In pure mortgage terms one set of products appear to be particularly risky in the current climate – any product which tracks a variable rate as opposed to the Bank of England base rate. These include discounted rates, variable rates and Libor linked or Libor rate deals.

All of these products could be subject to large rises in this potential scenario even if the monetary policy committee of the Bank of England decides to keep interest rates low. As we saw when the BOE base rate was reduced heavily in 2008 many lenders did not pass these cuts into their variable rates for some time as doing so would have seriously jeopardised their ability to remain afloat.

Similarly in the scenario of the collapse of the Euro and or the default of a nation such as Greece, Spain or Italy this would undoubtedly cause a similar crisis in the banks leading to a drying up of money markets and an upward pressure on banks variable rates.

Most discount rate mortgages are offered by smaller building societies who in general have a much lower risk exposure and would be better insulated against having to raise their variables rates significantly if this happened and this was mirrored by the rate reductions in 2008. However they are not immune to this risk, rates which are more concerning though are Libor linked deals as these are effectively priced against the going rate of lending between UK banks and as such could rise a lot if we saw more market turmoil.

Even so tracker deals could still be a risk, who knows how the different repercussions of this kind of event could ultimately play out? So when looking at current products comparing the difference between fixed and variable rates in general is well worth doing and I would take a pragmatic approach where the difference is minimal as it seems likely that the last string of bailouts may yet prove to be the tip of the iceberg.

Fixed rate mortgages have been dropping steadily for several months with the expectation that interest rates in the UK are now likely to remain low in the long term. However the downgrading of several major banking groups in the UK by the rating agency Moody’s last week is likely to put pressure on the big UK mortgage lenders to increase the cost of these deals.

It could be a flash in the pan though, rates were beginning to rise early this year when the economic outlook was less gloomy but the effects of the Tsunami in Japan and the subsequent concerns over the Eurozone were enough to revert the trend.

What is certain though is that there are fixed rate mortgages available which are several percent lower than the average mortgage interest rate paid by borrowers over the last 25 years so if you are concerned by the possibility of higher rates and don’t have too much to lose by switching to a fixed rate deal there have definitely been far worse times to take a fixed rate.

The most important of these new calculators is the maximum loan calculator which actually models some of the more complex systems for affordability lenders are using to assess customers borrowing potential.

Lenders are increasingly stepping away from using pure income multiples and the large high street banks and building societies now take into account many factors including credit scoring, number of financial dependents and overall debt to income ratio to decide on an appropriate borrowing figure.

The calculator is as far as we are aware the only one currently available which actually illustrates how different types of lenders calculations vary and takes into account dependents, existing credit commitments and credit scoring.

There are several more new tools in development which will soon be added so keep an eye out for more to come.

In my opinion the question of whether to fix your interest rate comes in two parts. Firstly your attitude to risk should be taken into account and the severity of the risk assessed too. If you have ample income to afford higher interest rates then it comes down to your preference as to whether to gamble on variable type products, but if you simply couldn’t afford for your mortgage payments to go above current figures then not only should you be considering a fixed rate but also trying to reduce your borrowing levels asap.

The second part of the answer comes down to the difference between fixed rates and variable products, if the difference between a suitable variable product and a fixed is relatively low then even if you are a little risk averse it may be worth opting for a fixed rate. However when the difference is greater it becomes harder to say.

Let’s compare for example a 5 year deal currently on offer with one lender of 6.49% with a 25% deposit, compared to their 2 year fixed and 18month tracker product this is 3-4% higher and this means the chances of it being good value for money long term are much lower as it would require average interest rates over the next five years to be over 5% or so which is a big increase from current rates, hence I would only really recommend this scenario to someone who was really on the borderline of what they can afford and needed absolute long term security.

Many lenders are touting products with an option to switch to a fixed deal at a later date without early repayment charges, but for those who would be at serious risk of being unable to afford their mortgage if rates went up this is probably a poor option, as the reality is that fixed deals available at the time are likely to be higher than now as well.

