Halifax’s Standard Variable Mortgage (SVR) interest rate now stands at 7.1%

The Halifax rate is often quoted as a benchmark for the UK and this now illustrates the widening disjunction between mortgage interest rates and the Bank of England base rate at 5%

Fixed rate mortgages are now averaging 6.75% for a 2 year fix and 6.72% for a five year fix. To my mind this indicates that the banks are not projecting much easing in the medium/long term either.

In the mean time, Halifax’s regular saver rate hit 10% for 12 months.

Unfortunately, it is rather hard to track SVR historically for individual banks. If anyone has historic data series for any bank’s rates, please let me know on the comments form below.

Halifax home price data released today shows that home prices in the UK have fallen 7.76% since their peak in August last year. The average home ‘lost’ £15,500 in potential sale value over this period.

Levels of borrowing in what some describe as the biggest asset price bubble in UK history reached over 5x the average salary with people on lower incomes borrowing even more. Now the credit crunch causing banks to reign in their lending in no small way, preventing excessive borrowing. The knock-on effect is a collapse in the house price bubble as sellers are forced to reduce their asking price to meet the limitations of mortgage offerings.

Halifax data[MS Word Doc]

The Halifax has posted a report of 2.5% house price falls month on month, the sharpest drop since the early 90s. The year on year figure is still positive at 1.1%

Martin Ellis, chief economist for Halifax said:

Overall, we expect there to be a modest fall in UK house prices this year. Any declines, however, should
be viewed in the context of the significant price rises over recent years. The average UK price has risen
by £120,860 during the past decade from £70,696 to £191,556; an increase of 171%.

Predictably there were some calls for the Bank of England to reduce interest rates but obviously, it is not the BoE’s remit to look after asset prices, rather to target inflation. Furthermore, the Bank of England’s previous interest rate cuts have not been passed on to mortgage borrowers, the private banks have instead been increasing their rates to customers.

Any such downward move in interest rates in the face of massive inflation would destroy the pound’s value against the Euro just in time for British people’s summer holidays.

The Abbey National bank deleted it’s 100% mortgage product today, the last such 100% product available in the UK.

The Halifax has released it’s 2007 annual first-time buyers review which looks at the state of the housing market for FTBs within the United Kingdom.

They have found that the number of First Time Buyers has dropped to it’s lowest level since 1980 at the start of the 80’s house price crash.

New Halifax research estimates that the number of first time buyers (FTBs) is at its lowest since 1980. An estimated 300,000 first time buyers entered the market in 2007 – 44% less than in 2002 (532,000).

First time buyers cannot afford* to purchase a terraced property – traditionally the least expensive property type - in 71% of towns across the UK (322 out of 454). In 2002, the typical FTB could not afford to purchase a terrace in only 11% of towns across the UK (51 towns).

It seems clear that FTBs are not buying simply because they are unable to. The initial symptom was that they became priced out due to the massive house price inflation and the new symptom is that as a result of the credit crunch, they can no-longer obtain the frightening amounts of credit required to purchase a home.

It is now speculated in various circles that the prices of houses will fall as their current heady heights are the result of ‘bubble-market’ which, without the credit to support it, will collapse.

The full Halifax report can be read HERE. Watch out, it’s a Microsoft Doc format file but you can read it by downloading OpenOffice.org Note to HBoS: Portable Document Format (PDF) is your friend.