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Why the Best Mortgage Deals are Hard to Find

[ Posted February 26th, 2010 ]

New research looking into the mortgage markets has indicated that mortgage lenders are currently floating as many as six different versions of each of their key mortgage deals onto the market – even before any change of rates dependant upon the size of an individual’s deposit or how much equity they have. One example of this is Halifax’s three-year tracker deal, with a rate that is set at the Bank of England’s base rate plus 2.44% through until 2013. Such a rate reels people in as they see best-buy comparisons and adverts in today’s difficult climate. However, working out specific eligibility for this deal is exactly where confusion begins.

In order to qualify for this best deal rate borrowers will need a minimum of 40% equity if you are already a Halifax borrower as well as if you pay a fee of £999. Those who are not existing borrowers but instead have Halifax currents accounts will pay the base rate plus 2.76% as well as a £4 fee discount. For those who are neither borrowers of current account holders with the Halifax must pay the base rate plus 3.09% and can then also save £4 on the fee. The fee can also be cut to £495, however this will result in a rise in the interest rate to as much as 3.39% over the base rate depending on where your current mortgage and current account are held. Further, the definition of current account is not the Standard account but rather the Reward current account. This account demands a regular monthly payment of £1,000.

Other lenders are also undertaking similar practises, among them Northern Rock and Nationwide, with Nationwide charging different rates depending on just how the application is made. For example, applications through the website can be as much as 1% lower than through the branch. Whilst lenders argue that they are attempting to offer maximum choice to enable as many people eligibility as possible brokers state that the ensuing confusion can prove extremely expensive for borrowers attracted by low rates who are subsequently then offered a far less agreeable rate. As an example, even an extra 0.5% on the rate will mean an additional £42 per month payment on a £145,000 repayment mortgage. Because of this borrowers are advised to shop around and treat adverts with healthy scepticism, particularly if looking for deals on bad credit or re-mortgages with less-than-ideal histories.

Co-operative Survey Shows UK Mortgage Ambitions

[ Posted February 24th, 2010 ]

According to a new survey by by the Co-operative Bank, one of the UK’s leading commercial so-called ‘ethical’ banks, almost two-thirds of mortgage customers in the UK have genuine ambitions to be free of their mortgage commitments before or at least when they get to fifty years of age, revealing that around 62% of those responding to it the were aiming for this goal. The report also hinted at interesting additional information in respect of what such mortgage freedom might have on British people’s lifestyles, and the research and responses suggest that the impact would be significant indeed.

As an example, over half of respondents (some 52%) said that they would in the event that they were mortgage free take more holidays each year, whilst a little under a third would look to increase their savings considerably. Also, 27% of those questioned told questioners that in the event that they were able to become mortgage-free they would examine ways in which they could fundamentally alter the way in which they work and their working patterns. They would look to do this by switching to part-time hours in some cases and by quitting work altogether in others.

Head of mortgages at the Co-ooperative, James Hillon, commented on the survey, saying that ‘The research clearly indicates that many mortgage holders are seeking to take the best advantage of the continuing low interest rate levels by making overpayments on their mortgages’ in addition to locking in reasonable fixed-rate mortgages and even utilising re-mortgages to clean up old residual debt to help put them in a better position to pay off all mortgage debt at a later date. Also, according to recently released figures from the Bank of England, mortgage customers that are on tracker products are currently enjoying mortgage rates that stand at their lowest levels since 1997. The figures state that, with the base rate of interest still remaining at 0.5%, the average tracker mortgage rate stood at 3.63% which compares very favourably with the figure of 3.92% that was recorded in December 2009.

UK Home Repossessions Fall in Final Quarter of 2009

[ Posted February 18th, 2010 ]

Recent data has indicated that fewer people in the UK had their homes repossessed during the last three months of last year, and this was also mirrored by a definite fall in the number of court orders issued for the seizure of properties.

According to the Council of Mortgage Lenders, lenders repossessed more than 10,000 homes during the three month period leading up to December, a figure that is 13% lower than the previous quarter, and also 2% down on the same period in 2009. During the period of October to December 2009 there were almost 17,000 home repossession orders in the UK, and this figure is 15% down on the previous three month figure to September 2009. Independent figures issued by the Ministry of Justice showed that 42% fewer mortgage possession orders were issued by English and Welsh courts during the last quarter of 2009 as compared to the same period for the previous year.