It remains quite likely that while interest rates must increase at some point, that overall market competition will do too and to some extent increases in bank base rate are likely to be met with at least some reduction in lenders margins. Current two year fixed deals come with an average margin of about 3% over the bank base rate which would have been unthinkable three years ago, so at some point slowly but surely these differences must be eroded by competition as the market improves too.

In general it is properties from the post war era of a pre-fabricated construction type which can be difficult however even establishing which type of construction has been used can be a challenge. Most properties built after 1984 are likely to be ok as the introduction of Building Regulations established a suitable guideline for ensuring properties were not defective.

Some concrete construction types particularly those which contain structural iron or steel elements built between the early 1900’s and 1970’s have been found to suffer from concrete corrosion and either require significant work to prevent failure of the concrete or are indeed not suitable to mortgage at all, these are classed as defective types. In these construction types contaminants in the concrete react with the Iron in the steel rotting the concrete and steel beams from the inside out.

There are some very common concrete construction types such as Taylor Wimpey No Fines which should not be a problem though too so if you are looking at buying a property which is a concrete construction type you should inform your mortgage advisor at the outset and they should be able to check with local surveyors to see what construction method has been used and who if anyone might be able to lend on them.

You will be classed as Self Employed if you are a sole trader, in a partnership or if you own more than a set percentage of an Ltd company (typically 25%). PAYE employees who also own a significant share of a different company may be classed as having income from employment and self employment.

If you are classified as self employed the overwhelming majority of mortgage lenders will require a minimum of two years full accounts before you can be considered for a mortgage, there are certain exceptions for example where an applicant buys a share of an Ltd company with existing trading history. This means for many people that if you are considering entering into any of these types of employment then securing a new mortgage deal prior to making the switch to self employment could be a good idea.

When classed as self employed the lender will base their affordability assessment on your net pre tax profit, not your turnover. This is essentially your money taken in minus all allowable deductions and so will therefore usually be the profit figure from your tax returns.

If you are the owner or major shareholder of an Ltd Company you may well pay yourself PAYE income and dividends which is tax efficient and the two added together would be considered your profit. It is important to remember that leaving profit within the business as capital rather than drawing down these funds as dividend income will limit the maximum borrowing potential available to you. It may be worthwhile taking a “tax hit” in the accounting year prior to arranging a mortgage if the previous year’s drawings are low as many lenders will refuse to look deeper into accounts and base assessment on actual profits rather than just your personal PAYE and dividend takings.

Some lenders will base their lending figures on the last years accounts only however if your accounts figures are decreasing or have gone up and down most will take an average over two to three years.

Proof of income for the self employed will normally be either your SA302 or self assessment tax computation, or a copy of your accounts often for the last two to three years. Some lenders will request accounts certificates in these are not available. The sole traders or those submitting their own tax returns it usually pays to keep your SA302’s handy for coming mortgage applications although you can request reprints from HMRC.

Answer: Lenders always have to be aware of risks that may affect the value of a property and saleability should the loan go into default. A flat above a shop or commercial premises has several risks which a lender will consider when deciding whether to lend.

These will include the nature of the business which the flat is above; if it is something which would cause little disturbance to the owners of the flat such as a florists or estate agents it is less of a risk. However if it were a fish and chip shop for example where late opening hours and food smells may affect the ability of the lender to re-sell the property then it is likely that it may be difficult to arrange a mortgage.

Consideration will also be given to the area in which the flat is located. A flat over commercial premises in an area like Chelsea or Knightsbridge would still command a significant value and appetite for lending. However the same property in an unfashionable part of a city like Manchester or Liverpool may be much more difficult to arrange a mortgage on.

Another important factor would be the access to the property, if it has a connected access to the commercial premises then insurance would be very difficult to arrange separately and this would also restrict lending.

You should be aware as a potential purchaser of such a property of these same risks as properties which are difficult to mortgage may in turn be difficult to sell. For further information and advice on flats over commercial property call one of our mortgage advisors on 08454594490 for independent mortgage advice.

You are paying for some form of valuation to satisfy the lender that the property being mortgaged is suitable security for the loan. The surveyor owes no duty of care to you as the buyer despite the fact that you pay for it.

