The news does not come as any great surprise as many experts have been predicting this decision. Keeping interest rates at 5.0% is a move to help stabilise the economy following a turbulent time in recent months and should go a long way towards stopping rising costs and maintaining a low level of inflation.

So what does this mean for those individuals with loans and mortgages? Those people who are on standard variable rate loans or tracker loans will not see any difference in their monthly payments. Perhaps the worst affected will be those borrowers who are coming to the end of a low, fixed rate deal with their lender. These individual’s are likely to experience a dramatic rise in their monthly repayments as they move onto a high standard variable loan rate, a blow which would have been softened had there been a rate reduction.

We have seen a couple of reductions in the Bank base rate since the beginning of the year and many economists are predicting the next reduction is likely to be in June. However, despite these rate cuts, along with a £50bn cash injection from the Bank of England, many major banks and other lending institutions are not passing these savings onto their customers and are maintaining their interest rates at current levels, some are even increasing rates in a bid to restore their own capital positions and liquidity in the market. The Government is insisting that these savings are passed onto customers who are paying for the Banks’ previous mistakes, but it may still be some time yet before borrowers (other than those on a tracker rate) start to feel the full benefits of any interest rate reductions.

However, when we consider the reasons for previous property crashes and the economic circumstances at the time, it seems likely that the present housing market will not see the same level of reduction as previously.

The latest statistics from the Halifax shows that, generally, house prices fell by 2.5% in March and that they were overall 1% lower for the first quarter of this year compared with the final quarter of last year. Although these figures show a decrease in property values across the market, there have been large variations from region to region, with some areas actually showing an increase in values, whilst, others such as Wales and the West Midlands have seen above average reductions (although these areas had previously enjoyed above average growth).

Although loan and mortgage companies are suffering at the present time, there are many positive factors to support the property market. Employment levels for individuals is at a record high, inflation is at a low level which in turn keeps interest rates low. Many of us remember the early nineties when inflation was running at 10% and interest rates reached up to 15%. Currently the Bank of England base interest rate is set at 5% and is likely to reduce further over the course of the year. Also there is still a significant shortage of housing and Government targets for new homes are likely to fall short of requirements. People will always need somewhere to live and the demand for homes remains high.

Overall, the latest predictions suggest a slight reduction in house prices of less than 10% over the next twelve months, but with people generally having lower loans on their properties against the value of their homes, the equity ratio looks strong, which should stop the potential problem of negative equity as we saw in the early nineties. On average, house prices have risen by 171% over the last decade and what we are currently experiencing is hopefully nothing more than a price correction rather than a crash.

The Bank also acknowledged that although the worst of the slump is perhaps over, it is likely to be a long time before any confidence returns and we start to see an improvement in the loan and mortgage markets.

In the mean time many of those people who are currently struggling with their finances are likely to continue in a state of financial hardship, particularly those individuals with a less than perfect credit rating, as restrictions applied by lending institutions remain in place and seem unlikely to be lifted in the foreseeable future, especially in the sub-prime sector of the market.

Anyone who has applied for any type of loan or mortgage recently will almost certainly have noticed a much tougher line from the lender with regard to lending criteria. The Banks and other lending institutions appear to have learned a valuable lesson from their recent exposure to the sub-prime loan and mortgage market and it seems unlikely that they will return to the generous (some might say irresponsible) lending criteria of the recent past. 

It would be nice to think that the current problems with the downturn in the economy are about to be reversed, but with major lending institutions closing their doors to new loan business and making huge redundancies, high street banks forcing rights issues with their shareholders and the housing market remaining dormant, it seems it will still be some time before we see the light at the end of the tunnel.

According to one expert, thousands upon thousands of British consumers may become vulnerable to the grasp of Bankruptcy, as record numbers of loans sought after for the purposes of controlling personal debts, are refused. 

There are actually very few options remaining for individuals who are seeking additional funds to control their fixed costs, and after the last chance saloon of friends and family are exhausted, a comparatively large number of Brits will have little in the way of realistic alternatives to voluntary insolvency or Bankruptcy.

An impartial expert commented that in his opinion it was unlikely for Bankruptcy numbers to increase at the rate that this specific piece of information hints at, however, there is no getting away from the fact that a lot of people will almost certainly become very seriously hindered by the national credit draught. It is very possible that Bankruptcy and Insolvency numbers will surpass those recorded in 2007 (which were high in themselves), although to what degree would be extremely hard to determine at this early stage.

According to a reputable financial site, UK loan lenders have now started to look beyond the average criteria in which they would have ordinarily approved a loan application, opting instead to skim off the cream of their prospective applicant pool.