With the current signs of greater stability within the labour market, as well as the general consensus that interest rates will stay long for a continuing period, the Council of Mortgage Lenders has cautioned that its previous estimate of 53,000 repossessions throughout the coming year now appear somewhat overdone. The Council warned, however, that we continue to face a rather uncertain period. They caution that, although the lower levels of repossessions are a tribute to continued low interest rates as well as efforts from the government, lenders and the advice sector, borrowers are likely to come under pressure as and when interest rates are eventually raised.

The job market has also been one of the key factors in keeping the number of repossessions lower than expected, with unemployment rising much lower than had been expected and much lower than was seen in the previous recession. Overall confidence in the housing market has also improved with a 5% rise in the number of construction orders during the three months leading up to December 2009 up by 5% on the previous year. New buy-to-let lending also rose for the second quarter in a row, further stimulating market confidence. Many home owners being able to take advantage of some of the best mortgage rates in years as well as find quality re-mortgages have also helped contribute to this trend.

Mortgages: To Fix, or Not to Fix

[ Posted February 13th, 2010 ]

The choice facing borrowers between a tracker or a fixed mortgage is a very tough one, with some opting for the tracker option as they are currently the cheaper option due to extremely low interest rates, although any sudden rise would make this choice look a very poor one overnight. With the inflation rate in the UK reaching 2.9%, economists remain split on exactly when and by how much the interest rate will rise.

Some economists are predicting a rise as early as May of this year, although this would still appear to be very much the minority view. Many others are forecasting no interest rate rises until perhaps the final three months of 2010, and more rises following in 2011. Whilst some may look simply at the current interest rate and inflation figures (CPI currently stands at 2.9%) to make their choice, a number of economists are advising that lifetime trackers may be the wisest choice. This may also be due to the fact that the predicted cuts in pubic expenditure and concomitant tax rises will result in the same curbed levels of inflation as would a rise in interest rates – even if inflation remains high-ish.

Many have forecast that rates may not rise over 2% for another three to four years. Tracker mortgages have continued to rise in popularity over the last twelve months, and currently account for more than half of all newly issued mortgages. In fact, figures for the easily part of last year show that around 90% of newly issued mortgages were fixed rate mortgages, especially for many first-time buyers. Yet, many Building societies are now breaking their promises to borrowers and raising their rates, citing what they call ‘exceptional circumstances.’ In the wake of this some mortgage brokers have postulated that, should rates remain at their historically low levels over the next few years, then those borrowers with smaller deposits may benefit more from a tracker mortgage. The decision is, however, more dicey for a borrower with a larger deposit, of perhaps 40%. Average figures show that, in such a case, the difference between the two mortgages would be negligible at best.

The Mortgage Sector – Use It To Your Advantage

[ Posted February 11th, 2010 ]

If you are struggling with getting your mortgage under control you can start to regain some power in your life by writing a monthly budget as well as looking at what options are available to you. Although UK mortgage fees may have risen considerably in the past few years despite historically low interest rates and considerable high levels of mortgage market competitiveness this does not mean you have no power on your side. Many UK mortgage lenders, for instance, are more and more open minded as of late to those people who may have bad credit histories or are simply looking at a helpful alternative to what they are currently facing in the market. UK mortgage protection insurance available in most areas can even help provide you with a valuable safety net to land on as well if you ever suddenly find yourself unemployed due to illness or injury – or even simply a company restructuring.

Many options today such as adverse credit remortgages (also known as bad credit mortgages), self employed, self certification or remortgages are all recently being seen available in the various UK mortgage sectors to help those in need. The mortgage market currently also looks set to improve offerings available to borrowers as new, cheap mortgage deals become open to help finance and support your particular conditions. This is particularly important now as the bank of England has recently decided to maintain the low base rate for mortgages for the next few months and will not increase rates until the following year.

This does not mean that the sector will say positive forever, however, as recent concerns over the ability for the mortgage market to keep up towards the end of 2010 are raising ever since Mr. King from the Bank of England announced that the Bank is not looking to continue the same low rate mortgage offerings into the following year, thus potentially solidifying the current 300bn debt facing the mortgage market into a difficult hurdle to pass. Still, in the meantime home owners and prospective buyers alike can continue to take advantage of the mortgage offerings available until that occurs and should look towards locking in a good fixed rate before it’s too late.

2010: A Home-Buyers Odyssey?

[ Posted February 9th, 2010 ]

New research has suggested that the coming year could well be heralded as ‘the year of the home-buyer.’ It appears that house buyers are not expecting any further falls in property prices, as recent statistical evidence shows that as little as 3% of potential buyers are delaying a decision on buying until prices see further falls. Despite the fact that just over half of Britons surveyed in January 2009 felt that property prices would be unlikely to recover until the latter part of 2010, almost 30% recently surveyed now believe that residential property prices are beginning to rise, with 18% replying that prices had most likely reached their lowest possible levels.

