A new and
unexpected player has entered the mortgage market, as supermarket group Tesco
announced recently that they would be offering mortgages via Tesco Bank.
taking advantage of the deals on offer will have to put up at least a 20%
deposit, but Tesco Clubcard holders are given the opportunity to earn loyalty
card points as they make their monthly repayments.
‘Its opening rates would have been competitive
a month ago,’ commented Ray Boulger of John Charcol mortgage brokers, who
seemed unenthusiastic about the 3.19% to 5.09% interest rates on offer. By
comparison, a number of lenders have begun offering less than 3% interest on
their fixed-rate, long-term mortgages.
on to say that ‘Any hopes that the entry of Tesco would provide a significant
increase in competition have been dashed, at least initially, by its opening
rates, which seem designed more to avoid getting too much business than to
ruffle the feathers of existing lenders.’
Montlake, of mortgage brokers Coreco, was more positive, noting that ‘The
products themselves are priced sensibly, with the opportunity to repay 20% of
the loan amount off each year without penalty a nice extra.’
A study from
Cambridge University predicts that current economic stagnation will have
long-term repercussions for the potential homeowners of the future.
If the economy remains flat, a mere 27% will
be in ‘mortgaged home ownership’ by 2025. The figure is presently 35%, a
substantial drop from the 43% seen in 1993-94.
As a result,
millions of young families throughout the UK are entering a market where renting
is their only option. Falling wages and banks’ unwillingness to lend are
impacting on families with children who have little or no money left at the end
of each month to save for a deposit.
meant that the number of families renting over the past five years has rocketed
Based on the report, the outlook for the next
ten years will see the trend towards renting and away from ownership
Robb, chief executive of Shelter, the housing and homeless charity who co-commissioned
the report, said that these findings highlight ‘what is fast becoming the new
realities of our housing market in the current economic climate: home ownership
continuing to fall while renting becomes a way of life for British families.
in the property market are continuing throughout the middle of 2012.
and June experienced an increase, house prices fell by 0.6% in July, according
to the most recent Halifax House Price Index. This year has so far seen four
monthly increases and three monthly drops, adding up to a flat and stagnant
‘Prices continue to fluctuate on a monthly
basis’, said Martin Ellis, Halifax Housing Economist.
for the rest of the year remains uncertain at best, warned Halifax, citing
reluctant sellers and cautious buyers as the potential cause of further
‘Looking forward,’ said Ellis, ‘we expect
little change in prices over the remainder of 2012 so long as the economic
climate in the UK does not worsen substantially.’
Due to the
high cost of moving house, many homeowners are staying where they are until
they see concrete signs of economic improvement.
The Chief UK
and European Economist at IHS Global Insight, Howard Archer, commented on the
Halifax’s findings, stating that ‘Limited activity, low and fragile consumer
confidence, muted earningsgrowth and
relatively high unemployment’ mean that a drop in prices of at least 3% from
current levels is expected over the rest of the year.