And on that note I thought I would begin the year with something completely unrelated to mortgages but connected to todays completion of the new world’s tallest building in Dubai.

You see there’s a lot of talk flying around about how can we ensure that this never happens again, that theres never another recession or credit crunch and that banks are never again allowed to overstretch themselves.

The answer to this question is in fact that you can’t. What goes up will in fact go down sooner or later, and growth is always followed by decline at some point down the road. Gamekeepers have known this longer than most and I first heard it put into terms by a comparison to the populations of foxes and rabits.

Fox and Rabbit populations have been recorded for centuries and it has long been observed that Rabbit populations mushroom until overcrowding causes disease to make them weaker and more vulnerable to predators like the Fox. And so Fox populations have also followed Rabbits peaks and troughs because the number of Fox’s inevitably goes up as Rabbit populations increase, but then when the Rabbits decline a lack of food for the Fox also inherantly leads to Fox populations going down too.

What’s the point of this? In the middle of the last boom I heard a theory that recessions can be predicted as they always appear to happen upon the construction completion of the world’s tallest building.

Now I had forgotten about this altogether until I heard on radio 4 this morning that the new world’s tallest building has just been completed in Dubai. The theory says that as building the world’s tallest building is a mark of prosperity then it is something that a country will only consider when the good times are rolling, and by the time its off the drawing board and into construction its pretty likely those good times are coming to an end.

So if you want to know when to sell everything, and go on an extended world tour keep an eye on those construction projects!

Now as for how to end a recession its pretty simple. Stop putting prices down and put them up instead, it’s just human nature that if prices are going down you wait to buy until their cheaper and if their going up you buy now before they get any higher - And that my friend is why you can gaurantee one thing,

It will, most definitely happen again.

Fin

The rates which include a 2 Year fixed at 3.89% available up to 70% loan to value and at 4.09% up to 75% loan to value have an application fee of just £199 with free valuation and legal work on remortgages or £200 cash back towards legal costs if using your own solicitors. Early repayment charges apply of 3% of loan to be paid until 31/01/2012, and APR for the products is 2.8% On both.

They have also included a 3 year fixed product at a similarly competitive rate.

This is a big departure from the glut of products currently offering headline rates with either £995 or even 2% arrangement fee’s and will surely serve to kickstart the lending industry back into competitive pricing with more than just on paper rate cuts.

The products are also available on new purchases and equally competitive there although the lenders standard valuation and legal fee’s will apply on purchases.

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.

Now that’s a good thing where the calculation makes sense, but on mortgage products in its current guise it makes no sense at all.

A simple look at the best buy tables on our website will show you that a product far cheaper during its initial interest rate term may have a much higher APR than a product with a considerably higher rate of interest. The issue is that APR is calculated over the lifetime of the loan and so will also consider the reversion rate of the product after its initial term.

There are several reasons why this is misleading;

1. 1. Reversion rates are generally variable and not linked directly to bank base rate. In two years time a lender with a previously un-competitive reversion rate may well be leading the market and vice versa – hence it is not a factor that should play a major part in the decision making process.
2. 2. You would generally regularly remortgage during the early years of your mortgage repayment to ensure a competitive rate of interest so including the reversion rate after the initial mortgage term distorts the picture.
3. 3. Clever design can skew the figure. Lifetime trackers appear very competitive because they have no reversion rate, and refunding upfront fee’s affects the calculation but could cost a pretty penny if the loan never goes ahead.

APR is a system that was never really designed for mortgage contracts but has become a legal obligation when advertising them due to the confused dual regulatory system between the FSA and the Office of Fair Trading, it makes some sense on unsecured loans and very little in the mortgage market.

It is high time this dual regulation was removed and APR calculations either scrapped on mortgage contracts or replaced with something far more specific to the complex nature a mortgage product.

So if you bought a property as a second home or buy to let then it is liable from the date of purchase, whereas if you bought a property as your main home and subsequently moved to a new property letting the old one, then the old property becomes liable to Capital Gains Tax from the date of transfer however there is a 36 Month leeway given so effectively you owe Capital Gains tax on the property from 36 Months after its transfer to a buy to let.

Losses and expenses can be set off against any gain, so keep a record of all your costs as a landlord including maintenance bills etc but not including your mortgage costs (mortgage interest is offset against income tax). This means it is also worth having some form of valuation on the property at or around its 36 month as a let property to establish the value of the asset at its date of becoming liable.

