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Archive for October, 2009

Mortgage Broker Q & A – Removing a party from a mortgage

Friday, October 30th, 2009

Question – I have a joint mortgage currently and we want to change it to being solely in my name or my partners what do we need to do?

Firstly you need to establish whether your existing mortgage is still within any tie in period and what penalty there is if so. Then you need to check with the lender whether they are happy for the mortgage to be in only one of your names, which will mainly come down to their assessment of whether it is affordable to you as a single applicant.

They will re-assess the affordability of the case as if it was a new mortgage. If they are happy that you can afford it alone then a new mortgage contract will be required and there will be costs involved with the legal process of making the transfer of equity. However if they are not happy you will not be able to make the change without finding a lender that does believe you can afford the mortgage in your sole name. As it’s a contract the only way to make the change if your existing lender is not satisfied is to change lender and this is where it becomes important to consider any early repayment charges and whether it is best to wait until these penalties cease.

As well as affordability the lender will usually re-assess you as a credit risk and possibly the property value. If however you are considering this because of an impending bankruptcy this will not actually prevent the property from being seized which is a common myth.

As usual if your need further information about this call 0845 4594490 to a speak to a mortgage advisor about your own circumstances.

Tags: Mortgage Advice, Mortgage Contract, Removing party from mortgage
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Mortgage Broker Q & A – Letting a mortgaged property

Thursday, October 29th, 2009

Question – I am intending to let my property which has a residential mortgage on it, what should I do and is this ok?

Firstly it is a typical condition of almost all residential mortgage contracts that the property should not be let without the consent of the lender. So you should always speak to your lender first and see what they say.

Most lenders will be relatively helpful with this as there are numerous reasons people choose to let what was once their home and it’s a very common occurrence. They may want to change the mortgage contract to a buy to let type or in some circumstances change nothing until the current mortgage is out of its initial term.

A lender is unlikely to give you a positive response though if you only entered into your mortgage contract very recently. If they did then very few people would bother paying the higher interest on a buy to let mortgage and would simply take a residential mortgage and switch it a week later.

You will also need to look at your buildings and contents insurance as it will very likely invalidate this policy if you are not the main occupant. Tenants are more likely to ruin a property than the owner so your home insurance may be a little more expensive, and last but not least you need to make sure you comply with all the regulations around being a landlord as regards gas inspections and using a secure tenant’s deposit scheme to avoid any litigation in the future.

As usual if your need further information about this call 0845 4594490 to a speak to a mortgage advisor about your own circumstances.

Tags: Buy to Let, Let to Buy, Letting property
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Fool’s Gold?

Tuesday, October 27th, 2009

In January this year I made some market predictions to my friends, I said I thought Oil would hit $75 a barrel again before the end of the year, that the Euro would fall back against the pound (which it did but not quite as far as I expected I said about 1.3 to the pound which it seems was way too optimistic) and that the value of Gold would plummet like a stone before Christmas.

Gold did drop early in the year from a trading price of about $980 an Oz to about $800 certainly a big fall but not enough. There’s an old saying about investments called Dumb Money, which is when everyone on the street is talking about it then it’s time to get your money out of it.

Everywhere I go now someone is advertising cash for gold, or new gold treasury pieces or the like. Which makes me confident the end is nigh. You just have to consider that Gold is primarily used for decoration, only about 15% is used industrially and both consumer spending and industry are down massively so Gold can only be priced on speculation.

Now canny investors with enough money muscle know that there is so little Gold produced annually that big investments can have a gold finger effect, starving the market to drive prices up and flooding it to drive them down. Such investors can then buy short dated futures or options which will actually make them a profit when prices fall, initially to hedge a position but also in full knowledge that when they drop their holding it’s going to hit the price and make a double profit.

So while stock markets around the world are rising the question has to be starting to build in these investors mind that the time to pull out is sooner rather than later with Gold currently running at $1050 an Oz up almost 50% on two years ago! So I am going to make a Charity pledge – If gold is still above $700 an Oz on the 25th of December I will literally eat a hat for the British Heart Foundation.

Tags: Commodities, Futures, Gold Prices, Options
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Why the rate loading Mr Lender?

Monday, October 26th, 2009

When a mortgage broker arranges a mortgage for a borrower the commission they receive (if they take the commission as opposed to a fee) is not standardised but there is however only a limited difference from lender to lender. Typically the percentage is about 0.3 to 0.35% for a residential mortgage with good credit, 0.40 to 0.45% for buy to let mortgages, and slightly higher for adverse credit applications.