Many borrowers believe that this basic valuation is suitable evidence that the property is in a good state of repair, and many have found out in court to their dismay that this is not the case.
Some basic valuations will not even involve entering the property it may just be a “drive by viewing” or even performed on an AVM or “Auto Valuation Model” which is a computerised average.

Many lenders will offer either a homebuyers report or a full survey as a form of extra or upgrade to the basic valuation. These survey types do offer you some legal protection and do entitle you to a duty of care from the surveyor in question.

A homebuyers report should identify major problems and structural defects, where as a full survey should be very thorough and identify any serious issues including electrical and dry rot problems etc.
If you buying a property and you want to know that the property is structurally sound then don’t rely on the basic valuation to protect to you because unfortunately it will not.

To a certain extent all of these accusations carry some merit (most particularly the one regarding the sub-prime mortgage sector) but there is another factor that comes into play regarding those mortgages which is perhaps more fundamental, and likely to cause more long-lasting damage.

Over the last decade and a half the value of the average home has sky-rocketed. Some houses increased by as much as 100% in value over a decade. The rise in prices was largely sustained by a ready supply of credit, this increased demand massively, and as there is relatively fixed supply when it comes to housing, the only place that the price was going to go was up.

This resulted in large numbers of people borrowing on houses that were far beyond their means, it seemed that everyone could get a large enough mortgage to pay for a house regardless of what their particular financial circumstances were like.

For those people who have stretched their income now is the perfect time to reduce your levels of borrowing and save money in the long term on your mortgage repayments. The new government and the recent emergency budget indicate we are likely to see relatively low interest rates for some time to come although bank base cannot remain this low forever.

It’s therefore a good time to look at remortgaging and trackers in particular can look like good value for money in the short term. There are several ways you can reduce your mortgage in this period of low interest rates. You can remortgage and reduce your mortgage term, although you should pay attention to how this will affect your repayments when rates do rise. Another option is to look at offset mortgage products which allow you to pay no interest on the equivalent amount of savings held in the offset account however offset rates continue to be a little uncompetitive.

For many the best of way of reducing your mortgage may be to use a savings account and then make use of the typical 10% overpayment facility offered by most mortgage lenders. It’s worth checking whether you have the right to make overpayments and to what extent but the majority of products do allow this. Interest rates aren’t particularly attractive at the moment but banks like Santander are offering some excellent deals on savings accounts that are definitely worth a look.

If you’ve survived the bubble bursting, whatever state your finances are in, it’s important that you pay down any debts you do have whilst interest rates are low, and save what you can in order to give yourself a bit of a cushion should the situation deteriorate further, or if interest rates rise and your mortgage costs a little more in the future.

In terms of the actual number of repossessions that figure fell from 10,600 homes in the final three months of 2009 to 9,800 in the first three months of 2010. Most encouragingly that number was 26% lower than the same period in 2009 when an enormous 13,200 people lost their homes.

The CML said that the biggest factor in the drop of repossessions was the drop in the interest rate. In March 2009, partially in response to the rising number of people losing their homes, the Bank of England dropped its base interest rate to 0.5% and has kept it there ever since. This meant that many people who were looking at the precipice, even those who found themselves unemployed, were able to claw back some of the arrears on their mortgages.

On the back of these positive figures that CML has said that it may revise it’s original forecast of 53,000 repossessions for the year should there be no further problems with the economy.

The news did, however, come with a warning from the CML. If interest rates were to increase, it warned, many hundreds of thousands of people could find themselves struggling to meet higher repayment costs and therefore find themselves facing the prospect of repossession. It warned that it was imperative for the BoE to keep the rates low for as long as possible, even in the face of rising inflation.

Mortgage Interest rates have however fallen to record lows for those customers with a sizeable deposit and good credit history. The personal loans market is also improving steadily with Santander’s flagship product for existing customers having a typical of 8.9%, and secured loan rates also falling to levels more in line with previous years.

At the end of the day the news from the CML is positive, though there is the warning that things could deteriorate at any moment and we should not forget that even though the numbers are dropping, nearly 10,000 people lost their homes in the first three months of this year, the economic crisis, whatever the figures may say, is very much still with us.