With regards to potential first-time buyers, again, almost one-third are delaying the purchase of their first property in order to save sufficient funds for the deposit, and 10% are waiting for market conditions to give them reassurance with regards to job security. Conversely, the belief that residential property prices have bottomed out has made people generally less positive about the possibility of negotiating the price of a possible property. More than 20% of those questioned believe that it might now be possible to negotiate the price of a property down by 15% of the market valuation, which compares to around 30% that believed that such a negotiation and subsequent agreement could be reached when asked back in January 2009.

It has been stated that the events of the past year have revealed a real change in people’s general attitudes to house buying. Rather than waiting until house prices have fallen further, people are generally planning to buy and save up in order to furnish the deposit. They are also willing to negotiate their asking prices down from the original asking price, even despite the much stricter current lending criteria as well as the possibility of further rises in house prices.

Analysts also see the continuation of all-time low interest rate levels as of vital importance to house buyers of getting the right mortgage at the best mortgage rates possible, and generally recommend that buyers and re-mortgagers seek the best professional advice where the current mortgage market is concerned.

Spanish Giant Now Issuing Half of UK Mortgages

[ Posted February 8th, 2010 ]

The giant Spanish banking group, Santander, is looking to further its expansion in the UK after posting huge profits in a British market where the group currently hands out half of all new mortgages. The Spanish giant’s mortgage lending share peaked at over 20% during the final three months of 2009, and its red, flaming logo began its sweep up and down the British high street and among various advertising platforms. The net lendings of Santander came to £7.6 billion in 2009, a figure that is reckoned to amount to half the net lending of the market in its entirety. The bank’s overall market share for 2009 stood at 18.6%, with a gross mortgage lending figure of £26.4 billion. Analysts at Santader believe these figures – especially those relating to market share – are their highest ever.

Satander now ranks as the UK’s third-largest bank in pure deposit terms, after RBS and Lloyds. This rapid jump in rank came principally after its acquisition of both Bradford and Bingley and Alliance and Leicester. The group now derives 16% of its total profits from the UK market, and has plans to expand still further after the Chairman Emilio Botin announced that the bank had posted 2009 profits in Britain totalling £1.5 billion, a rise of 30%. Senor Botin stated during Santander’s annual profits presentation that he would look to also take the SME business sector as Santander looks to ‘grow organically’ in the UK.

Currently, Santander is believed to be among the parties looking into acquiring the former Williams and Glyn’s branch network that current owners RBS will put  on the market next year. The network concentrates mainly on small business and commercial banking. Santander is also currently involved in discussions aimed at expanding in China and is looking at offering a wider range of overseas mortgages in various areas, although such discussions are believed still to be at a preliminary stage.

As far as the British market is concerned there is no doubt that Santander has benefited greatly from the collapse of its British rivals, most of which have paid for their past dealings in the highly risky investment banking sector which Santander avoided and therefore did not see the so-called ‘toxic’ losses witnessed by many of the British and other European  banks.

Mortgage Funding Gap Could Squeeze Mortgage Market

[ Posted February 4th, 2010 ]

According to the British Council of Mortgage Lenders (CML), the government will need to reform the way in which lenders raise funds in order to prevent house buyers facing difficulties finding competitively priced mortgages. The Council of Mortgage Lenders postulated that a funding gap of around £300 billion will appear when the current government-run support schemes finish in 2014. The funding gap is basically the difference between the sum house buyers wish to borrow and the actual funds available to them and is expected to remain large thanks in part to many bad credit mortgages and low-value re-mortgages offered as a result of the long-standing economic depression..

The housing market, therefore, faces major uncertainty as to how mortgage lenders will replenish the £300 billion potential shortfall-if indeed they will be able to. Industry analysts and insiders believe that what is needed is a new policy approach formulated to stimulate the development of wholesale funding. Many caution that, unless this happens, there is likely to be a long-term fall in the amount of choice for mortgage customers in the UK, and that without such new government support, establishing a sustainability market on the scale needed to fill the upcoming funding gap could be extremely problematic.

Such a scheme may well involve wrapping up and repacking existing mortgages in order to sell them as interest-bearing bonds. The bonds would be sold to institutional investor, thereby raising funds for new lending. Firms might be left reliant on continued government funding, with the UK risking facing a real credit undersupply, leading to the rationing of mortgages for customers for a protracted period of time, according to the CML. Many, including the Council of Mortgage Lenders, believe that, even if the wholesale markets began working properly again on the scale previously witnessed ore 2007, which many analysts believe to be rather unlikely, considerable uncertainty would exist as to whether or not lenders would be able to repay the full extent of government funding. It seems highly likely, therefore, that there will need to be an extension of the current period of government support.