Why then are several banks, one of which I won’t name but is almost entirely government owned (guess who?) is loading rates available via intermediaries by anything up to 1% against an equivalent product available through them direct? If these lenders are proposing that it costs them more to accept intermediary applications this is farcical.

They may argue that the intermediary market would simply direct too much business to them which they don’t have funds to supply. This is plausible but I think it is actually pricing intermediary products out of the market to attract business from consumers direct who can then be goat herded into higher rate products with down valuations and clandestine credit scoring, or even lower rate products with ridiculous fee’s which are more expensive in reality. Without a broker to argue the case and guide on fee’s most people will simply accept being cascaded to a higher rate without asking difficult questions, or being declined an application having paid for valuations and the like.

I want someone to actually put the question to these banks, how is this rate loading fair practice and why is it in place? Because to the educated it seems to be the intention to get mortgage advisors out of the market so that dodgy products can once again be sold in bulk. Just look at the return of long early repayment charges on market leading rates as a sign that lenders are looking for ways to lock customers into potentially crippling mortgage rates.

Tags: Mortgage Brokers, mortgage market, Mortgage Rates
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The end of self cert mortgages?

Monday, October 19th, 2009

I wrote an article some time ago about the FSA’s proposed changes to end self certification and fast track mortgage lending in which I made a big point about how this could leave a lot of people struggling to refinance and cause trouble for the recovery of the housing market.

The FSA last week confirmed that action would be taken, and the press have been making similar observations to my own today about the impact that this could have on our recovery and those borrowers with an existing loan of this type.

But over the weekend I had a realisation and did a u turn on the subject. In reality there are few if any legitimate borrowers who cannot “prove” their income. The point being that “proof” and it’s interpretation is the key point here, because almost all people can show evidence that the income they declare is broadly accurate however they may not be able to prove income in the manner that a normal full status mortgage would require.

For example if you have a business from which you could take far more income than you currently do without running the business into decline that is your prerogative, and if you can show that you can still afford a large mortgage then fine, but you can also evidence that your business has the potential for you to take further income. It may not be satisfactory at your local building society now, but lenders with good product development teams will soon see how to create a new type of product to cater for this market once their appetite comes back.

So if the FSA get this legislation right and don’t dictate or define what proof consists of then there will still be the opportunity for lenders to market products for those with non standard income, priced above full status products as before but simply requiring some evidence to back up that the income declared isn’t total fabrication. This is what’s needed in the market and the FSA just need to be careful not to try and make this legislation so watertight that it chokes the housing market to death.

Tags: Financial Services Authority, FSA, Mortgage Affordability, Proof of Income, Self Cert, Self Certification
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Rates continue to drop at lower loan to values

Thursday, October 15th, 2009

There have actually been so many new rates announced over the last two weeks it hasn’t been possible for me to talk about them all. Suffice to say if you are remortgaging or buying your first or second property rates across the board have dropped by as much as 0.3%. Arrangement fee’s also seem to be reducing slightly as well with several of our broker best buy products now having arrangement fee’s below £600 against an average fee of £999 for most headline rates a few weeks ago.

Swap rates have dropped significantly since the massive drop in BBA LIBOR over the past two months and this has helped to fuel cuts in fixed rates, however there still seems to be a general lack of movement on rates at higher loan to values for borrowers looking to remortgage. Fixed rates at 85% loan to value for example continue to sit around the 5.99% mark with little movement.

It will be interesting to see who makes the first move on this market of higher loan to value remortgage borrowers if indeed there is any drop at all, it seems almost as if the pot is so big that banks are scared to dip their toe in the water in case they get swamped. It certainly can’t be claimed that a remortgage at 85% is a greater lending risk than a purchase at the same loan to value yet you could get a much better rate if you were buying at this ltv.

Mortgage Advisors will be keeping their eyes peeled for changes on these higher LTV products and hopefully the news that interest rates are likely to remain low in the long term will help to drive swap rates down further and one of the big banks into releasing some decent remortgage rates for those with little equity. And if you’re listening a 95% purchase product wouldn’t go amiss either!

