According to a recent report published by the Economic and Social Research Council, the recent rises in house prices are going to be reversed. As the government has to cut it’s expenditure, economic recovery will waver and house prices will fall again.

This in turn is expected to create a spiral as potential sellers take their house off the market and buyers find it harder to find what they want and, disillusioned, they too effectively leave the market. Then as household wealth falls, consumer spending falls and this again impacts on house prices.

The Council predicts that it could take three years for UK house prices to sustainably break out of this spiral.

If this is true, it is going to be three four, or even five, years before we see the mortgage lenders pluck up enough courage to accept low deposits as in a falling housing market. When markets fall, the equity homeowners have in their property can be eaten up very quickly leaving them in negative equity - and leaving the mortgage lender facing a potential loss on their lending. For the time being we are unlikely to see any lenders reduce their deposit requirements and this is not good news for first time buyers.

Let’s hope that the Economic and Social Research Council has got it wrong!

First time buyers have been dealt a further blow as Britannia, the mutual mortgage lender, withdraws its low deposit mortgages. It has decided that it will not now lend to anyone who has less than a 10% deposit.

This leaves only a very few mortgage lenders offering to finance homes with small deposits – lenders such as the Yorkshire bank, HSBC and the Cheltenham & Gloucester. And even then the interest rates on offer are sky high.

So life remains tough for cash strapped first time buyers and even where deals are publicised, some borrowers can’t get the funds when they apply. Lenders are remaining very picky as to who they accept and who they don’t.

At the other end of the spectrum, if you are remortgaging with a good credit record and 40 or 50% equity in your home, then there’s a who host of lenders waiting to welcome you with open arms!

As commentators remain concerned at the margins that are pushing up mortgage interest rates, lenders have also started sneaking in a few hidden charges. Here are four for starters:

1. You have to move your current account to your lender – and unless you pay in a specified minimum amount each month you get charged a monthly service fee a month for the account.

2. You have to buy the lenders home insurance package along with the mortgage. And don’t expect internet premiums – the lenders premium will be VERY expensive.

3. Very high redemption fees – as much as 2% - if you want to move your mortgage within a fixed number of years. This fee is charged if you move for a new deal – or if you move house.

4. Everyone is getting used to high application fees. What we now sometimes see is a lower “reservation fee” or a “booking fee” taking the place of the application fee - but watch out for sky high “completion fees”.

Our advice is if the promoted interest rate looks really keen, the lender will probably increase their income some other way – so be vigilant!

Remember the old adage – if the deal sounds too good to be true, it probably isn’t true!

The cost of mortgages is on the up despite bank’s costs falling to record lows. The cost of three and five year fixed mortgages has risen again despite bank’s paying less to obtain the funds they lend.

It means that for a £100,000 mortgage, the banks are making £515 more annual profit than they were just nine months ago in January. Figures show that the average price of a three year fixed rate mortgage increased from 4.67% in July to 4.81% at the end of August. For five year deals the price increased from 6.68% to 5.72%.

At the same time, the three year interest rates paid by the banks on the wholesale money markets was 3.3% and five year rates were 2.6 %.

But the biggest cash cow for banks are tracker mortgages. Banks are borrowing funds for these products at 0.7% and lending it out on tracker mortgages at 3.84%.

In our view these represent market forces where the demand for mortgages simply exceeds the volume of funds which banks, post credit crunch, are prepared to supply. Until demand and supply come more into balance, we are likely to see the banks making hay whilst the sun shines and taking the opportunity to boost their profits and balance sheets.

According to a recent survey 1 in 8 homeowners expect their house to fall in value during the next 12 months. This is despite 5 months of upbeat market reports from mortgage lenders and even the land Registry.

Confidence is lowest in the Midlands and Wales but even in more affluent London just over 50% think prices will rise with 31% expecting them to stagnate.

