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Mortgage rate warning is voted down

[ Posted April 26th, 2012 ]

The Government has voted down the Labour mortgage rate warning that would have resulted in amending the Financial Services Bill so that lenders would be forced to educate borrowers before they signed their mortgage papers.

The Labour party wanted a mandate that would require all lenders to be advised clearly on the fact that interest rates could change over the lifetime of the mortgage and how rate increases could change the actual costs and affordability of the mortgage package that they are considering purchasing.  Chris Leslie, the Shadow Treasury financial secretary, led the call for the amendment that would have brought new proposals to the table over the next six months.

Mark Hoban, the Treasury financial secretary, stated that the change to the bill was not needed because the FCA is responsible for checking and requiring that mortgage providers offer an adequate amount of information to borrowers.

According to Hoban, placing a separate amendment to spell out that lenders needed to inform lenders about increasing mortgage rates was not necessary.  He also added that many lenders already offer mortgage lenders information about this anyhow since they want to avoid foreclosures down the road.

Hoban went on to explain that those who seek out fixed mortgages already receive information on changing interest rates and there is currently a consultation being conducted on the mortgage market.  One of the provisions that are part of the consultation includes requiring lenders to think about the changing interest rates in terms of each lender before offering them a home.

Therefore, the implication is that if lenders are lending funds responsibly and weighing in the change in interest rates then a lender should already be deemed able to afford the change down the road making it a non-issue.

Leslie on the other hand defended the proposal before it went up to vote stating that it was needed to help protect consumers down the road when their mortgages suddenly become more expensive because of the jump in interest rates.

He explained that mortgage rates are not going to stay low forever and people need to know that in the future mortgage rates are going to increase and therefore need to be ready and able to accept the change. He added that he was worried consumers will believe that mortgage rates are really this low when in fact the current mortgage market is far from normal.

Euro Deal does not affect mortgage rates

[ Posted October 29th, 2011 ]

Despite the facts that this week’s Euro deal caused a great deal of unrest around the world, mortgage rates are still low which was most likely helped by the stir of optimism that was stirred yesterday by the agreement of the Franco-Germany Eurozone deal.  In fact, the stock market soared to new heights at the news and the stocks helped to increase the MBS prices which helped to keep the mortgage market sitting at the same spot that it has been for weeks which is great news for those considering a remortgage or purchasing a home.

The news that the Eurozone may be stabilizing may also help those seeking out a commercial mortgage as the stock market increase helps renew faith in the business world again.  In fact, these rates have not changed either, making it a great time to invest in new property as the stock market and the mortgage market remains stable and looking good for the first time in the past few years.  Since 2007 there has been a black crowd surrounding the economy, but within the European nations there is now a ray of light that makes investment and lending prospects look a bit better.

The average 30 year fixed mortgages are set at about 3.875% as the week closes, the 15 year fixed rates are set at 3.25% and the average five year fixed rates are set as low as 2% for some banks.  These low rates are available for borrowers that have good credit and are able to pay about one percent of the origination fee.  Steady income is also a requirement and assets or savings accounts for collateral is also important for those that want to receive funds from a bank, but even those who cannot can still get rates that are slightly higher depending on which factors need improvement.

Given the fact that the mortgage rates are still low those considering tracker mortgages will also find that there are plenty of great loan options available on the market with sufficient credit and with the ability to pay a LTV of at least 75% although 85% is most likely.  It is hard to tell how long the mortgage rates will remain low with the EU still reasonably unstable and the lending crisis not quite over so experts are advising that those considering taking out a mortgage act now.

Approvals for mortgages peak in August

[ Posted October 5th, 2011 ]

Last August mortgage approvals increased by a whopping 6% which is the highest that the approval rates have reached in the last twenty months since the economy tanked. Of course, the drastically low and best mortgage rates helped lure many homeowners into the housing market with the thrill of remortgaging at a lower rate which in turn would help boost the approval ratings since it can be assumed that most homeowners have the equity needed in order to get approved.  There were also some first time home buyers that made up the results although the figures of these were lower.

Over the month there was a little over 52,400 mortgages approved as borrowers rushed out to the banks in an effort to take advantage of the many great fixed mortgages on offer.  Remortgages also jumped up by almost 10% over the previous month as everyone rushed to get in on the great rates.  Most analysts are predicting that rates are likely as low as they now will go as they have hit bottom and with the looming economic state and the interest rate it is unlikely that banks are going to go any farther.

