A leading property group released figured yesterday showing a rise in the number of mortgage applications in April.

Council of Mortgage Lenders (CML) claimed that close to 57,000 loans were approved in April a rise of nine per cent from the previous month and the highest figure since December 2007.

This figure might be a sign of a turnaround or it could just be a reprieve for a market that has been in a steep decline for most of the year.

It seems that as soon as talk turns to more positive economic news, more data is release showing the economy is a long way from getting out of trouble.

CML has indicated that there would probably be further hurt before any real growth was established.

“Monthly house purchase lending volumes continue to be lower than levels and there will be a further weakening in coming months as recent approvals data has shown,” CML director general Michael Coogan said.

Borrowers are confident that increasing inflationary pressure will force the Bank of England to raise interest rates so borrowers are trying to lock in a fixed rate.

Higher interest rates mean cheaper houses; better a lower principle than a lower interest rate.

Now might just be the time for first homebuyers to wait because further falls in housing prices will put buyers in a better position even with a higher interest rate. But if you are already in the property market, then refinancing is definitely an option worth considering.

Chancellor Alistair Darling wants banks to help easy the credit crunch by passing on rate cuts, but banks will try to resist any weakness to their bottom line.

Historically banks have always been held up as institutions and safe sharemarket investments.

They were a safe haven and immune from financial trouble as they controlled the money. But if this credit crunch has proved anything it is that banks are like any other business.

They are exposed to slowdowns and credit troubles, not only does it increase the levels of bad debt on their book, but it also increases cost with credit markets tightening.

Need we be reminded of the long lines of customers abandoning Northern Rock late last year?

With these conditions there is growing economic pressure not to reduce interest rates to maintain profit margins, even with the base rate in decline.

Darling’s ‘request’ for relief for customers from the banks, will hold little weight with the banks that are seeing their ledgers drained.

Some banks have reduced their interest rate after the Bank of England reduced the interest rate by 0.25 per cent, from 5.25 per cent down to 5 per cent.

But the cost to homebuyers wanting to establish a mortgage has risen, it is the case of giving with one hand and taking with the other.

Darling comments were definitely a warning to banks, after also mentioning the rescue money that the Bank of England and the HM Treasury supplied to stressed banks and financial institutions was a show of goodwill from the government.

But these words are falling on deaf ears as all the attention turns to the US market that shows all the signs of being in a recession, and the banks asking each other how bad this slowdown will hit.

Sub prime is a buzzword at the moment, and the way things are going it will soon earn an entry into the Oxford dictionary.

The meaning could be twofold: (n.) loans given with little or no security from the borrower, or (adj.) the description given to an economy suffering from poor management and slack lending standards.

Sub-prime the adjective is headlining the business pages at the moment.

It was used by BBC recently when reporting another write-down by Swiss financial group UBS.

UBS also announced that the chairman Marcel Ospel has stepped down in light of these latest write-offs.

There are financial companies out there with falling stock prices due to the “sub-prime crisis”, but have strong management and well-maintained balance sheets.

These companies will be the market darlings after the dust settles and the crisis is over.

But, now could be the right time to re-enter the market and pick up some of the stock on the cheap.

A word of warning however, it is important for any investor to do their homework, ask questions and make educated decisions.

Analysts and investors are concerned that, despite financial institutions writing off billions of pounds in the last quarter 2007 and this latest quarter, there is still billions unaccounted for as more borrowers struggle with their loans.

There may be a few more big institutions to fall yet, but you can be sure there are many companies out there with the right checks and balances in place to weather the storm.

Everyone is feeling the bite of a slowing economy; even banks are finding it tough as funds start to dry up.

According to the Council of Mortgage Lenders (CML) gross lending declined in February to £24 billion from £25.6 billion in January.

This has led many lenders to reduce their product ranges, increase their mortgage prices and, in some cases, to reduce their lending capacity,” CML direct general Michael Coogan said.

Banks are facing higher interest rates to fund their own loan book.

This cost is passed on to the customer.  This begs the question, what influence does the Treasury have against the raging tide of the free market?

The answer is not much.

A bank is like any other business, it must pass costs to its customers to maintain profitability. A bank that doesn’t will suffer in the current economic climate of low consumer confidence and high borrowing costs.

We are seeing the effect of high borrowing costs in other countries. In the US the Reserve Bank is lowering the interest rate but banks cannot follow suit and offer customers the same savings because of the cost of borrowing.

To combat this problem the Reserve Bank is offering cash to US banks to help sure-up their balance sheets.

Central banks are being marginalized by the power of the free market.

So this raises another question. Will higher base rates from the Bank of England help curb the inflation rate? Only time will tell…

The latest inflation figure released by the Office of National Statistics suggests Britain’s homeowners might not receive any interest rate cuts in the near future.

The latest figures showed inflation at 2.5 per cent.  Well above the Bank of England’s comfort zone of 2 per cent.

This is the second rise in as many months with the figure rising from 2.1 to 2.2 per cent in February.

