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Best fixed rate mortgages may be pulled by lenders

[ Posted March 27th, 2009 ]

If you are looking for the best fixed rate mortgage, now is the time to consider signing up with a lender.

Many lenders are advertising cheap fixed rate mortgage deals, but these rates may not stay around for long.

Fixed rate mortgages give borrowers a guaranteed monthly repayment for the term of the ‘fix’ and at the end of the period, the some lenders offer another competitive rate or your mortgage rate switches to the lenders normal rate for all borrowers.

Generally, the incentive period last for two to five years.

Fixed rates are gambles for lenders and borrowers, who are both trying to predict how the mortgage rate is going to perform during the incentive period.

Nevertheless, for the first time in many years, it’s not hard to foresee mortgages are only going to rise in the medium to long-term, as they have nowhere else to go because the Bank of England interest rate is so low.

The problem for borrowers is working out when they will rise and by how much.

Discussing the products on the market with a specialist mortgage broker will certainly help you gather the information you need to make a decision about the best mortgage for your personal financial circumstances.

You can also compare mortgage products, rates and features by using a site like ours.

The current fixed mortgage rates may not be on the market for long because of the failure of last week’s government gilts auction. Traditionally, the rates banks set to lend money to each other are based on gilt rates.

For the first time ever last week, the government failed to sell all the bonds on offer, which many interpret as a the money markets lacking confidence in the government’s abilities to handle the recession.

A gilt is a bond issued by the government. The holder is paid a coupon – a fixed interest payment – every six months until the bond matures. On maturity, the final coupon payment is made and the holder gets back the money they lent to the government in return for the bond.

Don’t forget some points to bear in mind when looking comparing the best fixed mortgage rates -

  • What is the ‘lock in’ period during which the lender will charge you a penalty if you end the mortgage
  • Is the mortgage a portable product that you can switch to another property?
  • The best rates apply to the lowest loan-to-value – which is the amount you have borrowed against your property as a percentage of the market value
  • Is there a fee to obtain the mortgage and once you factor this in to the cost, is the mortgage still good value for money?

The industry scoop is that many of the best fixed rate mortgage deals will be pulled by lenders next week to be replaced by new, higher rate products.

What to consider when taking out a mortgage

[ Posted March 24th, 2009 ]

If you want the key to your front door by buying your own home, you need to think carefully about what is involved in making probably the biggest personal financial commitment you will ever sign up to.

Why take out a mortgage?

Despite the property market doldrums we’re experiencing now, historically a mortgage has proved to be an excellent investment that has outperformed most other investments year-on-year. The advantage over renting is your mortgage repayment is a personal investment in an asset that is appreciating in value.

Your commitment to a lender

Your responsibilities and obligations are laid out in detail in the terms and conditions your lender sends you together with the mortgage offer. This may vary slightly between lenders, but generally, you are responsible for making mortgage regular mortgage repayments, insuring the property and maintaining the property in a reasonable condition.

Repaying your mortgage

The typical methods of repaying a mortgage are:

Repayment mortgages: This is a monthly payment that is part interest on the loan and a contribution towards reducing the loan, so at the end of your loan term you have repaid the all the interest and the amount you have borrowed

The loan term is of time over which you have to repay the loan, for example 25 years.

Interest only mortgages: You pay the interest on the loan each month, but none of the money you have borrowed. Borrowers need to make some sort of provision for repaying the loan amount at the end of the term, generally through some sort of savings plan.

Don’t forget mortgage rates rise and fall, so you need to include a contingency in your budget for higher repayments.

What happens if I can’t repay my mortgage?

A mortgage is secured against your home. This means if you fail to keep up the repayments, the mortgage lender can repossess the house. This is a last resort measure after you and the lender have tried every other means to sort out any financial problems.

Mortgage protection insurance from a specialist provider is a worth considering as a stopgap if you lose your job or can’t work through sickness or injury.

The government has a scheme to help borrowers in trouble with their mortgage repayments. This covers paying the interest on a mortgage of up to £200,000 and starts 13 weeks after redundancy.

What else should I consider?

You need to think about the mortgage product that suits you best – common products are tracker mortgages that rise and fall with the interest rate and fixed rate mortgages that allow you to pay a fixed monthly payment for a specific term.

How an independent broker can help

Mortgages are complicated and making a wrong choice can cost you a lot of money over the years. A specialist, independent mortgage broker will have an in-depth knowledge of the mortgage market and special relationships with some lenders.

The broker will discuss your options and provide a list of mortgages from different lenders that match your requirements so you can make an informed choice.

