standard variable rate (SVR ) is lower than the rate that had been paid during the initial deal. That’s the reason for many borrowers whose current deal is coming to an end to choose betweentaking out a new deal or moving to their lender’s SVR.
Sometimes the mortgages arrangement fee cannot be justified due to the risk of defaulting so it must be due to the risk of interest rates rising.
Asking yourself if you shouldinsure against mortgage hike? There is only one answer:
Unfortunately there isn’tany insurance that will protect against a rate increase.
Choosing to move to your lender’s SVR for the time being you should consider setting up a savings account in which the difference between your old and new lower monthly payment could be saved.
This money can be utilised in a future event of a of a sudden rate increase, giving you a buffer,while you are looking for a new deal.
The only way to ensure that your monthly payment remains the same, regardless of any rate increase, is to move from your current deal onto a fixed-rate deal. But, even financial experts can’t agree on the way ahead.
Borrowers are facing unprecedented uncertainty over the future path of interest rates, which means a tough choice between low-rate tracker mortgages and the security of more costly fixed-rate deals.
Accordinding with L&C the tracker would be the best choice in terms of total repayments over the five years if interest rates rose at a slow, steady pace, but the fix would be better if rates rose sharply.
Homeowners with low SVRs of 2.5% should also stay put. Theresearch shows that on any SVR at 4% or higher you could end up paying more than on a five-year fixed rate by the end of the term (in this „steady” scenario) and should consider remortgaging.
Mortgage lending to home buyers increased 17% to an estimated £12.3 billion from May to June, says the Council of Mortgage Lenders.
Although lending was up 17% from £10.5 billion in May, the June total was still almost half the amount lent to home buyers in June 2008.
Then £23.8 billion was available for home buyers and remortgages.
Year-on-year the amount of cash available from lenders to home buyers has reduced 52% as lenders changed their policy from splashing the cash to almost everyone who applied to selecting a chosen few.
The figures also show that total lending of £33.3 billion for the first quarter of 2009 was the same as total lending for the second quarter, ending June 30, 2009.
The figure of £33.3 billion is the lowest quarterly lending figure since the first three months of 2001.
CML economist Paul Samter said: “The pick-up in June’s lending largely reflects seasonal factors, and these may well support lending volumes at moderately higher levels over the rest of the summer.
"Combined effects of the restricted nature of mortgage funding, reduced number of active lenders, weak labour market and limited consumer demand are likely to hold back any significant and underlying improvement.
"Our forecast for gross mortgage lending of £145 billion this year is unchanged."
According to the CML, mortgage fraud is also rising due to restricted lending and the inability of many buyers to get high loan to value mortgage deals because they cannot afford deposits.
Most first time buyers have to pay up at least 25% of the value of their prospective new home as a deposit. Those with a 10% deposit have little choice on the mortgage market and anything less turns up nothing.
To try and get round this difficulty, borrowers are giving inflated salary details or failing to mention debts, like credit card balances. Many mortgage lenders will not lend to anyone who does not have a perfect credit history .
A single missed mortgage payment could prevent a borrower qualifying for a remortgage .
The CML highlighted the fact that lenders are looking closer at applications to try and cut out fraud,
On top of all that borrowers have to watch out for ‘here today gone tomorrow’ deals as the average shelf life of mortgages is getting shorter all the time.
According to a Moneyfacts, a finance research company, mortgages were typically available for 14 days in June, down from the 23 days on the shelf when conditions were more stable. Moneyfacts also expects this time to shorten while the mortgage market remains restrictive.
Mortgage comparison web sites are still considered one of the best ways to keep on top of available mortgages as the data is updated daily in line with new mortgage deals.
At a time when lenders are being competative, Lloyds TSB is offering a new rate that might be appealing to those looking for a bargain and help on some of their expenses. The lender has announced a new Easy Step mortgage.
This mortgage offers a lower rate for a minimum of the first three months that the homeowners pay on the loan. This would help on expenses such as moving costs incurred during the process of a move into a new home, simply by the savings they would receive.
Rates available start out at 2.49%. That would be for a three-year fix with a 60% LTV (Loan-To-Value.) After that, the rate climbs to 5.49% once the discount ends.
Another rate available, from Lloyds TSB branches, is another loan at 2.59% with a three-year fix and a rate that increases to 5.59% once the discount ends.
The commercial director of mortgages at Lloyds Banking Group, Stephen Noaks, in a press release stated< “Upfront costs such as legal fees or Stamp Duty can discourage potential buyers from making that purchase. The low initial payments of the Easy Step mortgage give the option of some breathing space to get on top of these costs.
“We’re looking at different ways to encourage house purchase in order to stimulate the market. The Easy Step mortgage offers customers another choice in our homebuyer range.”
Contact your local Lloyds branch if you would like more information on these discounted loan packages.
Abbey has a new offering that those looking for a competitive fixed rate mortgage may be looking for. It is a four year fixed rate mortgage that has an 85% LTV (Loan To Value) ratio and at a rate of 5.99%.
If you want to take advantage of this deal, simply stop by an Abbey branch or contact one of their representatives by phone. This is for house purchasers and those interested in a remortgage.