Inflation is notoriously hard to manage with the trends difficult to reverse and although there is a new method of calculating inflation by the Office of National Statistics it is clear that inflation is on an upward move.

If the Bank of England starts rising interest rates to stem inflation there is a real possibility interest rates will be increased several times before inflation is back under control, particularly within an environment of rising energy costs.

In economic conditions like these it is important for homeowners to recalculate their home loans and determine what they can comfortably afford if rates increase.

This is a pattern that is forming across most of the industrialized countries at the moment.

As rates rise more and more homeowners are suffering from mortgage stress.

Buyers should calculate their repayments at 3 to 4 per cent above current interest rate levels to ensure they will be able to maintain repayments when the official rate inevitably rises.

…That’s not something I’m likely to say very often.

But Chancellor Alistair Darling deserves praise for his attack on the banks’ over-eager attitude to lending.

Between us, we Brits owe more than £1.3 trillion and record numbers are struggling to keep up with mortgage and other debt repayments.

In today’s Daily Telegraph, Mr Darling says the big banks need to get back to ‘good old-fashioned banking’.

And that means being far more cautious about who they lend to.

He makes it clear borrowers share some responsibility for their troubles, saying: “They need to ask themselves, ‘Can I repay this?’”

He adds: “Institutions have in some cases been prepared to lend to people without checking if they were ever going to repay it.

“It doesn’t do any good for anybody, particularly the person in debt but also the lender, to be getting into a situation where you have bad debts.”

Well said – if banks didn’t lend irresponsibly people wouldn’t be able to get into such a mess.

A record number of households are having serious difficulty keeping up with debt repayments, according to the Daily Telegraph.

And no wonder – between us, the paper says, we owe more money than the UK’s entire economy generates in a year.

Add together outstanding mortgages, loan, credit card and higher purchase balances plus other forms of debt and it comes to a whopping £1,345 billion.

Meanwhile, our annual economic output stands at just £1,330 billion.

Apparently, we owe more per head in relation to our income than the Americans, Japanese or Germans.

So it’s no surprise to learn that around 2.5 million people describe themselves as “very concerned” about their ability to manage their debts.

Frankly, I’m amazed that figure isn’t a lot higher.

But there may be a chink of light amid all this gloom.

Mortgage company mform.co.uk says the rates at which mortgage lenders borrow in the money markets to support their fixed-rate deals fell last week, and it thinks this could be the beginning of a new downward trend.

The Nationwide and West Bromwich building societies have now reduced their rates on some fixed-interest deals.

Fingers crossed the desire not to be left looking uncompetitive will encourage other lenders to follow their example.

It’s not just the young who seem to lack a sense of financial responsibility (see previous post).

The UK’s OAPs owe £57 billion – yes, £57 billion – on mortgages and credit cards.

Research from Scottish Widows reveals that around one in five retired homeowners are still paying a mortgage.

They have an average debt of £38,000, with one in eight owing more than £50,000.

And almost one in three have had an outstanding balance on their credit cards for the past three months. Here, the average debt is £5,900.

Lord knows how some of them are managing the repayments.

With a full basic state pension of just £87.30 a week for a single person and £139.60 for a couple, it hardly bears thinking about.

I know it’s easier said than done, but if you want to avoid this kind of misery in retirement, there are just two steps you need to take:

1) Pay off your debts as fast as you can. Then…

2) Start saving as much as you can for retirement.

It’s that simple.

Following on from my last post, the Daily Telegraph reports this morning on the rash of ‘flash sales’ companies.

If you get into financial difficulties, these property vultures pay quick cash for your home – at a discount of around 20 per cent.

You’d have to be pretty desperate to take up an offer like that.

Sadly, it seems plenty of people are, otherwise these firms wouldn’t be in business.

They opt for a ‘flash sale’ as a way of avoiding repossession, get cash to clear (hopefully) all their other debts, and then rent their old home back from its new owner.

Sue Anderson, head of member and external relations at the Council of Mortgage Lenders, says flash sale companies ‘have the potential to be a good thing’.

What planet is she on?

Okay, so people are not homeless – at least not initially – but they’ve lost a huge chunk of money that was rightfully theirs and no longer own the roof over their heads, all in the name of accessing a bit of quick cash.

These firms offer six-months leases, and as TV news reports have already pointed out, they won’t hesitate to evict the old owners after that time if they want to cash in on their canny investment.

Thankfully, Sue does add that a flash sale should be a last resort.

She says: ‘The first thing to do is have a conversation with your lender, who may allow you to defer payment, switch to an interest-only mortgage or extend the term of the loan.

‘The next step would be to seek independent advice from a debt-counselling operation such as National Debtline. Only then would you turn to selling the home.’

In an extreme emergency, she adds, lenders may allow homeowners a breathing space to sell their home and clear their debt.

Let’s hope these firms which profit from the foolishness and misery of others will turn out to be a flash in the pan.