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.
Many people blame subprime mortgages for the credit crunch; others point the finger at merchant banks and hedge funds, whilst some have even suggested that China is directly at fault for the current state of Western finances.
To a certain extent, all these views carry some merit (particularly regarding the subprime mortgage sector). But another factor that comes into play regarding those mortgages; is perhaps more fundamental and likely to cause long-lasting damage.
Over the last decade and a half, the average house value skyrocketed. Some houses increased by as much as 100% in value over a decade. This rise in prices; sustained by a ready supply of credit on increasingly generous terms; increased demand massively, and due to the relatively fixed housing supply, the only place prices could go; was up.
That resulted in large numbers of people taking loans far beyond their means. It seemed that everyone could get a large enough mortgage to pay for a house regardless of their financial circumstances.
For those who have stretched their income, now is the perfect time to reduce your borrowing and save money in the long term on your mortgage repayments.
The new government and the recent emergency budget indicate we should see relatively low-interest rates for some time, although the bank base cannot remain this low forever.
So it is time to look at remortgaging, and trackers, in particular, can look like good value for money in the short term.
There are several ways to reduce your mortgage in this period of low-interest rates.
You can remortgage and reduce your mortgage term, but 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 uncompetitive.
For many, the best way to reduce your mortgage may be to use a savings account and then use the typical 10% overpayment facility on most products.
It’s worth checking whether you have the right to make overpayments and to what extent. Savings interest rates aren’t too attractive currently, but banks like Santander offer some excellent deals on savings accounts that are worth a look.
If you’ve survived the bubble bursting; whatever state your finances are in, it may be a good idea to pay down any debts you have whilst interest rates are low and save what you can to give yourself a bit of a cushion; so should the situation deteriorate further, or if interest rates rise in the future, you are less exposed to increasing costs.
A recent report by the Council of Mortgage Lenders has revealed that the number of homes repossessed in the UK fell by 7.5% in the first three months of 2010.
Home repossession is one of the ultimate fears for any homeowner, and the fact that the figure is falling is perhaps proof that the nation’s finances have recovered a little.
Repossessions 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 in the same period of 2009 when an enormous 13,200 people lost their homes.
The CML said that the main factor in the drop in 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.
That meant many people on the precipice of default, even those who became unemployed, managed to avoid losing their homes.
On the back of these positive figures, the CML has said it may revise its original forecast of 53,000 repossessions for the year should there be no further economic downturn.
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 struggle to meet higher repayment costs and face the prospect of repossession. It warned that the Bank of England needed 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; Santander’s flagship product for existing customers has a typical of 8.9%, and secured loan rates are falling to levels more in line with previous years.
This news from the CML is positive, though there is a warning that things could deteriorate at any moment, so 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.
Over the past few weeks new mortgage lenders have been popping up at quite a pace, with Platform Igroup and Kensington all returning to the market after considerable time away there is at last some possibility for clients with less than perfect credit history to obtain new mortgages although loan to value limits are still strict.
These lenders maintain adamantly in the press that they are lending to prime borrowers only however the truth is that they are lending to customers who would have been considered near prime or very light adverse in the days preceding the credit crunch.
To boot this week also saw the announcement that Aldermore mortgages had opened its doors to the main intermediary marketplace for both residential and buy to let loans, as well as Precise Mortgages adding further new options in the Buy to Let mortgage marketplace.
Kensington and Igroup in particular have filled the much needed whole between highly competitive high street residential mortgage rates and ultra high adverse rates offered by the likes of Platform and Cheshire Mortgage Corp. They have rates ranging between the 4-6% mark which are much more palatable than 8% plus offerings from the other two.
For further information on any of the products from these new lenders speak to one of our independent mortgage brokers on 0845 4594490
Mortgage Interest rates continue to creep slowly downwards towards the current bank base rate of 0.5% and it’s clear to mortgage brokers that while the range of products on offer in the market currently is still a major factor preventing true growth in the property sector particularly in buy to let, It is still very encouraging to see the mortgage works increase their maximum loan to value for buy to let mortgages to 80%.
The new products are quite competitively priced and so this reduction of minimum deposit size is one of the few examples of lenders returning to a competitive spirit since HSBC announced their 2% tracker rates more than a year ago.
Fixed rates are available from 4.69% with a 2.5% arrangement fee, 5.69% with a 1.5% fee and 5.79% with a £1795 arrangement fee and a 5% early repayment charge during the initial term of the product. Standard legal and valuation charges would apply.
A lending limit of £350,000 at this LTV will reduce the popularity of the product in the south east but should help to ensure that TMW are not saturated with new business, and it is likely that this too will be increased in the not too distant future.
For further information about these products please speak to one of our mortgage advisors on 0845454490.
Just a short post to announce that you can now get live online quotes direct from our main site for Life Insurance, income protection, Mortgage Protection and Critical Illness Insurance direct from the Rightmortgageadvice.co.uk website.
To get an instant quote today follow this link for Life Insurance Quotes.
If you have life insurance cover which was arranged prior to a marriage, or before increasing your mortgage value or mortgage term it may need to be reviewed. It’s crucial to ensure that your protection requirements are reviewed regularly to ensure that it is arranged in the most tax efficient manner and will benefit the people you intended it to.
To discuss protection requirements and products available call one of mortgage protection advisors on 03454594490 for advice.
