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RICS warns those thinking about taking advantage of buy to let mortgage rates

[ Posted December 30th, 2011 ]

Although most people are expecting house prices to drop in 2012, buy to let investors are anxious to see the year start because for them this is the prime time to jump in and make a profit out of the depressed housing market. However, the Royal Institution of Chartered Surveyors has put out a warning to those thinking about taking advantage of buy to let mortgage rates and low house prices that they need to be careful when considering purchasing properties that are in older in age.

High inflation, low mortgage rates, increasing rents, and low high prices are all reasons that many landlords are considering acquiring more properties. In fact, the Council of Mortgage Lenders put out a report that listed buy to let loans on the rise with almost a 16% shown over the third quarter of 2011, making up about 12% of all new home purchases.

With this in mind, it is no surprise that more landlords are thinking about taking advantage of the conditions to get more rental income out of their businesses and continue to rake in profits as the society leans more towards a rental society. However, as many people are not selling and there is a shortage of houses available with fewer sellers willing to sell at the low prices there has been a lot of competition among investors competing for the lowest buy to let mortgage rates and for property.

As a result, many are looking at properties that need work instead of at properties that are already ready to be rented out. The RICS  is warning that these properties may need a lot more than just a new bathroom or a little redecoration because old homes often come with surprises of their own. Some of the typical problems that come with purchasing an older home include blocked drains, dry rot, fractured support beams, subsidence, and rising damp problems.

In fact, the Building Cost Information Service estimates that some private landlords could end up investing tens of thousands of pounds extra to fix up an older property, making their great deal not so great in the end.  Therefore, RICS is telling potential landlords to take a close look at the properties and make sure they have a thorough investigation performed before finalising their lending deal to avoid problems down the road.

Eurozone crisis hits commercial property market

[ Posted December 30th, 2011 ]

Over the last few months the shape of the housing market has changed drastically, as it has shifted from looking as if it would stabilise to a future that matches the current state of economic uncertainty. In fact, just a few months ago, consumers were looking at the best mortgage rates in the last few decades and mortgage lending was at an all time high.

Now, however, with the eurozone crisis impacting the banks lending abilities and increasing the interbank Libor, rate the housing market looks poised to take another dive back down. However, this time as the housing market dives, the mortgage rates are not going to be so great as banks are finding themselves forced to increase their rates in order to make up for the higher costs of wholesale lending between each other.

Many major banks have already increased their standard variable rates while other major lenders have taken off their best mortgage deals and replaced them with much higher rates and put many associated mortgage fees back in place that they were previously waiving in order to cover their expenses.  In addition, most banks are expected to tighten their mortgage lending criteria again.

This time around not only the average home buyer is likely to be affected by the increase in the mortgage rate, as many worry that the commercial mortgage market is also going to take the brunt of the recent economic troubles. With many construction projects stalled during the recession due to a lack of funds experts fear that the rising interest rates could hurt those who hold commercial property that they have not yet been able to develop.

For these commercial owners sitting on vacant property that is now even more expensive to afford, this may simply be the straw that breaks their back. In addition, as European banks are choosing to sell their assets outside of the region, many international developers are taking a step away from investing in commercial property within the UK, which will also hurt both development and the economy in major metropolitan areas such as London and Manchester.

Overall, the Eurozone crisis is expected to continue to wreak havoc on the state of the housing market in England, until it is resolved and with no clear ending or resolution in sight, it is likely that the housing market and the commercial property market is going to become much more unstable again.

Foreclosures expected to increase in 2012 but fall over 2013

[ Posted December 21st, 2011 ]

The regional forecast of HML is that repossessions are going to increase by about 7% over the course of 2012, with those who work in the public sector and those that are on SVR’s most likely to be affected by the increase in mortgage rates. The HML looks regularly at 800,000 mortgage accounts making their figures reasonable, but still terrifying for those who are concerned about their ability to afford their monthly payments over the course of the next few months or  over the next year.

The forecast continues to suggest that most regions in the UK will see small increases in their mortgage rates and thus in the amount of foreclosures that occur in these areas, but Northern Ireland will likely be hit the worst with a 1% increase in foreclosures. On the other hand, the South West region of England will most likely be the least affected with only about .25% of borrowers expected to be affected by the increase in foreclosures and repossessions.

This is due largely to where house prices are falling the most as this affects the amount of equity remaining in a mortgage and leverage that can be used to secure better loan terms. Director of business intelligence, Damian Riley, stated that the increase in repossessions over the course of 2012 will be the result of how many homeowners are already in arrears carried over from 2011.