Almost all of the major lenders including the Post Office and Nationwide have dropped their rates with lenders and building societies all over the UK following suit in a race to see who will truly have the lowest rate on the market.  A large reason why the typical fixed mortgages have dropped so low is because of a sharp decrease in the swap rates.  Most of these the great deals on the market are based on the swap rates which are supposed to stay steady until 2013 at which point the Bank of England may change its policy.

Head of lending at the brokerage company Mortgage Advice Bureau, Brian Murphy, stated that the figures show that there are now some very competitive mortgage rates out there for those in the market for a new home or a lower monthly mortgage rate.  Those with tracker mortgages may also want to consider if they are getting the best deal based on their length of contract and consider if remortgaging their home and switching to one of the low fixed rate packages may be the best long term protection against future interest rates.

Mortgage approval to be peaking in August is a bit of a surprise as most people are either away or looking for cheap holiday deals. This news has surprised a few people here in the UK. This time of the year is when the schools are closed and is considered to be the holiday season.

Which? survey proves that homeowners are worrying about mortgage rates

[ Posted August 18th, 2011 ]

According to a new survey published this week from the watchdog group Which?, about seven out of every ten people in the UK are worried that their mortgage rates will increase, leaving them in a position that may lead to foreclosure.  Analysts have long predicted that if the base rate increases too sharply many homeowners on a tight monthly budget will not be able to afford their variable mortgage monthly payments, and will fall into default and possibly foreclosure before the end of next year, causing the property market to take another sharp fall.

The Which? survey asked almost 1,300 UK citizens what their concerns were about mortgage packages and property ownership and found that out of those surveyed, about 35% were already struggling to make their monthly payments and have been forced to ask their lenders for aid.  Some were able to get a ‘payment holiday’ from the bank allowing them to get their finances in order while others were helped by the banks to get a new mortgage deal.  Right now, many homeowners are anxiously applying for fixed mortgages in an effort to get out of potentially lethal variable mortgage deals.

Out of those that sought help from their mortgage lenders, about three quarters stated that they did receive some type of aid, but the watchdog group is worried that there is still a large group of lenders that will not reach out enough to help customers that need it.  At the top of their concern is the fact that some lenders will not work with mortgage customers at all, even though it would be more beneficial for the banks and the mortgage holders if the loan did not default.

Which? estimates that about three quarters of those that responded to the survey would be negatively affected if the base rate increases, causing mortgage rates to increase as well. Even the people who rely on interest only mortgage rates to keep their payments down are worried.  According to the consumer group, most of these households would suffer if the average monthly mortgage payment were to increase by just £50 each month.  Executive director for the group, Richard Lloyd, stated that homeowners that are suffering should first turn to their lender for help and, given the fact that it is not in anyone’s interests for a mortgage loan to default, lenders should do their best to help find a solution.

Bank of England expects inflation to rise

[ Posted August 17th, 2011 ]

For those that have not yet considered changing their tracker mortgages to fixed rate mortgages the news that the Bank of England expects to see inflation rise by five percent may not be welcome.  According to the BoE, the inflation rate will cap out by 5% before the end of 2011 which will cause mortgage rates to increase sharply for those that are currently on tracker mortgages.  This will mean an end to the low mortgage payments that many homeowners have been taking advantage of since the housing slump of 2007.

Mervyn King, the Bank of England governor, stated that the inflation hike is the result of a rise in the costs of imports, energy, and also VAT.  Lenders that responded to the news have stated that this will not change the way they make secured credit available over the next quarter as they are still quite restrictive following the economic shutdown and the financial crisis of 2007.  The presence of tight credit has led to a low overall sense of activity within the housing market and it’s likely that with the mortgage rates set to increase the activity will remain restrained.

In fact, according to a report from the Credit Conditions Survey and the Bank of England, if credit stays as restrictive as it has been over the last three years, then combined with the increase in mortgage rates, it is likely that the private housing market will take almost double the amount of time to turn over than it did just ten years ago.  For lending agents that make their money from mortgage lending this may be dire news, although those who invest after doing a compare buy to let mortgages will find the news uplifting as it is likely that the rental market will stay strong.

