In the last two weeks, both Natwest and Coventry Building Society ceased offering interest-only mortgages for residential property following Nationwide’s decision to do the same some time ago.
Add to this the vast number of lenders who have restricted interest-only borrowing to less than 75%, 66% or even 50% of the property value and the market for these mortgages is now stricter than ever.
Borrowers on interest-only mortgages currently sitting on their lender’s variable rate should consider changing their mortgage to a new product now before the market contracts further.
With the FSA’s announcement that interest-only lending would become part of the mortgage market review following the credit crunch, many lenders have reacted in a kneejerk fashion, and Eliminated the option for customers with a suitable repayment strategy to refinance their loan regardless of the plausibility of their circumstances.
This is already creating a large number of mortgage “refugees” unable, simply due to the lender’s criteria to arrange a new mortgage and who then become trapped on a variable rate without the option to move.
Whilst this may not be the end of the world whilst the Bank of England Base Rate is low it could result in thousands more repossessions in the event of the collapse of the Euro.
This scenario would almost certainly see wholesale increases in lenders’ standard variable rates which many borrowers might find too large to handle.
For those in the last years of an interest-only mortgage or even halfway through with borrowing of more than 50% of their property value, waiting too long to consider a move to a new product could see them shut out of the market in the long term.
Of course, for those borrowers without a suitable strategy for repaying an interest-only loan, then this is the right time to think about switching either to a full repayment mortgage or alternatively, if investments such as endowments are not performing and are predicted to fall short of requirements, a part repayment and a part interest-only loan might be suitable.
For more information contact one of our whole of market advisors on 0845 4594490.
It has been a long time since we’ve had significant news about new products; this morning, Kensington Mortgages announced one of the most significant indicators to date; that mortgage lending is returning to normality.
Their new buy-to-let product range is available up to 85% loan-to-value even for first-time landlords; although the arrangement fees on the 85% product are 2.5%, it is still a step forward for buy-to-let landlords.
It is available on up to 3 properties, with an interest rate of 5.99% fixed for two years, and a portfolio maximum of £1 Million or three properties on the product.
Rental coverage requirements are also lower than the competition, with a rental yield requirement of 120% coverage at the pay rate; this should help to ensure that the products are viable.
The range also allows first-time landlords into the market at 80%, and at this loan-to-value, there is a flat fee product option in addition to the 2.5% fee option, which will work well for those borrowers with higher property values.
The products are available for purchase and remortgage; however, they are only available for properties in England and Wales and have a minimum income requirement of £25,000 or £30,000 above 75% loan-to-value.
For more information on these products, please call one of our mortgage advisors on 0345 4594490.
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.