The latest Hometrack survey which is conducted amongst 6,000 estate agents and surveyors suggests that price increases were restricted to just 11% of the country – primarily in the south east. Across the rest of the UK, prices remained level.

The constant talk in the press about “green shoots” appears to be centred in the south east and amongst those in whose self interest is served by price rises. Hello Mr estate agent!

Estate agents and others in the property market have consistently criticised Home Information Packs (HIPS) as an irrelevant add-on to the home selling process. But does a hidden agenda explain the Government’s lack of hearing?

Rumours abound that HIPS certificates are to be pressed into service to raise more cash for the government. Since October last year, anyone renting or selling a property has had to have a HIP certificate and an energy rating certificate. Some are predicting that the autumn budget will see the stamp duty on the sale of houses rescheduled to take into account the property’s energy rating. And we all know what “re-scheduled” means – it’s a rise!

And this could open the flood gates! If the government can use HIPS to increase stamp duty they could also use it for increasing property valuations for council tax purposes. Now wouldn’t that get the mini mandarins at the town halls salivating!

Ambitious buy to let landlords are finding it more difficult to expand their portfolios of properties as banks like Lloyds, which includes HBOS, impose new borrowing limits.

Last week Lloyds announced that its lending to landlords would be capped at £3 million and a maximum of 9 properties. Prior to this announcement, the bank would have lent £6 million on as many as 18 properties. It is not known how this will affect landlords who need to refinance their portfolios as their existing finance deals come to the end of their term, but presumably these landlords will have to diversify their borrowing to new lenders. Whether they will find new willing borrowers will depend on the equity within their property portfolios.

This move by Lloyds is another symptom of the finance sector wishing to diversify and reduce their exposure to the buy to let market which has been so badly hit during the current recession. Many landlords invested heavily in city centre apartments only to see the value of these properties fall by 50 per cent in cities such as Leeds, Manchester and Bristol.

First time buyers once again have the opportunity to get their mortgage deal without paying an up front application fee.

Since the credit crunch first bit, application fees have steadily risen to a typical level of £995 – although some lenders are charging as much as £1,498. It’s not as if the pain of paying these fees can be added to the mortgage as many insist they are paid upfront.

But now a small band of lenders have bucked the trend by offering fee free deals to first time buyers and well healed homeowners whom want to move up the housing ladder. However, they give with one hand and take with the other! You effectively pay for the fee free privilege by paying a higher rate of interest. In broad terms this means that anyone wanting to borrow £100,000 or less will be better off on a no fee deal even if the interest is a touch higher. But the bigger the mortgage, the more important it becomes to get a keen rate even if this means paying a fee up front.

If you want to check out some fee free deals, speak to Britannia, Northern Rock and Alliance & Leicester.

The lenders’ generosity is tempered however. If you want one of their fee free deals, you’re likely to have to stump up a big deposit – around 30%, and most of these deals apply to fixed rate mortgages.

Top economists say that UK interest rates could remain low for years. Their forecasts come as the Bank of England hinted that if necessary, it would continue to pump money into the economy, thereby depressing interest rates.

Only a month or two back economists were forecasting that base rates would begin to rise from their all time low of 0.5% but now their expectations of a rise are being pushed back. There have even been forecasts that the 0.5% rate could last for years!

But other economists warn that things could change markedly after the election next year. They say that as government spending will have to be cut to close the budget gap, interest rates could have to rise.

All very confusing isn’t it?

The Northern Rock has already admitted that it costs about £25 a month to administer a mortgage that is in arrears so why do many other lenders continue to charge up to £115 a month for those in arrears? Is it punishment or profit? You decide!

And this problem is not small – the figures are huge. Figures from the Council of Mortgage Lenders show that there were 399,000 accounts in arrears at the end of last March. That means that they are charging nearly £46 million each month in arrears charges when the true cost is just under £10 million.