King also stated in the report that the mood within the housing market has really taken a downturn with much concern about debt and sustainability within the general euro area.  He added that the world economy potential for growth is also looking dismal and as a result growth at home is also looking disappointing.  According to the governor, the leading risks for market growth come from within the area of the euro, and the fact that several banking systems are struggling in member countries does not help to build a sense of stability for any of the regions within the EU.

Base rate Increase Could Cause Mortgage Payments to Increase by £500 or more

[ Posted August 11th, 2011 ]

According to a new report from the National Institute of Economic and Social Research, if the base rate were to increase by just the small amount of 0.5% over the next year then mortgage payers could expect to pay as much as £500 more per year.  This is due to the fact that mortgage rates are set alongside the base interest rate so if it increases so will mortgage rates for those that have variable mortgages which could upset a great deal of household budgets.

While many experts have been advising that people take advantage of the best mortgage rates that have been popping up while the interest rate is low, others are warning that now is not actually the best time to purchase a variable mortgage as the risk is too high.  The safe advice over the last few months has been to sign into a low fixed rate mortgage while rates are down for added security that you can continue to make your monthly mortgage payments, but there are still some advisers that believe it will be another six months or so before the interest rate jumps.

Despite which panel of experts you decide to listen to or the actual time frame that it takes for the base rate to increase, the facts remain that if there is a .5% rise in the base rate taking it up to a total of 1% then the average family with a £150,000 mortgage could expect to pay about £516 more per every year with each monthly payment costing about £75 more.  For those on strict household budgets, this sharp jump could cause foreclosure or bankruptcy to occur which in turn could destroy the housing market once again.

An economist for NIESR, Simon Kirby, stated that given the fact that disposable incomes are virtually gone now any change in the base rate that affects mortgage rates will hurt many household budgets as wages have not grown to match the rate of taxes or inflation meaning people simply do not have the money to keep up with higher mortgages floating around.  In fact, NIESR has already lowered its economic growth prediction down from 1.4% to the lower 1.3% which is much lower than the optimistic 1.7% that the Treasury would like to see occur.

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Buy to let mortgage rates on the rise

[ Posted August 10th, 2011 ]

New research that has been released by the NLA (National Landlords Association) has created fear that if buy to let mortgage rates increase then most private landlords will be affected.  In survey results released just this week a total of 662 NLA members are concerned that if the interest rate jumped by two a small two percent on BLL mortgages then most private landlords would be negatively affected.  The survey was conducted in light of the fact that it the base interest rate is expected to be increased by the Bank of England in the near future.

Out of those included in the survey most felt that if the interest rate goes up then about 90% of all private landlords would be affected with another half stating that the impact on their lives would be devastating as well as the impact on their rental profits.  Another 8% of those in the survey admitted that if the mortgage rates increase by 2% or more than they will have to step back and think about whether they should continue viewing property rentals as an alternative income.

Out of the members of the NLA, 6% also revealed that if buy to let mortgages best buys increase then they will have to at the very least reduce the size of their property portfolios and seriously consider selling off their private rentals altogether as they would no longer be able to turn a profit on their properties.  This news is very disconcerting due to the fact that with property rates so low many people have actually been moving towards the rental market.  Also concerning is the fact that many first time buyers are forced to rent instead of own due to the credit crisis, so a shortage in property rentals would cause renters to pay extremely high premiums.

Out of the landlords that participated in the study about a quarter held at least one mortgage with over half of those surveyed reported that they held at least five BTL mortgages if not more.  Over the last few months many private landlords have taken on new properties as rental demand continues to increase and the mortgage rates have been low, but a sudden interest rate jump could change the ballpark and ruin plenty of investors’ portfolios.

Rise in interest rates may lead to a sharp incline in mortgage rates

[ Posted April 8th, 2011 ]

With many people worried that the Bank of England will soon raise its interest rates many people are worried about what will happen to mortgage rates which are already a bit unsteady in a shaky marketplace that has been rocked time and time again since the recession.  It seems that with every bit of news that may indicate that property is starting to stabilize there is another report about the property market that undermines any small amount of growth such as the recent news about falling house prices and a poor overall uptake in many urban communities.