The CML also stated that the remarkable reduction in levels of competition in UK mortgage markets is one of the results of the fact that wholesale debt markets were closed in 2007. Added to this, the emergency government measures to close the concomitant gap, despite being largely welcomed, focused largely on those taking bigger deposits which adds to the general lack of competition in the market.

Mutuals Edge Rates Higher in Difficult Market

[ Posted February 3rd, 2010 ]

Those borrowers holding mortgages with building societies will now be looking at steep increases in mortgage repayments after two further mutual lenders announced that they would increase their standard variable rates (SVRs). First, Norwich and Peterborough, which boasts over 50,000 borrowers, is raising its variable rate to 5.35% from tomorrow, seeing a half point raise. This means that borrowers with interest-only rather than fixed-rate mortgages of £150,000 will be looking at increases in excess of £700 per year in their repayment costs. Also, the smaller lender, Holmesdale, is raising its SVR to 4.89%, seeing a rise of 0.35%. The market has now seen four building societies in total raise rates in a short space of time, with both Skipton and Nationwide raising rates during the course of last week.

Analysts and insiders expect the trend of rising rates to continue, and are advising borrowers to side-step the extra concomitant costs by switching to cheaper deals with alternative lenders, if need be. The rate raises will see those borrowers with lower deposits and equity stakes hit hardest, as they will be unable to switch. Figures released today by the Building Society Association illustrate that mutual societies’ gross mortgage lending fell sharply last year to just £18.6 billion from £37.5 billion in 2008. The figures mask a minimal, short-term spike in gross lending figures seen in December 2008, which stood at1.8 billion, up slightly on November’s figure of 1.6 billion. Analysts believe that this short-term spike was due mainly to the fact that borrowers were looking to obtain deals before the reduction of the stamp duty threshold. Insiders also believe that, total gross lending will most probably remain at low levels until funding and credit conditions improve, particularly for those seeking bad credit mortgages. These fears are underscored by the fact that total gross lending during 2009 was only half that seen in the previous year.

Building societies have been particularly hard-hit in the current low iinterest rate market conditions, as the low rate has seen their profit margins ebbing away. Their mortgage lending has relied upon the deposits of their savers, due to the freezing of wholesale money markets as a result of the global credit crunch. Also, competition among lenders-especially from state-owned banks-has increased the cost of drawing new savers. As many as eleven building societies have now raised their variable rates, and analysts expect more to follow suit soon as market conditions continue to bite. Ultimately, the pain will be unavoidably passed on the customers.

UK Mortgage Approvals Fall in Dec. 2009

[ Posted February 2nd, 2010 ]

New figures have shown that the number of mortgage approvals fell in the UK in December 2009, to the surprise of industry  insiders, as it is the first fall in these figures for more than a year. Many analysts believe that this could signal the inability of the housing market to keep up the momentum of its current recovery. The figures show that over 59,000 loans were granted to borrows by lenders in order to buy homes. This figure compares to just over 60,000 in November 2009, according the figures from the Bank of London. The Bloomberg News Survey forecast had previously predicted an increase to almost 62,000. Some have speculated that, despite the fact that house prices rose for a straight sixth month in January,  mortgage figures are a sign that housebuying may begin to wane. Analysts also cite the fact that credit is still not widely available, particularly for those seeking bad credit mortgages or other risky re-mortgages, and the concomitant terms and conditions are likely to be off-putting to many. The household sector still carries a large burden in terms of the wider economic recovery, and with projected cuts in public spending by the government, labour markets could suffer, causing obvious knock-on effects to sectors like the housing and mortgage markets. November 2008 was actually the last time we saw a drop in the number of home-loan approvals in the UK, although overall mortgage lending rose in December, to a figure of £13.5 bn, up from £12.7 bn in November, according to figures from the Bank of England.

House prices also increased in January, although analysts have cautioned that further house prices rises may well be curtailed if wage rises are not forthcoming as a result of a strengthening economy. It is feared that the rapid recovery in house prices is very much a one-trick pony with very little meat behind it. Consumer confidence, however, saw a rise in January-the first time this has happened in three months, as optimism for economic recovery grew. This may be due in part to the fact that Britain’s fourth quarter figures for 2009 saw a 0.01% rise, inching the UK out of its longest recession in history. However, M4, which measures money supply, fell by its largest ever margin of 1.1% in December 2009, underscoring problems with credit and lending and fears for continued recovery in the UK property market.

 
 
 
 
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