If the homeowner has equity in their house then these charges don’t seem to matter to the lenders as they will get their money back as and when the property is sold. So they don’t spare the horses on any other charge either. Say for example, you want a debt councillor from your lender to come around to see you – that’ll be another £100 please! And if the lender has to repossess and sell your property your eyes will water when you see what they typically charge for estate agents fees – we’ve heard of 5% of the sale value. Who would dream of paying an estate agent 5% when the market norm is 1.5% at the most?

And if the lender has had to change the locks then a pair of locks on the front and back doors will typically cost £400 plus a further “management handling fee” of £50.

It seems all wrong to us. People who have their backs to the financial wall should not be preyed upon. Yes they should pay the costs incurred in sorting the situation out but what we are hearing of amounts to out and out profiteering on the most vulnerable.

It must be stamped out!

We in the UK have some of the highest house prices in the world – but does that really mean we’re richer? There is a paradox here. Our house prices are high because there is a constraint on the supply of houses. If overnight we could construct a million houses in the right locations, which would increase our housing stock by about 4%, we might assume that the nation’s wealth would increase.

But such a sudden increase in housing supply would probably lead to a collapse of prices in the entire housing market – and lead to a reduction in our national wealth even though there were 4% more houses.

This paradox lies at the centre of our national obsession with the price of houses. We feel rich when house prices are rising and tend to borrow more against them to finance fancy cars and holidays. But at the same time we forget the obvious: that apart from a lucky few with castles in the country, higher prices force us to live in smaller and poorer houses that we would like to live in.

In this context, higher house prices make us poorer.

Traditionally recent university graduates were offered special mortgage terms – but how times have changed.

Until recently if a graduate remained loyal to his or her student bank, they were promised more generous income multiples, lower interest rates and even help with paying their stamp duty. Today, virtually every special deal has gone.

A few lenders will allow degree holders to have a mortgage with a lesser deposit, say 15% rather than 25%, and sometimes offer them a fraction off the interest rate but it’s nothing to be overjoyed about. In the absence of the old special deals, experts are advising graduates to shop around along with all the other prospective homeowners.

Some experts are advising these first time buyers to take a fixed rate mortgage as the cost of home ownership takes many first timers by surprise and it make the adjustment a little easier if they have at least one household expense set in stone. But graduates how are sure that their incomes will rise steadily and make their mortgages increasingly affordable, may prefer a tracker. Currently, the rate on a tracker is lower than most fixes.

Meanwhile, recent graduates are being warned about fraud. Young professionals in rented accommodation are the main targets for fraudster’s intent on stealing identities. They are being advise to regularly check their credit file to ensure it is clean.

Property Surveyors are running scared. Having seen hose prices dive by up to a third, they are covering themselves by taking a conservative value and then knocking off some more.

This can be devastating for some applicants. The ultra low valuation cuts the value of equity they will own in their house and this can result in the mortgage company pushing up the interest rate they are charged and this can cost them hundreds of pounds every month. And in some cases it can even result inn their application being refused.

So if your Surveyor knocks down the value of your house, contest it. Remember, you must accept that prices have fallen but if the value still comes in well below what you think it’s worth, complain. To get anywhere with this, you’ll have to base your estimate on facts not just your annoyance – and remember, if another surveyor has to come out, that’ll be another set of survey fees! But if the low valuation has pushed you into a higher interest band with your lender, it might be worth it.

One of the results of the credit crunch has been the big difference between the interest rate charged to those with just 10% equity as against those with much more. If you have 40% equity you could currently get a 2 year fixed mortgage for just 3.34%; with 25% equity the rate rises to 3.99%; and it’s 5.99% for those with less equity. This 5.99% rate pushes up the monthly payment for a typical £150,000 mortgage by £205 per month.

But as we’ve said, if you do appeal against the valuation you’ve been given, do support your claim by reference to the size and character of your house in comparison to other houses which have been sold recently in your area.

