Welcome to the brokers blog; where we discuss the latest developments, common queries, spurious sources and the sublime, ridiculous and esoteric aspects of the mortgage industry.
Alliance & Leicester announced further rate reductions yesterday on their 75% loan to value two-year fixed rates for new purchases.
The new product, with a £995 arrangement fee and a fixed rate of 4.53%, sits alongside their 4.48% product with a 1% arrangement fee.
The new rate brings them into line with rates from Abbey, but this product could benefit those who have recently gone self-employed or started a business; Alliance & Leicester require only one year of accounts minimum against two from Abbey. It also has a free valuation, much like Abbey’s 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 rest of the market, unlike what we have seen with variable rates from HSBC and Woolwich, although; swap rates have not dropped in the same fashion as Three-Month LIBOR which fuelled the reduction in variable rates.
The new rates have an APR of 5.1%, and the reversion rate currently stands at 4.99%. Early repayment charges are 3% of the loan until 31/12/2011, and the lender’s Conveyancing fee is typically £189.
Always consult the Key Facts Illustration before deciding on a mortgage product and seek independent advice. To speak to a mortgage advisor, call 0845 4594490.
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Findaproperty.com’s new house price index suggests that house prices have remained stagnant at the bottom of the market while large 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 0.3% for first-time buyer properties, leaving them still down -4.6% year on year.
That would suggest that difficult lending conditions for first-time buyers continue to drag down property prices as second times buyers struggle to find a buyer who can afford their property in the current market.
However, there is good news in the bag as average first-time buyer affordability has improved dramatically, fuelled by the price reduction.
Their figures for the 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 over the August figures, leaving the average national asking price at £218,134.
Mortgage Broker Q&A; what’s an offset mortgage?
In Q&A, we look at some of the questions mortgage advisers answer; on a day-to-day basis. Question; what is an Offset Mortgage, and how could one 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 retained with the lender, and any balance in that account; will offset the outstanding mortgage amount.
The savings earn no interest, and none is owed, on the equivalent balance, of the mortgage.
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 for 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).
That 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 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 choose for the offset either 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; 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.
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 fees are refunded on completion for a property value of up to £1 Million and would be £280 based on borrowing of £100k at 70% LTV.
Applicable fees are the lender’s Conveyancing fee of £189, Telegraphic transfer fee of £30 and early repayment charges of 3% of the loan until 30/11/2012.
Whilst this brings them into line with offerings from Abbey, it is still some .4% higher than the current products on offer from Woolwich.
As usual, always consult a Key Facts Illustration before deciding on a mortgage. For further information on this product or others, 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.
In Mortgage Adviser Q & A we look at some the common questions answered by mortgage brokers on a day to day basis.
Question; Will lenders consider my benefits as income when assessing affordability?
Most lenders will consider some types of benefits as income and this varies from lender to lender. For example it is quite common for child tax credits to be considered as income but child benefit not to be, it is also quite common for other income such as regularly received child maintenance payments to be considered. Again though how much is applied will be specific to each individual lender.
Most lenders will however require you to have some form of income apart from benefits as well, this is because year by year benefits will be changed in the budget and your entitlement to a benefit cannot be guaranteed in the long term.
For information about which benefits are considered as income with different lenders seek independent mortgage advice.