It is not only those with home mortgages that should be concerned however as a rise in the interest rates may also mean a rise in all types of different mortgages such as a rise in commercial mortgage rates as well which could once again cause development to stall.  During the last few years, development of new office space and businesses all but came to an abrupt stop; which contributed to the high unemployment rate and hurt many independent contractors and those within the construction fields.  Therefore, there is much more potential harm in store outside of within the home housing market if the interest rates hike again.

If interest rates do increase it is a safe bet that the best mortgage rates are going to see dismal compared to what people are used to now and those with variable mortgage contracts will be hurting the most as their monthly payments will drastically increase.  This is one reason why so many people have been taking advantage of the opportunity to remortgage their homes in exchange for fixed mortgages in an attempt to get out of a potential mess before the bottom drops out of the housing market once again.

Although most analysts are predicting that it will be six months until the mortgage rates once again increase, the housing market is heavily entwined with the economy and if the threat of a double dip recession continues to hang in the air than no safe assumption can be made about the next sudden drop in property worth and mortgage value.  For this reason, the expected increase in interest rates may be more deadly to the ordinary home owner than the Government is letting on as it continues to tackle its own debt via budget cuts and public service cuts.

Mortgage lending drops again by another 13%

[ Posted February 26th, 2011 ]

As if the fact that the mortgage rates are already threatening to go up placing many people with tracker mortgages on the possible cliff of disaster, now it looks as if mortgage lending criteria are stiffening again as lending opportunities revealed to dropping by an additional 13% at the close of January.  It was already revealed last week that for the first time in three quarters, house prices took a nose dive during the fourth quarter of 2009, but now the news that lending is down again may be just the bad news that the housing market has to take before it is considered depressed officially again.

According to figures released by the Council of Mortgage Lenders (CML), during January only £9.2 billion was advanced to consumers during the month compared to December when £10.6 was given out.  Even worse, last month’s figures were at the lowest level of mortgage lending that has been seen since last February.  While the weather is partially being blamed for the dip as it kept many people inside on days when they otherwise may have been scouting for a new home or meeting with the bank, it mostly reflects the market instability that already has many people teetering on edge.

It is no secret that the high deposits that many lenders are now asking for that can range anywhere from 10%-40% of the house value is impacting many buyers decisions to purchase a home compounded with the ever looming threat of an increase in the mortgage rate attached to the home.  Add unto to this the fact that many expect the property market to stall within the next six months and the economy to perhaps fall into a double dip recession and there is plenty of reasons why the average lending advances are falling.

Bank of England found that only 41,000 mortgages were approved during last month which was aligned with the figure for the previous month of December as well which was the lowest lending figures that have been seen since March of 2009.  According to the CML, even if the mortgage demand were to start to pick up due to the mortgage rates and the amount that banks will have to pay out to public support schemes in return for their bailouts it is unlikely that there will be a large change in how much was actually received.

January saw 1,600 new mortgage deals

[ Posted February 12th, 2011 ]

According to statistics from Mortgage Brain, consumers are not completely shying away from the fear of rising mortgage rates a there were 1,600 additional mortgages signed over January as compared to the year on year average.  At the moment the online mortgage website estimates there are about 10,000 mortgage deals completed.  The news conflicts economists’ worries and complaints that the banks in the UK have reduced their lending and tightened the criteria they use when making a mortgage lending decision.  Over last year there were a total of about 5,200 new mortgage deals completed.

Despite concern about an increase in the VAT and mortgage interest rates hikes in January there were 820 new mortgages opened bringing the number to date from the start of the year to about 2,000.  However, people are wary about their mortgages choosing fixed mortgages which showed a 17% increase in the first month of the year alone.  Fittingly, variable interest deals have sharply declined standing at only a thousand with only 11 mortgages signed by UK banks over the course of January as home owners are wary about seeing their monthly mortgage payments jump with the predicted interest hike.

This is good news for those in the market for a new home as it seems that UK banks are offering mortgages to qualified candidates despite the negative press surrounding the banking system with many people claiming that banks are not offering lending.  It is also good news for those concerned that mortgage rates will destroy the housing market as it seems that consumers are smartly proceeding with mortgages but instead carefully choosing to secure a fixed mortgage over a variable interest mortgage.  Despite this fact, all potential new homeowners should carefully look over their finances before choosing to secure a mortgage in this delicate market

 
 
 
 
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