Home Information Packs, HIPS for short, which have to be prepared before you can put your house on the market, are making estate agents loads of money by taking advantage of their position. Great for them but bad if you’re a seller!

A survey found that some estate agents are charging double the price that a specialist HIPS provider would charge. The result is that many sellers could save upwards of £130 by shopping around.

Apparently the Halifax estate agency was the dearest taking a typical three bedroomed freehold semi. For that they charged £413 – but a HIPS specialist such as Fridays Property Lawyers would have charged just £189, giving a saving of £224!

And when it comes to leasehold properties the cost are even higher due to the additional legal work involved.

The Government imposed HIPS on to home sellers back in 2007 despite constant opposition from solicitors, mortgage providers and estate agents. The Government claimed that the selling process would be faster and more efficient with the HIPS containing information for the potential buyers on planning searches and the energy performance of the property.

So our advice is, get a quote for a HIPS off your estate agent and then go online and see how much you can save.

Experts are warning that a second wave of house repossessions could hit the country. Whilst repossessions were down 10% on the previous quarter, the outlook continues to look bleak.

Industry figures have revealed that the number of households in serious arrears has rocketed by almost 50% during the last 12 months. Against this background, the Government has been applying pressure on lenders to go softly on those behind with their payments. This to some extent has suited the lenders as house prices have dropped up to 335 in some areas and they want prices to recover somewhat before they take action.

This situation has led Shelter, the housing charity, to warn that as interest rates, house prices and unemployment rise, we could see the second wave of repossessions.

Currently 2.5% of households are significantly behind with their repayments – some 205,600 homeowners. It is this group which is most at risk as they could be taken to court at any time. But the Council of Mortgage Lenders insists that it’s members are doing everything they can to help those in arrears.

The interest you are charged is as much a reflection of the lenders’ financial circumstances as it is of yours. These are the main factors that affect the interest rates you pay:

The Bank of England’s official Base Rate
These days this affects saving rates more than lending rates. Only Base rate tracker mortgages are directly affected by movements in the Base Rate.

Money market interest rates
There are two interest rates which are very influential to the you are charged. Firstly, there’s what’s called the LIBOR rate. This is the rate banks pay to borrow money from other banks for short periods. Then there’s the SWAP rate. This is the rate banks pay for borrowing money from other banks for longer periods. These interest rates particularly influence the cost of fixed rate mortgages and those tracker mortgages that are linked to LIBOR.

The bank’s money supply
The principle is simple: If the lenders are short of money to lend but the demand is there, they’ll charge more and vice versa. At the moment the mortgage companies are using higher interest rates and higher deposit requirements to effectively control demand. As their coffers are replenished you’ll see lending criteria being relaxed.

Pressures on lenders to increase their cash reserves
Post credit crunch, the Financial Services Authority has forced lenders to hold twice as much in cash reserves. This means they have less to lend. And as we all know, some of the banks owe the Government billions which they’ll have to repay. This all creates pressures on them to increase their profits. How to the respond? Guess what, they charge us more!

Your Deposit
The bigger your deposit the more equity you’ll own in your home – and bankers like you to have plenty of equity - as that means they’re more certain to get back the money they lent you, if things go wrong. This means that they entice borrowers with plenty of equity by offering them the lowest rates.

Your Credit Score
The large credit agencies such as Experian, constantly collect information about your finances. They know who you owe money to and who you have applied to for credit and whether you’ve missed any payments. They also record defaults and County Court Judgements etc. They then use all this money to score you for your credit worthiness.

The lenders of unsecured loans and credit cards also use this information to decide not only whether to lend you money, but what rate to offer you.

Have you noticed the mortgages being promoted at just 2.49% per annum? It’s hard to argue with these super low rates. But be warned they are not always what they appear.