You also have a personal Capital Gains Tax threshold of £10,100 currently below which no tax is due, so if you are married or in a civil partnership having the property held on a joint tenancy or tenancy in common basis will allow you to use both your tax thresholds up to £20,200. To work out any tax owed take the sale value of the asset, less any costs and applicable tax threshold and the value at its date of becoming liable the multiply by 18%.

So if you let a property worth £120K in 2005 and sold it this year for £150K with costs in the four years of £3k then you would owe £30K less £3K, less £10,100 which = £16,900 taxable gain then multiply £16,9K by 18% giving tax due of £3,042. In the same situation for a married couple where the property was held in joint names you would instead take the gain of £30K less £3K costs, and £20,200 tax exemption giving £4,800 taxable and tax owed of £864.

Capital Gains Tax is a complex area and there are other factors which may affect your tax liability, and it should be remembered that taxation policy can change in each government budget. For more information or to speak to a mortgage broker call 08454594490. Seek independent taxation advice for an exact analysis of your tax liability and guidance on tax mitigation.

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.

As always for more information about what type of repayment would be best for you and to speak to a UK mortgage advisor call 08454594490.

Myself and colleagues once helped one of the UK’s largest Insurance companies sort out their customer service by explaining to them that it was probably a bad idea to send brokers all over the country individual notifications of a cancelled policy with no details of the reasons for cancellation and outstanding payments owed, because that meant they had to handle thousands of calls from brokers every day just to ask why the policy had cancelled and what it would cost to re-instate, information they could quite easily send on the same message. These calls were going into the same service team that dealt with their customers with an average hold time of twenty minutes.

The same insurer had an online broker quote system that allowed you put in a postcode on the first page and on the last page twenty minutes later it would dutifully inform you that it was a decline due to flood risk or area! We helped them re-develop their system but with a little logical thought from their IT team in the first place there would have been no need.

One big bank is proud to inform all brokers that they have moved to a paperless office! Hoorah! However because they insist on you faxing every document to them brokers all over the country probably aren’t enjoying a similar lack of paper of in their offices. Have they heard of the wonders of email? You can actually send a message electronically with documents attached to them, and unlike faxes the output at the other end is actually legible? You might argue you can email to a fax number, but not without an email to fax account and what’s the point anyway? It reminds me of the operation Good Guys episode where blank paper is just being faxed over from another station!

But the icing on the cake was the credit card company who after taking about seventeen security questions and proof of ID over the phone just to let me speak to them, informed me that to change my account address I would have to write them a letter. Yes because as we all know the royal mail is the most secure system of passing information available anywhere, and anyone who has my credit card can probably fake my signature but wouldn’t normally be able to guess my date of birth, place of birth, mother’s maiden name etc.

One thing that most definitely flies in the face of the FSA’s treating customers fairly objective is the practice of credit scoring and what is referred to as black boxing. Black boxing is one of the terms used to describe the elements of a lenders credit scoring criteria that are kept secret and undisclosed.

While I don’t think that using a system of credit scoring is unfair or bad practice I do believe that it is unfair to keep any part of the methodology behind a scoring system secret. Firstly there have been a lot of issues with lenders accepting a decision in principle from an applicant which obviously incurs no cost, and then declining a mortgage application based on the secondary scoring of the application.

There is an obvious issue with this practice particularly where funds are limited in supply in that it leaves the lender open to accept many more applications than they can possibly fund while accepting application fees and booking fees (many of which are now charged up front) and declining an application post valuation. Interestingly many lenders also now include administration fees within their basic valuation fee, or have moved free valuation incentives to the back end of the deal asking you to pay for a valuation then refunding the costs upon completion. Several newspapers have also reported that many lenders are now removing the right for mortgage brokers and consumers to contest valuation figures on deals with free valuation incentives as a way of forcing borrowers into a higher loan to value product.

It’s also well known that while the idea of a credit blacklisting is a bit of a myth it is true that lenders may apply a weighting to their credit scoring systems that is based on geographic location for example. Some streets or postcodes may be dragged down on score based on the lenders experience in the area which may make it more difficult for people residing there to get credit. Now take this concept and how do we know that ethnic groups for example are not being penalised, which would naturally be illegal under racial discrimination laws? The simple answer is we don’t because we can’t see how these decisions are being made. Which means it’s bad for public faith in the industry and consequently the industry as a whole.

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.

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.

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.