He added that the CML figures show that there are over 27,000 mortgage loans that are already in arrears, with about 10% of the balance outstanding. These homeowners were not able to take advantage of the best mortgage rates due to their situation over the past year, and now will have no other choice but to face foreclosure.

Riley added that the base rate will most likely stay low throughout 2012, but the double dip recession that looks like it is on its way will most likely impact many household budgets, adding more pressure to those who are already badly affected.  He continued to say that most lenders will only offer forbearance in certain circumstances and that soon will be forced to take a much tougher approach to homeowners that fall behind, forcing the rate of repossessions to increase at a very fast rate over the next year.

Lenders looking for amateur buy to let mortgages

[ Posted December 21st, 2011 ]

Mortgage brokers concerned about repossessions increasing

[ Posted December 16th, 2011 ]

As the average mortgage rates continue to increase over the course of December many brokers now fear that repossessions and foreclosures will also start to increase as homeowners find that their mortgages are no longer affordable.

Just a few months ago many people thought that the standard variable mortgages were the best on the market, given the low interest rates that were attached to them, but now due to the Eurozone crisis many banks are increasing their rates and adding on more fees to cover the costs of higher lending, thus hurting those financially who did not get onto a fixed mortgage product.

Many people passed up fixed mortgages in an effort to take advantage of the low rates, but according to the FSA this has come back around to hurt many as a new survey from the Financial Services Authority reveals that foreclosures have increased by about 6% over the year up to the end of September, when compared to figures from last year.

As the Eurozone crisis continues most expect that the rates will increase even higher, causing many more to face foreclosure as they can no longer afford their monthly payments. This is disheartening news as in November the CML (Council of Mortgage Lenders) stated that they might be able to lower their foreclosures predictions that were originally set at 40,000 for the year down to a much smaller 27,500.

However, these statistics only take into account mortgages that are regulated whereas the FSA data includes both unregulated and regulated mortgages; which causes the number of foreclosures to increase quite a bit. Especially at risk are those who have tracker mortgage rates as they are likely to see their monthly payments jump the most over the next few months since the rates are set by the banks and not set on the base rate.

Director of ‘Your Mortgage Decisions’, Dominik Lipnicki, stated that if the economy starts to fall even more those who live in areas where house prices are down, and employees of the public sector, will be at the highest risk of foreclosure and repossessions. He added that also at a high risk are any people that cannot get off their SVRs as many lenders continue to hike up their rates and will likely continue to increase prices over the next few months.

Eurozone crisis causes mortgage rates to jump

[ Posted December 14th, 2011 ]

The Eurozone summit is something that the entire UK will be watching, given the fact that if something is not done the Eurozone crisis will continue and increase the average mortgage rates. The Bank of England may be keeping the base rate down low at .5% for the next year or so, but home owners should not start feeling too secure yet because lenders can play with rates in other ways that will still impact the amount that they will end up paying each month.

Over the last few weeks mortgage rates have been slowly increasing and it is expected that if the eurozone crisis gets any worse then the rates will start to increase at an even larger rate, making it harder for home owners to get their hands on a rate that they can actually afford.

In fact, just last week both ING and Nationwide chose to increase the rates that they attach to many of their most popular deals and near the end of the week the Chelsea Building Society did the same thing, increasing its tracker rate to1.69% above the base rate scaring many that thought they would be safe with a SVR over the next few years.

One of the top reasons that the best mortgage rates are now disappearing from the offers by the top lending agents is the fact that wholesale rates are continuing to increase as there are many fears that the eurozone is about to collapse, taking down the interbank trading system with it.

The wholesale rates are what actually determine most fixed and tracker mortgages as it is deemed more important than the bank rate. Therefore, even if the Bank of England does not alter its base rate mortgages will still continue to increase.

The reason for this is because most major lenders depend on the wholesale money markets in order to continue to hand out loans, but over the last few months the wholesale money market has tightened its lending criteria out of concern for the Euro crisis.

This has forced banks to once again tighten their conditions to offer mortgages; which is making the cost of borrowing much higher than it was previously.  In fact, the three month Libor rate is now up by about .3% in just a few months, and is expected to continue to increase.

October mortgage lending drops

[ Posted December 10th, 2011 ]

Despite the fact that the average mortgage rate and mortgage payments were the lowest they have been in eight years during the month of October, lending fell by about eight percent during the month.  The CML (Council of Mortgage Lenders) stated that during the month of October there were about 44,500 home mortgage loans given out, which is a decrease of about 5,000 from the previous month and 2,4000 than last year during the same time period.

Also down was the amount of mortgages offered to first time home buyers which dropped by about ten percent compared to the rate seen in September. The news is surprising since the mortgage rates for October are now considered rock bottom with the average monthly payment for the period estimated to be about 12.3% of the average lender’s income.