There is a 995-pound fee that applies to this loan however there is a free valuation. The company throws a 250-pound cash back on completion. On the other hand, a Remortgage Solution offers free valuation and free legal work for the customer.
Abbey is also starting a four-year-fix if you are a customer with an existing account which comes with a rate of 4.99% and no fee.
There is also a similar plan that is in effect that comes with a 75% LTV over the telephone and through branches of the lender.
The company is also offering another plan that comes with a three-year fix at 4.59%. It has a fee of 495-pounds and is available with a 75% LTV. This is for remortgage customers. You must also be a member of the staff at UK universities. It is sponsored by the Santander Universities programme.
There’s no telling how long these offerings will be made available, so you should contact Abbey as soon as possible to take advantage of them.
Home buyers are often known for seeking their own loans through certain banks and others that service this particular area. There are some however, that see the usefulness of going through loan brokers so that they can get the best deal.
According to the Council of Mortgage Lenders (CML), the latter seems to be the way many future homeowners are attempting to get their loan, this according to information that has been supplied by the Financial Services Authority. This accounts for roughly sixty-percent of the public for the first quarter of 2009. This is roughly the same number that accounts for the last quarter of 2008.
Many of the lenders are tending to offer their products in the fashion due to the credit crunch and some of the pre-qualification efforts that goes into the brokerage industry. Buyers also like some of the service levels and expertise that some of the brokers have when it comes down to matching them with the loan that they need.
Numbers have increased in the number of brokers being used and it seems that first-time buyers are more likely to use a broker than those who are looking to remortgage, find a second home or simply looking to move from one location to another.
According to Peter Williams, executive director of the Intermediary Mortgage Lenders Association, “People value the service that the mortgage broker provides.” It’s one of the main reasons that many people go looking for a mortgage broker to use instead of doing the rate shopping themselves.
Mortgage brokers still have a job to do, as the number of products available on the market is less than it was at one time when the housing industry was at its peak and there was a large number of lenders on the market willing to do business.
The Moneyfacts Treasury Report has found something significant when it comes to the life of mortgage products available to consumers. During the month of June, 2009, the products fell from 23 days to 14.
These monthly figures are compounded monthly and take a look at trends in the market in the United Kingdom and are lately reporting on some of the turbulent and volatile conditions that are taking place right now.
The shelf life of these mortgage have been falling over the last few months and this could be because of a couple of reasons. One may be escalating fixed mortgage rates. Another reasons is that lenders change the products when they become too marketable.
According to the report, there is a practice of lenders who change the rates on their loans which in turns cuts the shelf life of that particular product. The actual number of products was 1,299 which was a growth of 33 in one month time period.
Darren Cook, an analyst at Moneyfacts commented that, “It is bad news for consumers that mortgage deals are only appearing in the window for such a short period and there are only a limited number of cheaper deals available and before the consumer has a chance to look at them a second time, they are gone.”
He continued, “LIBOR and SWAP rates are continuing to prove unpredictable and I would not be surprised if the shelf life is cut even further during the next few months.
In closing, he said, “When the Bank of England cut interest rates by a total of two and a half per cent within two months back in November and December last year, the shelf life fell to only six days, which is less than the life of a pint of milk.”
Rip-off banks and building societies are pushing up the best mortgage interest rates despite the cost of borrowing between lenders hitting the lowest level for more than 20 years.
Banks and building societies lend to each other at the London Interbank Offer Rate (LIBOR). The rate has fallen to 0.99%, effectively the lowest rate banks have being able to borrow ever.
First time buyers and homeowners are paying the price of lenders failing to pass on cheaper rates with the average 2-year tracker mortgage up again today to 3.77%, according to financial researcher Moneyfacts.
None of the nationalised and part-nationalised banks — Halifax, Lloyds Banking Group and Northern Rock – offers a tracker rate mortgage below 3.25%, despite cashing in on taxpayers’ billions.
The issue is the average margin – the profit lenders add to the rate to cover their costs and profits – is more now than before the recession, while the interest rates are lower.
Effectively this means mortgage lenders could cut their interest rates and take less profit if they wanted – but the simple fact is they won’t.
Vince Cable, the Liberal Democrat Treasury spokesman, said: “I just do not accept that it makes any sense for the nationalised and semi-nationalised banks to be building up capital reserves. There is no risk they will fail because they are owned by the taxpayer. Their primary requirement is to support the economy through lending.”
Mick McAteer, a former head of policy at Which? and now the head of the Financial Inclusion Centre think tank, said: “Banks have been using the cuts in the Bank of England rate to increase their revenues by billions.
“There is a basic lack of competition and they have a stranglehold. People are paying more than they should for credit cards and overdrafts as well.”
Four million home owners have tracker mortgages that rise and fall with the Bank of England base rate, currently at its lowest level. However, banks have gradually raised the starting rate for trackers by withdrawing their most competitive deals.
The Council of Mortgage Lenders claims that the cost of borrowing was a more “complex jigsaw” and not solely set by LIBOR.
“It is misleading to assume that higher fixed rates simply reflect a desire to increase profitability,” a spokesman said.
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.
This site is intended for UK residents only.
Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it.
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.
