mortgage lenders are still unwilling to approve loans and their closed coffers are expected to remain unlocked for several months yet. This is likely to mean property prices will stagnate at best in 2009 as the homes market is restricted by mortgage lending policies.

“Continuing pressures on incomes and the negative impact of the dislocation of the financial markets on the availability of mortgage finance are expected to exert future downward pressure on the market over the coming months,” said Halifax chief economist Martin Ellis.

The Nationwide Building Society will not pass on any more rate cuts for tracker mortgages, regardless of how the Bank of England changes interest rates in their monetary policy meeting next week.

Mortgage contracts of 250,000 customers say the lender does not have to lower rates when the Bank of England’s rate falls below 2.75%.

The UK and US stock and money markets were closed for New Year.

The FTSE 100 index lost 31.3% in 2008, the worst annual return since the index was created in 1984, following a 3.8% gain in 2007. The FTSE edged up 0.94% to 4434.17 on the last trading day of the year, a gain of 41.49 points.

Sterling recorded the poorest year against the euro, since the latter was launched almost 10 years ago. The pound ended the year at 95.44p versus the euro.

Against the dollar, the pound lost nearly 27% over the year, the sharpest drop since the gold standard monetary system was abolished in 1971. The pound currently stands at $1.46.