Low rate mortgages are all the rage at the moment but check out the small print and some of the gloss wears off. Take the deal being offered by Lloyds TSB. Depending on the size of your deposit it comes with an interest rate of between 2.49% and 2.59%. But you haven’t got long at that rate – that rate only lasts until February next year, seven months. After that borrowers automatically move to a fixed rate of between 5.49% and 5.59% until November 2012.

These higher rates are at least half of a percent more than comparable three year fixes from lenders such as the Woolwich and Alliance & Leicester.

There is also a question of whether it’s sensible to fix for less than 12 months. Very few commentators are forecasting that interest rates will rise in the short term. In mid 2010 and beyond, yes, but not until then.

So if you are tempted by these super low rates, check out the small print and think hard. Better still, take professional and independent mortgage advice.

Some insurance companies only have one in one hundred endowment policyholders on target to repay their mortgage and over 3 million homeowners have been warned that their policies will not fully repay their mortgage when the time comes.

With-profits endowment policies were sold a reliable way to repay your mortgage as the insurers added an annual bonus to the policy every year and then added one big bonus at the end of the policy’s term. Projections were then used to show how the bonuses would add up to produce an investment sum that would exceed the money you took out on your mortgage. Throughout the 70’s and 80’s Policyholders were assured that this was the savvy way to finance the repayment of your mortgage. They had never failed to perform and they never would.

Never say never!

The insurance companies all blame the failure to reach investment targets on the performance of the investment markets, it’s not their fault! But if that was the whole reason why is Standard Life facing 98% of its policies behind target whilst Royal London only has 2% behind target? It seems clear that the worst performing insurers cannot entirely blame the stock market. In actual fact, to us it seems that the insurers themselves are to blame!

Another question supports our belief. The insurers have resolutely failed to explain how policies that were previously on target can suddenly fall behind so much. For example, last year only 19% of the Pru’s 164,000 endowment policies were likely to fall short of their target. That figure has now risen to 74%. How come?

Perhaps the insurance offices would care to explain.

Some mortgage companies are actually paying borrowers up to £25,000 or 10% of the value of their outstanding mortgage, to take their mortgage to another lender. It’s all because they need to down-size their mortgage portfolios in the wake of the credit crunch.

The problems are particularly difficult for the companies that lent to those borrowers with relatively poor credit track records – the sub-prime market. And it is precisely these lenders who are paying the highest rates of interest.

So we sniff an opportunity! If you took out a mortgage when your credit record was, well let’s say “less than perfect”, but your record has since improved, try asking your lender if they will pay you to move your mortgage elsewhere. You might get a rather nice surprise. Then you can use that money towards the deposit for your replacement mortgage and the odds are that you’ll end up with a mortgage at a much lower interest rate than you were previously paying. We know of one family who did this and their monthly repayments fell from £475 to £240.

But a word of warning. Check out how much equity you have with your existing mortgage. With house prices having fallen, even with the “goodbye payment” you may still not have enough equity in the house to fund the necessary 10% deposit you’ll need for the replacement mortgage. If you’re going to have a difficulty funding a 10% deposit with everything taken into account, the deal’s not on.

Sale and lease back arrangements are where the homeowner sells their house to a third party at a knock down price and then rents it back. It’s been one of the options people have had when they are in financial difficulties but are desperate to remain living in their house.

One of the problems has been that some unscrupulous landlords have thrown their tenants out after the first year and then gone on to sell the property at a healthy profit. The Financial Service Authority which now regulates these deals has already said that such actions are unfair.

Last week the Birmingham County Court backed up the FSA’s view. The Court said that a couple from Shropshire could remain in their house even though the company they had sold it to had stopped paying the mortgage. In fact the judge said that they could remain in the house for life by either renting from the mortgage company that had repossessed the house or buy it back.

Whilst this shows the way the English courts are thinking, the judgement in Birmingham doesn’t represent a legal precedent. Precedents can only be made in the High Court.

So if you are court in a similar position, before you take ant action, talk to the experts at the Citizens Advice Bureau to see whether they agree that you have been treated unfairly.