Banks say Gordon Brown is finally beginning to grasp the severity of the credit crisis, but it might be too late as mortgage fees and rates soar and property prices continue to plummet.
Over a breakfast meeting yesterday, Gordon Brown spoke to the heads of leading British banks, such as HSBC, Barclays, Lloyds TSB, HBOS and the Royal Bank of Scotland about easing the credit squeeze.
Originally billed by some sceptics as a PR stunt by the Prime Minister to demonstrate to voters that he was getting his hands dirty in the credit crisis, bankers admitted that they came away with the notion that he has now fully grasped the potential impact of the crisis on the UK economy.
In the meeting, Mr Brown urged the nation's biggest banks pass on the Bank of England's rate cut to their financially-stretched customers, but by lunch time Halifax had defied his wishes and announced that it was raising the interest on some of its two year fixed rate mortgages by half a percentage point.
Other lenders continue to limit the availability of their mortgage
products, and many homeowners are now facing mortgage fees of up to £5,000, almost double what they were faced with a year ago.
"After all the panic of recent weeks in the mortgage market people may be tempted to grab the best deal they can and may focus on rates to exclusion of everything else." said Francis Ghiloni, marketing and business development director at mform.co.uk, but "They could be in for a nasty shock when it comes to the fee which is charged as they have rocketed in the past year. They should be focusing on the true cost of their loan taking into account fees as well."
Mortgages are now costing the average British homeowner a quarter of their income, it has been revealed, which is almost double the 14 per cent which they absorbed a decade ago and more than triple the eight per cent of income which went on mortgages at the height of the last hosing boom in 1991.
While mortgage providers presently have little room for attracting new business, there is some light at the end of the tunnel for reliable borrowers, as lenders will be eager to keep hold of the ones with big deposits and a good repayment history by trying their hardest to offer them competitive rates.
Even though many lenders continue to raise their rates, Abbey has announced today that it is reducing its Standard Variable Mortgage rate by 0.25 per cent.
Meanwhile, Government data has revealed that the price of flats dropped 2.9 per cent in February, even more than detached and semi-detached houses at 1.5 percent, terraced home at 1.1 per cent and bungalows at 0.6 per cent.
Industry experts believe that this can be accounted for by the flood of flats that have been built in city centres for which there is now a smaller market, and that such properties are often aimed at buy-to-let investors which are the first to suffer under tighter lending conditions.
Few of the fixed rate mortgage
deals available have become significantly cheaper after the third rate cut in a row, but they still offer homeowners the security of knowing how much they will be paying each month; economists hope to see the financial turmoil settling down in a year's time, so more competitive fixed rate deals could become available in the near future.
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