A commercial mortgage can be great for business

[ Posted March 20th, 2009 ]

Most of us remortgage our homes for better rates and deals – but strangely, few business people consider shopping around for a better commercial mortgage.

It makes sense. We do it with our home mortgage to save money and as a business, one of the best ways to maintain profit margins is to eye expenses as well as income.

If you own commercial property as a landlord or a trader, you probably have a mortgage deal tied in to the same lender who looks after you’re overdraft and banking.

You may think this gives you leverage with the bank if you need working capital, but having all your business cash eggs in one basket is generally not the way to go.

The advantage of separating your business finance between banks and lenders is no single organisation has an overall picture of your finances.

Many business mortgage deals are available from banks, building societies and specialist lenders.

Many building societies and specialist lenders offer more competitive loan-to-values and better mortgage rates than the banks.

With a commercial mortgage, you can:

    •    Buy business premises
    
    •    Buy commercial and residential investment or buy-to-let property
    
    •    Raise money with a commercial remortgage for working capital, expansion, or buying equipment.
    
    •    Finance buying distressed commercial property at below market value
 
Commercial mortgages are generally based on the lender’s risk assessment of the business’ ability to repay the money borrowed.

The lender will look at your business experience, your business performance trends over the last three years, your current trading position and your plans for spending any cash you raise. You should also expect to have a professional business valuation as well.

Finding the right commercial mortgage at the best rate is the problem. Many business mortgage lenders do not advertise their products and rates and set them according to your business sector and trading performance. The lender will also expect you to share the risk by providing a sizeable deposit of at least 20% of the business valuation.

Approaching a specialist commercial mortgage broker is worth considering. A broker can help you put together a polished finance proposal that makes you look professional to a prospective lender.

Many commercial brokers also have good networking relationships with commercial finance managers and can often negotiate a deal on better terms than a businessman could expect as an offer by walking in off the street.If you are cash-rich and in a position to invest in distressed commercial property – that’s premises where the owner is struggling to meet their financial commitments – then a commercial mortgage specialist can help you put together an investment strategy.

A broker can also help with business finance arrangements – like invoice factoring and discounting and arranging specialist finance to buy equipment and machinery.

Don’t get in a fix over the best mortgage rate

[ Posted March 17th, 2009 ]

Many borrowers opt for a fixed deal as the best mortgage rate when they take out their home loan, knowing that their repayments are fixed for a definite period and budgeting is easier every month.

Unfortunately, when the fixed rate period ends, either the mortgage rate switches to the lender’s standard rate, some lenders offer a new deal or the borrowers shop around for a best rate remortgage.

Knowing whether to stick with the new rate or shop around for a remortgage is a difficult decision while lenders are keeping a tight grip on their purse strings.

Should you take out a new fixed rate?

While mortgage rates are low and volatile, it’s probably more sensible not to lock yourself in to a fix.

It’s doubtful rates will drop any further, after all, they are as low as they have ever been, but certainly until we have had the upcoming budget that will be followed by an election in the next year or so, no one really knows how the economy is going to react.

The chances are they are not going to rocket sky high again in the next year or so, because it suits the government to keep them low.

Should you remortgage?

If you can, it would seem sensible to talk to a mortgage professional about your options other than fixed rates or a higher standard rate. With products reaching and leaving the mortgage market so quickly nowadays, it’s difficult to put your finger on the best deal.

A remortgage specialist will have information on the up-to-date deals to hand and should pinpoint one that fits your financial circumstances and the best remortgage rates, saving you the footslogging and hassle of searching around town or the web yourself.

Don’t forget you won’t be able to remortgage if your loan-to-value (LTV) is more than the lender allows. For instance, if the lender gives their best rate at 65% loan-to-value on a £200,000 home, that means if your remortgage is more than £130,000, you won’t get that rate and will have to look for another product.

Do I wait to the end of my fixed rate?

If you are coming to the end of your fixed rate period, speak to a broker about a remortgage. You need to know your options and to be ready to switch as soon as possible after the fixed rate ends, if that’s the appropriate advice.

The broker will also check to see if you incur any penalties that outweigh the cash benefits of a remortgage – especially if you act before the fixed period ends.

I’ve missed some mortgage payments. Can I still remortgage?

Talk to a broker. Your remortgage options and best mortgage rates will depend on your financial status. Don’t worry too much. It’s not always as bad as it first looks on paper and solutions are available.

Look at our post How doing your homework can get you a better mortgage rate to find out how to make your financial status look better to a lender. 

How doing your homework can get you a better mortgage rate

[ Posted March 12th, 2009 ]

Boost your chances of finding a mortgage with some simple steps that will make your application more attractive to lenders and hopefully get you a better mortgage rate.

