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Archive for June, 2009

Can I Buy without a deposit?

Monday, June 29th, 2009

A big question for many first time buyers at the moment is how can I purchase a house without a deposit in the absence of 100% mortgage products.

One way that is possible is the governments Home Buy Direct shared equity scheme which allows customers to buy a house for 70% or more of its value, the developer or makes a loan for the remainder on an interest free basis which later reverts to a very low rate such as 1.75% after several years. Some of the property developers involved in the scheme are offering purchase without deposit.

The scheme operator is repaid either by staircasing (buying a larger stake in the property towards 100% ownership) or on sale of the property in which case they will take their percentage of the sale value.

Housing associations may also run similar schemes known as shared ownership where you purchase between 25-75% of a property typically and pay a nominal rent on the remainder however these may require a deposit. Broadly both schemes are quite similar.

To find out more search for Home buy Direct on Google etc or for housing associations in your area.

However one way that usually wouldn’t work is if the vendor simply strikes the deposit value off the sale price. Known as a vendors deposit this is now very unlikely to be accepted and pretty much all lenders will take the lesser figure for the valuation leaving you back at square one.

Tags: 100% Mortgages, Buying without Deposit, First Time Buyers
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Getting the right advice

Friday, June 19th, 2009

As a mortgage advisor you often have to try and combat the expert opinion of “the bloke down the pub” and even apparently knowledgeable sources.

Whilst looking for a table of current standard variable rates recently I came across this quote on fool.co.uk;

“First of all, let’s look at Standard Variable Rate (SVR). This is the standard rate of interest that lenders use and like it says, it is variable. This is because it is linked to the Bank of England base rate – so whenever that goes up, so will your mortgage rate and thus so will your mortgage payments.

However, SVR Mortgages aren’t just linked to the base rate, they’re usually set at around 1-2% higher. This makes this type of mortgage very expensive.”

Any mortgage broker worth his salt would cringe at the apparent advice that SVR’s are linked to the bank base rate and will move in line with them. Any borrower whose SVR is still standing above 3% is probably more than aware that this is not the case.

Actually the lenders SVR is a rate that could move in relation to many things including the LIBOR rate, bank base rate and just as importantly the need to attract savers in order to lend money in the first place which is one of the key reasons why the full extent of the cuts in bank base rate has not been passed on by many banks as well as their obvious need to re-capitalise.

What’s the point you ask? When you’re looking to find out what to do with your mortgage speak to a qualified and authorised mortgage broker whose advice is properly scrutinised for accuracy

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Time to fix your mortgage?

Thursday, June 18th, 2009

A lot of people have been asking me recently whether it’s the right time to fix their mortgage payment in light of the fact that rates have started to go up.

And it’s a very interesting question without a very straightforward answer, but here’s the main considerations to think about.

Firstly if you are on or about to go onto your banks standard variable rate, is it below the current fixed rates? Many banks haven’t passed on the full rate cut and there are SVR’s out there far higher than current fixes if you have a decent amount of equity in your property. There are fixed rates available around the 3% mark if you have 25-30% equity.

So if your current rate is above 3% then it’s well worth considering if you have the equity there however if you don’t have a lot of equity or if you have any significant adverse credit the picture changes considerably and it may be better waiting till rates are about to jump significantly, it largely depends on how much more a month you will have to pay in order to fix now.

If you have a very low standard variable rate then the really big question is when will bank base rate go up and by how much? And while Mervin King announced that it definitely wouldn’t go up this year, it’s well worth looking at inflation. You may have noticed petrol starting to go up again and crude oil prices have bounced back to $70 a barrel. This could have a big effect on the Retail Prices Index & Consumer Prices Index and very importantly swap rates, and if you look at prices of other commodities which eventually filter down to consumer prices such as prices for metals like steel and aluminium many are enjoying a boost at the moment as well.

Many lenders have just increased their fixed rates due to increases in swap rates. Unfortunately without a crystal ball it’s hard to know whether swap rates will continue to rise or if they may even fall again before the bank base rate changes. It is likely though that the swap rate increases are due to inflation concern and the anticipated rise in base rate so may continue to rise moving forward. Historically speaking a 3-4% interest rate on a mortgage is still low so this all points to now being a good time to fix for 2-3 years as long as your circumstances suit.

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If MP’s are claiming for mortgage interest don’t the public own the property?

Friday, June 12th, 2009

I can’t help but get embroiled in the MP’s expenses debate seeing as it’s the only subject the BBC news feed on my website seems to be covering.

I have just this chestnut to offer;

If MP’s are claiming for their second homes but they are actually paying a mortgage with that bill then surely WE the taxpayer own the property?

I was just wondering because I am pretty sure it stipulates in their expenses rules that they are not allowed to gain financially from any claims they make. And I think buying a house for them might constitute a financial gain!

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