What this means is that even though a borrower may in essence have a good past history of credit, there is still a faint chance that they will not be accepted. This is because funding is rapidly drying up, yet the demand for finance has remained relatively constant (if not even increased). Lenders feel as though they have little other choice than to be overly picky towards where they allocate their funding, and due to the amount in which has been collectively lost on the sub prime markets there is all the more reason to be.

It is unclear as to when the troubles that are currently affecting the UK’s financial markets will change for the better, but many analysts believe that the situation is set to worsen before it starts to improve.

A popular online home acquisition firm has revealed that some 50% of active home sales are collapsing at the final stages of completion. The firm speculates numerous reasons as to why this could be happening, and cites difficulties in attaining competitively priced home loans coupled with last minute market jitters from buyers, as the root cause of the problem.

The firm has also suggested that large numbers of home sellers could be presented with something of a double blow in wake of the decline. First of all you will have a large percentage of fixed rate product home sellers, who are desperate to off load their current property in order to avoid the detriments of rising rates after their term comes to an end. Secondly, this same set of people will leave themselves additionally exposed, as any fees paid during the selling process will have been lost.

Commenting on the news, one industry expert suggested that buyers, especially FTB’s, have become extremely cautious towards committing to a new property. Although there is no definitive evidence that property values will fall, prospective buyers are not comfortable with taking that chance, preferring instead to delay their purchases whilst monitoring market performance over the next 6 to 12 months.

According to the UK’s leading credit charity association (Abcul), credit charities and debt advice outlets are becoming an increasingly important refuge for consumers who are suffering from serious debt and are left feeling as though they have no where else to turn. The charities offer readily available, free and impartial advice to the indebted and are often the only ear that many Brits are willing to confide in, during their time of need.

As a means for the charities to reach a broader range of people who require financial assistance, the trade body is believed to be in talks with the Government and is supposedly pushing for a greater level of authority to be bestowed upon them.
 
One expert suggested that it was a perfectly reasonable and maybe even essential notion for credit unions and charities to be granted more power, especially if it enabled them to help more people. It is always better for consumers to be able to combat their debts through the adoption of new monetary management skills opposed to referring to their old loan and credit crutch.

A leading economic trends institution has suggested that “property claw back” levels are likely to peak at 25% above 2007’s threshold. Worryingly, this could mean that more than 30,000 homeowners within the UK will lose ownership of their home within the next 6 months, equating to an accumulative repossession increase of more than 3 times that recorded half a decade ago.

Not surprisingly the credit crunch sits neatly at the helm of the problem and is responsible for skewing many thousands of British homeowners levels of affordability. Consumers are effectively having their pockets attacked from all angles, whether it’s a rise in their home loan repayment rates or an increase in the cost of buying groceries or paying the utility bills, regardless as to which factor is specifically at play, one thing is for sure…times have become tough for the vast majority of us.

Commenting on the report, one analyst stated that in a time when homeowners are in doubt as to their ability to repay their home loans, as well as meeting the daily financial demands of living, repossession levels can only go one way.

According to a new report, more than ten billion pounds has gone back and forth between parents and their children over the last 6 years, with debt consolidation or debt repayment comprising of the most popular need for the borrowings.

However, what may come as less of a surprise is that the collective total of money lent by UK adults to their parents pales into insignificance when faired against the amount which is supplied by parents to their children, throughout the duration of their lifetimes.

Studies show that British parents will spend approximately £180,000 to raise each of their children up until the age of 21. This figure encompasses the amount needed to keep a child fed, clothed and with a roof over their head as well as providing occasional treats, it does not however, include any contributions towards home loan deposits, cars or holidays (which are also becoming very common).

One expert commented that although parents do not expect handouts from their children, when times become desperate, they are often the first port of call (providing that they can afford to help). It is also very rare for children to reject a financial request from their parents for the simple reason that most people will feel as if it is the least that they can do.

Information drawn from a summary of Aprils gathering of economic heads has revealed that 60% of the voting committee urged that a reduction of 0.25 percent was adequate, whereas the remaining 30% were pushing for no movement whatsoever with an additional 10% voting on a 0.50 percent reduction.

According to impartial experts, the vote, which represents a massive indifference of opinion between committee members, may further support the theory that our countries economy is in serious doubt. On one hand, the base rate has to be reduced in order to control the home loan repayment burden, which is weighted upon the shoulders of millions of British homeowners, whereas on the other hand, a reduction in national interest will force up inflation, meaning that the daily cost of living will also increase.

The situation is further hindered through the current performance of UK’s housing market with economists predicting sizeable reductions in the value of British housing stock over the coming years. This, as you’d expect is causing further worry for homeowners and the nation in general, as the threat of negative equity becomes less of a buzz phrase and more of a reality.