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Woolwich respond to criticism with revised rates

Tuesday, October 6th, 2009

The Woolwich have responded to criticism around their stepped tracker rate which with a current headline rate of 1.98% is one of the lowest rates available in the market. I commented on the fact that the product was restricted to mortgages between 200K and 500K severely limiting its market when I announced the new rate here a couple of weeks ago, theses restrictions have now been removed and the rate is available for loans between 5K and 1 Million now from today.

They have not chosen to address however the lengthy tie in for five years with a 2% early repayment charge which could make the product very costly in the long term.

Instead they have released a new lifetime tracker at bank base rate +2.29% with a £999 application fee available up to 70% loan to value or at +2.69% with no fee again to 70% loan to value. The new products have early repayment charges of 1% for 2 Years making them much more favourable but crucially both allow you to switch to a later fix without penalty too.

Both products would have a valuation fee of £295 for a purchase at 70% loan to value with a mortgage of 100K and lender Conveyancing fee of £126 giving an APR of 2.9% and 3.3% respectively.

As usual always read the separate Key Facts Illustration prior to making a decision on a mortgage product and to speak to a mortgage advisor call 0845 4594490.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. We do not usually charge a fee for mortgage advice although you do have the option to pay up to 1.5% of the loan amount. Some buy to let and commercial loans are not regulated by the Financial Services Authority.

Tags: Lifetime Trackers, mortgage advisor, Mortgage Products, Woolwich
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Nationwide house price index shows year on year growth level

Monday, October 5th, 2009

The Nationwide has just released it’s latest house price indices figures today which show for the first time since the beginning of the credit crunch that year on year house price inflation is now static at 0.0% change from September 2008.

This indicates the average house has now recovered losses since this time last year as prices continues to rise month on month. Monthly change is down slightly at 0.9% from 1.4% in August. It leaves the average drop since the 2007 peak at 13.5% which is some way off the 40% drops expected by pundits until quite recently.

The news comes in a week where lenders have continued to announce reductions in interest rates on products up to 75% loan to value with the Nationwide themselves releasing a raft of new rates yesterday, of which there were too many for me to go into detail but more news will be this week.

Tags: House Prices
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Mortgage Broker Q & A. Interest only or repayment mortgage?

Friday, October 2nd, 2009

In Q & A we take a look at some of the questions mortgage advisers deal with on a regular basis.

Question; what are the pitfalls and benefits of an interest only mortgage?

They say life is all about risk, and this question is a prime example.

If you want the certainty that your mortgage will be repaid as long as you keep up your payments then you should definitely take a repayment mortgage.

However if the cost is too high in the short term however you could take an interest only mortgage and move to a repayment mortgage later although you should be aware that interest paid will be dead money and not reduce your debt.

If you take an interest only mortgage in the long term you are gambling that by investing wisely you can outperform mortgage interest rates on your investment return and produce a surplus by the end of the mortgage. However if your investment does not perform as planned then there will be a shortfall which you will have to find elsewhere.

It should be remembered though that your investment will not only need to outperform mortgage interest rates as you will pay interest on the full balance of the mortgage for the full term. Whereas if you took a repayment mortgage the capital part of your payment would gradually reduce the interest element and so like for like you will repay more interest over the term on an interest only basis as well.

Tags: Interest only mortgage, mortgage advisor, Mortgage Products, Repayment Mortgage
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Alliance & Leicester reduce 2 Year Fixed rates

Thursday, October 1st, 2009

A&L have announced further rate reductions yesterday on their 75% loan to value 2 year fixed rates for new purchases. The new product with a £995 fee and fixed rate of 4.53% sits alongside their 4.48% product with a 1% arrangement fee.

The new rate brings them once again into line with rates from the Abbey however the product will be of potential benefit to those who have recently gone self employed or started a business as A&L require only 1 Years accounts minimum against 2 from the Abbey. It also has a free valuation much like Abbeys three year fix at the same rate.

The move continues the trend of lenders moving their products down to a similar baseline but with no one currently undercutting the market significantly unlike what we have seen with variable rates from HSBC and the Woolwich although swap rates have not dropped in the same fashion as 3 month LIBOR which fuelled the reduction in variable rates.

The new rates have an APR of 5.1% and reversion rate currently stands at 4.99%. Early repayment charges are 3% of loan to be paid until 31/12/2011 and lenders Conveyancing fee is typically £189.

Always consult the Key Facts Illustration prior to making a decision on a mortgage product and seek independent advice. To speak to a mortgage advisor call 0845 4594490.

Tags: Alliance & Leicester, Fixed Rate Mortgage, Mortgage Products
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