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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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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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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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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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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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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September 30th, 2009
In Q & A we take a look at some of the questions mortgage advisors answer on a regular basis.
Question; I have been told it’s difficult to arrange a mortgage on a freehold flat, why is this?
In a freehold you are responsible for the maintenance and insurance of the building and own the land on which it is built, which in the case of a normal house is a good thing.
However in the case of a flat this means that there is no clear definition around who is responsible for which parts of the building. Your roof is your neighbour’s floor and your floor is someone else’s roof.
Imagine then that your upstairs neighbour leaves his bath running and your roof collapses, whose responsibility is this now? If your neighbour has no insurance then it could get pretty messy and that’s why as a mortgage lender it’s a bit of a no go area.
This problem can also occur with what’s known as a flying freehold, this is a maisonette or house where some of the property extends over or under another property on a freehold tenure.
If you are in need of a mortgage on such a property they may be steps you can take to go about getting one so call 0845 4594490 to speak to a mortgage advisor for specific advice on the area.
Tags: Flying freehold, Freehold Flat, Freehold Tenure, Mortgage Advice
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September 29th, 2009
Findaproperty.com’s new house price index suggests that house prices have remained stagnant at the bottom end of the market while strong rises in higher value properties are propping up the major indices.
Their figures collated from average asking prices on the website over the past month show high value properties climbing at 6.6% annually against a monthly rise of o.3% for first time buyer properties leaving them still down -4.6% year on year. This would appear to suggest that the difficult lending conditions for first time buyers are continuing to drag down property prices as second times buyers struggle to find a purchaser who can afford their property in the current market.
However there is good news in the bag too with average first time buyer affordability improving dramatically fuelled by the price reduction. Their figures for affordability gap or the average deposit required show a drop to £55,700 or 1.74 times gross household income against £71,000 or 2.8 times gross household income in January 2008.
Overall the indices showed a 0.2% rise on August figures leaving the average national asking price at £218,134.
You can see their results and the rest of the overview here Find a property.com’s September House Price Indices
Tags: Affordability, House Prices, Inflation
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September 24th, 2009
In Q & A we look at some of the questions mortgage advisers answer on a day to day basis.
Question; Whats an Offset Mortgage and how can they save me money?
Offset Mortgages have lessened in number thanks to the credit crunch but for some people they could still represent a very effective way to save money on mortgage repayments.
In an offset mortgage a savings account is held with the lender and any balance held in the savings account will be offset against the outstanding loan amount and no interest is paid on the equivalent balance of the loan. The benefit of this is that Mortgage Interest rates are generally above savings interest rates as this difference is the premium or margin the lender will make on the loan.
You are also taxed at either 20% or 40% on your savings interest (unless you don’t pay tax but let’s assume you do if you have a mortgage). This means that if you could get a savings rate of 3.5% gross and your mortgage was 4.5% for example then the real return on your savings would be either 2.8% or 2.1% after tax. That would mean that for every £1000 in the offset account you would be better off by either £17 or £24 a year in this scenario and your mortgage payments could be reduced by £45 per £1000.
But it doesn’t end there, you can usually either use the offset to reduce the term of your mortgage or your monthly repayments. If you reduce the payments but deposit the savings into the offset the balance will increase accelerating the reduction of your interest payments and increasing savings month on month but it also can be used as a way of effectively paying lump sums off a mortgage with the added benefit that these can be easily accessed should you have a rainy day!
For more information on Offset Mortgages call a mortgage advisor on 0845 4594490 for advice.
Tags: Mortgage Products, Offset Mortgage
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September 22nd, 2009
Alliance & Leicester have announced a reduction to 4.88% for their 3 year fixed rates up to 70% loan to value with either a 1% or £995 arrangement fee. The rate then reverts to 4.99% currently giving an APR of 5.2%.
Valuation fee’s are refunded on completion up to a property value of £1 Million and would be £280 based on borrowing of £100k at 70% LTV. Applicable fee’s are lenders Conveyancing fee of £189, Telegraphic transfer fee of £30 and early repayment charges of 3% of loan to be paid until 30/11/2012.
Whilst this brings them into line with offerings from Abbey it is still some .4% off the current products on offer from the Woolwich.
As usual always consult a Key Facts Illustration before making a decision about a mortgage. For further information on this product or any others please contact us on 0845 4594490 to speak to a mortgage broker.
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: Alliance & Leicester, Fixed Rate, Fixed Rate Mortgage, Mortgage Products
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