Many mortgage applications fail on small details – so you need to make sure you have all the bases covered before you make an application.

Here’s a checklist of ten top tips that you can brush up on to make yourself a better proposition to a bank or building society:

1.    Make sure your name is on the electoral roll at your home address by contacting your local council.

2.    Check your credit file with the big three companies – Equifax, Experian and Callcredit. Read through your file carefully and if you think any of the information is wrong, tell the company and ask for the information to be put right.

3.    If you are financially linked to someone with poor credit on your record, clarify the situation with the credit rating companies

4.    Take out a small loan or a credit card, spend a little and make regular repayments – this shows you have a responsible attitude towards money.

5.    Even if you have the worst job in the world, stay there for at least six months to show the lender you have employment stability

6.    Make sure your income is paid into your bank and don’t go overdrawn without making arrangements with your bank manager.

7.    Work out how much you can feasibly afford to borrow, how much cash you can put up as a deposit and don’t financially stretch yourself by trying to buy a house that is out of your price range

8.    If you want a really good interest rate deal, expect to put up to 40% of the property value in as a cash deposit and have a reserve fund to pay purchase costs, like solicitor’s fees, searches and surveys.

9.    Have a budget or cash flow worked out. Show the lender you have thought your purchase through and have set aside money for home insurance, Council Tax and utilities.

10.    Shop around for the best mortgage rate whether you are remortgaging or a first time buyer.  Don’t just take what your bank or building society is offering. Many specialist brokers like Mortgagerates123 have access to a range of lenders that offer a variety of mortgage products.

It’s a good idea to chat with a mortgage broker before you start looking for a property, so they can sit and work though these points with you and can confirm you have a reasonable chance of getting a mortgage before you waste time and effort viewing properties or even putting in an offer.

The objective of the exercise is to present you as a responsible, stable individual whom the bank can consider a good risk with their money.

You’ll be surprised how much a little homework like this can improve your chances of getting a better mortgage rate.

UK interest rates stand at 0.5%

[ Posted March 6th, 2009 ]

The interest rates in UK have been cut once again to their lowest level ever in a bid to resuscitate the British economy. In the past interest rates have been used by Bank of England as a brake or accelerator for the economy. For instance if the bank wants to make savings more attractive and debts more expensive, its going to increase the base rate. This will persuade people to save more and spend less and reduce inflation in order to slow down the economy. In contrast if interest rates are cut it encourages people to spend more and save less, and as a result the economy is going to get a boost.
 
The Bank of England uses interest rates as a tool to keep the UK economy on track by keeping a check on inflation. It ensures that inflation is kept around a healthy 2% mark which is set by the government. However, in these extra ordinary times when credit availability has become a novelty, this mechanism of increasing or lowering the base rate hasn’t worked. Due to toxic assets and loans which are unlikely to ever get repaid, the banks have become overly cautious. The banks have shown little enthusiasm for even trading with each other, let alone incur more consumer debt by lending to business or individuals.
 
Although the interest rates have been falling for the last 18 months but new buyers are still finding it impossible to get affordable mortgages. On top of all this, there is serious concern about the health of the British economy as banks have been nationalized and their credibility damaged beyond repair. The government has poured billions into the banking sector to ensure that banks do not collapse as this would be catastrophic for the economy as a whole.
 
The British government has given Bank of England £50 billion to buy toxic assets and mortgage debt as part of the 2nd bank bail out plan. This allows UK businesses for the first time to borrow directly from the central bank instead of going to debt riddled commercial banks. This also means that banks can offload their mortgages and other consumer debt from their balance sheet to Bank of England. The government hopes that this move will encourage banks to start lending and show more flexibility when people take out a mortgage or a loan.
 
Apart form the interest rates cut, the Bank of England has decided to print money. This money will be handed over to the troubled banks in return for their risky assets, but nobody knows if such a move will have its desired results. This procedure in the banking terms is called quantitative easing.
 
The MPC added ‘The committee recognised that the impact of such operations was both uncertain and subject to time lags’. Other countries have also used this model in the past to rescue their economy, for instance Germany tried this in 1920 and Zimbabwe in recent years but unfortunately both of them failed. This really is the last throw of the dice by the Bank of England, the aim is to make money so cheap that the banks start offering loans again.

 
 
 
 
mortgagerates123.co.uk aims to provide every client with cheap, affordable and best mortgage loans in the UK market, however the actual mortgage rate available will depend on client's financial circumstances and credit history. Although, mortgagerates123.co.uk has made every effort to ensure that the mortgage rates listed are correct, it bears no responsibility in case of an error. 
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