More a wrinkle than a crisis

More a wrinkle than a crisis

No one can have missed the first anniversary of the credit crunch. Doom-laden newspaper articles have chronicled the collapse in banks, rising interest rates, disappearing mortgages, stagflation - and the terrible summer weather.

Well, you can't blame the rain on the credit crunch, but it does plug neatly into our general mood of misery.

However if you take a look at Guardian Money's best-buy tables today and compare them with exactly a year ago, the misery count is oddly low. Then, the best fixed-rate mortgage (from Newcastle building society) was priced at 5.37% with a stonking £1,599 fee. Today, Newcastle is still at the top of the table. The rate has gone up to 5.65%, but the fee is down to £1,098. A move from 5.37% to 5.65% is hardly welcome. But Armageddon it ain't.

It's a similar story for remortgages. The best rate a year ago for a three-year fix was Furness building society at 5.49% with a £695 fee. Today the best rate for a similar loan is from Norwich & Peterborough building society, at 5.7% plus a £999 fee.

It's what you have to pay month-in, month-out, for your mortgage that counts, not the paper value of the property. If you're still in work and have built up some equity, the "crunch" is probably feeling more like a wrinkle.

Indeed, if you are a saver (and they are seven times more numerous than borrowers) then the credit crunch leaves you a winner. The best rates a year ago were around 0.25.....continued below

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percentage points below today's. The best one-year bond was 6.7% compared with today's 7.2%.

The reality is that the crunch is (so far) hurting specific groups rather than the mass of homeowers. One set of losers are buy-to-let investors who came late to the party. They are suffering from falling prices, falling rents and higher mortgage rates. But they won't find much sympathy. We will save that for first-time buyers. The stark difference in our tables compared with last year is the loan-to-value column. Last year, virtually every lender was willing to give 90% or 95% loans. Today, with the exception of HSBC, the best buys are all around 75%.

Finding a 25% deposit is insurmountable for most first-time buyers, which is why such palliatives as a suspension of stamp duty won't make any difference.

This week lenders have thrown one press release after the next at us, hailing falling mortgage rates. But they're not for the buyers who need it most: the ones without a huge deposit.

Maybe this is the lull before the storm. The middle classes and the middle aged are mostly unhurt by slightly raised mortgage rates. Food, energy and petrol prices are a more immediate concern. But if first-time buyers remain frozen out of the property market by hefty deposits for another year, then the predictions of economic Armageddon may not be so far off the mark.

Even after recent price falls, the house-price-to-earnings ratio for the UK remains above six, nearly double the level of the early to mid 1990s.

To drop back to those levels would take price falls of 40%-50%. Worryingly, the claimant count is rising, and two-fifths of the newly unemployed are under 25. For young adults it's now a case of can't buy (no deposit, no job), won't buy (prices are falling), or the couldn't care less (the rent's falling).