This is the lowest monthly payment that has been recorded since January of 2004.  The improvement in mortgage rates would have been expected to make a home mortgage more affordable for first time buyers, but they simply were not out shopping for new homes during October, most likely due to a variety of reasons including the simple fact that they may have feared rejection and stopped trying to get in on the buying market.

Despite the low rates and the best mortgage rates seen yet this year, the CML also stated that deposit requirements for the first time buyers did not change remaining at about 20% for most potential new home owners which may be the other reason why home mortgages did not increase over the period.

With the economy unstable and redundancies commonplace, many first time home buyers that normally would have purchased their first home by now are reluctant to invest in a new home mortgage for fear they will struggle with the sums down the line.

Others simply are unable to meet the high deposit requirements even though the mortgage deals may be the best they have ever been. The amount of mortgage lending is expected to drop even farther once the November figures are released, given the fact that mortgage rates are starting to increase again due to the Euro debt crisis and other factors that have reduced the amount of lending that banks have available to offer.

The unstable economy has even prompted many to fear a double dip recession which would shock the housing market that had just started to recover.

Leniency by banks reduces the appearance of mortgage arrears

[ Posted December 3rd, 2011 ]

One large surprise that has come out of the banking crisis has been the acceptance of major lenders to offer a bit of forbearance for customers that may have been hit by their own financial crisis by offering slightly altered repayment terms to loans in order to get through the difficult times without facing foreclosure.  In fact, the amount of altered loans for those with fixed mortgages and other types of mortgages is one of the reasons that mortgage arrears numbers may actually be down for the first time in years.

The Financial Services Authority claims that this leniency has helped to reduce the amount of homeowners that are thought to be in distress since the lowered or adjusted monthly mortgage rate has helped allow them to actually keep up with their mortgage payments instead of falling behind and losing their homes.  An analysis conducted as part of the Financial Stability Report as issued by the Bank of England reveals that the amount of mortgages arrears across the UK would be as high as the levels that were seen in the middle of the nineties if lenders had not decided to work with customers in trouble by rescheduling or reducing their monthly payments.

In fact, the FSA reported that around 5-8% of the fixed mortgages in the country would have been subject to some type of forbearance action with about 5% of customers potentially facing foreclosure due to the fact they would be behind by more than six months of payments.  The rate right now for arrears is estimated at about 1.2% which is surprisingly low despite the economic recession and the amount of unemployment that is spread throughout the UK.  However, the FSA states that this rate would be set at 1.7% of banks were not so lenient with lenders.

The FSA is concerned that some banks are not hiding their losses by not taking into account the provisions they have made that have caused some losses as a result of deciding to restructure loan repayments.  However, the FSA did admit that it has not yet decided if the banks are doing enough to help struggling home owners stating that it is important that major lenders continue to work with consumers faced with difficult situations instead of just letting them default and then lose their homes.

Landlords can save with special flat fee buy to let mortgages

[ Posted December 2nd, 2011 ]

Landlords and those looking to purchase more property before the mortgage rates jump up even more than they have already done so may want to take a look at a new range of buy to let mortgage rates that come with associated flat fees.  The new range of products come after dozens of years of landlords and property investors being forced to purchase products that have high percentage based fees attached to them that sometimes can cost as much as 3.5% of the loan.

Over the past year the competition within the buy to let mortgage rates market has been intense with more lenders coming back into the market as it slowly recovers or choosing to increase the LTV (loan to value) ratio that they have made available to potential lenders.  Due to this fact, there has been a large amount of growth in the type of products that landlords can choose from since the competition for property lenders has increased.  This is subsequently also led to a range of fee options for potential investors to mull over and choose from before picking a lender.

In fact, there are now 24 lenders that offer a grand total of 450 different buy to let deals that each comes with their own mortgage rates and their own fee options.  This is almost a 75% increase when compared to the 18 lenders that were able to offer 250 products during the course of 2010 according to a statistic from Mortgages for Business a brokering service.  Over the course of 2010 most of these products also were offered with a percentage based fee added on to any mortgage according to figures from specialist broker Landlord Centre.  However, the same broker also reports that the number of fee based products have decreased.

The new figures show that 50% of the buy to let deals on the market come with the other 42% actually come with a flat fee which most investors find more appealing.  A small 8% are very appealing to those with excellent credit as they come without any arrangement fees.  Chief executive for Landlord Center Andy Young stated that the lending market is now displaying a wide array of options when it comes to arrangement fees and buy to let mortgages with some rates themselves set as low as 3.29%.

 
 
 
 
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