Your Right Move » Borrowing

House repossession

Zanet — Tue, 14 Feb 2012 11:43:05 +0000

The one thing no one wants to hear is house repossession in there neighborhood. Its bad for so many reasons. How good it is to read that house repossession is at its lowest for 4 years.

The Council of Mortgage Lenders (CML) recently showed the dramatic drop. A recent CML report showed the number of repossessions by mortgage lenders last year amounted to 36,200. This is the lowest annual total since 2007.

We are all well aware that the recent UK recession has made things very difficult for home owners. It’s common to hear of worsening unemployment and other pressures to inflate figures this year. The reality is, if you are behind on your mortgage, the mortgage company can start proceedings for house repossession.

But it seems that unlike previous recessions, this one is heading a different way. If we have rapid inflation then you have the situation we had in the early 1980s where owners paid off a generation’s mortgages.

Those who bought a home in the 1980s to early 1990s, and then held on through double-digit interest rates and the 1990s crash, have emerged with properties that have risen to be worth five to ten times their mortgage.

While falling property prices has brought tough times for those who have seen equity slashed, fallen into negative equity or even had their homes repossessed, there are others who are pleased that prices are falling.

Lower property prices are a boon to first-time buyers and those moving up the property ladder, but only if they can raise the substantial deposit needed to take advantage.

House repossession is back for 2012

Sadly the expectations aren’t good for 2012 when it comes to house repossession. CML anticipates around 45,000 repossessions and around 180,000 mortgages in arrears of 2.5% or more by the end of 2012.

Paul Smee, director general at the CML says, ”Low interest rates and good arrears management by lenders are helping the vast majority of those borrowers who face difficulties to keep their homes and get back on track”

Sadly house prices remain at a stable rate. This means those on the verge of house repossession are not going to be in a position to increase to a point where they can sell any time soon. For others their repayment will continue to cover only the interest on their mortgage. While interest rates remain low, they will be merely propping up the lender’s balance sheet. When interest rates rise, they will be in difficulty as house prices will be forced down by forced sales further reducing any equity that they have gained.

Chelsea building society fixed rate savings

Zanet — Mon, 06 Feb 2012 13:50:56 +0000

Chelsea Building Society fixed rate savings could spark another price war for mortgage offers.

Chelsea Building Society is offering a five-year, fix-rate deal at an all-time low rate of 3.19 per cent.

The offer, which massively undercuts competitors in the five-year market, is available to borrowers below 70 per cent loan-to-value (LTV) with the arrangement fee of £1,495.

“The fee aside, Chelsea Building Society fixed rate savings is the lowest-priced, five-year, fix-rate mortgage deal we have ever seen. It signifies a fresh battle in the mortgage marketplace,” said Andrew Hagger from Moneynet.

Chelsea Building Society has launched the lowest ever five year fixed rate deal. But its worth noting that although Chelsea’s offer is cheaply priced, it doesn’t mean a 5 year fix is the right product for everyone.

Chelsea building society fixed rate savings may not be the best product for you

As the Bank of England base rate iscurrently 0.5 per cent, It is likely to stay very low for the forseeable future. So it may be wise to look at the range of base-rate trackers out there at the moment.

Borrowers wanting a mortgage of up to 70 per cent LTV can benefit from a rate of 3.19 per cent, or 3.39 per cent for the offset option. Both mortgages have a hefty arrangement fee of £1,495.

“This is the lowest five year fixed rate mortgage ever to come to the market, which is great for customers wanting longer term security in fixing what is likely to be their biggest monthly outgoing,” said Chelsea Building Society product manager

Chelsea Building Society was the fourth largest Building Society in the United Kingdom with total assets in excess of £13 billion at 31 December 2007. It is a member of the Building Societies Association. Operating mainly in South East England with its network of 35 branches, its head office is based in Cheltenham employing over a 800 staff. The society was established in 1875 as the London & Camberwell Building Society.

Affordable Mortgages

Zanet — Mon, 16 Jan 2012 13:38:51 +0000

Affordable mortgages aren’t a thing of the past. According to the Telegraph today, Mortgages are at their most affordable for 14 years.

The claim is based on the average mortgage payments for new borrowers, first-time buyers and home movers. The Telegraph speak of only 27% of disposable earnings needed for mortgages in the fourth quarter of 2011. Mortgage payments for a new borrower are now at their lowest in proportion to earnings since 1997.

A 14 year high for Affordable Mortgages in UK

Affordable Mortgages for new borrowers have reached their most inexpensive levels for 14 years! Typical payments in some areas of Scotland and northern England are taking up less than a fifth of disposable incomes.
The details were released from Halifax this week. So although most families are feeling the pinch,the figures are implying a different situation. Halifax claim it marks the lowest proportion since spring 1997 when a 26% proportion was recorded. This stands well below the 37% average over the past 27 years.

Once again the study highlighted a North, South divide. The least affordable areas located in London and the South East.
Kensington and Chelsea in London were named as the least affordable local authority district. Here mortgage payments are taking up 78% of disposable income.

Martin Ellis, housing economist at Halifax, said:

“The cuts in mortgage rates in the last few years have resulted in a significant improvement in housing affordability for those able to raise the necessary deposit to enter the market.. The marked improvement in affordability was a key factor supporting housing demand in 2011. The prospect of an exceptionally low Bank of England base rate over the foreseeable future should maintain affordability at favourable levels in 2012. This should support the market over the coming 12 months, helping to offset the impact of the downward pressures on demand from the ongoing difficulties faced by households regarding their finances and uncertainty about economic prospects.”

Do you feel these figures are truly representative of things changing? Will affordable mortgages remain or are these clever figures from Halifax?

Assement on new mortgages

Zanet — Mon, 19 Dec 2011 09:28:47 +0000

Self-certification loans will become a thing of the past on new mortgages. For thoses seeking new mortgages, that may prove difficult but the right news. Thats certainly the view as this week there are further efforts to make borrowing only for those who really can jump through the hoops first.

The Financial Services Authority (FSA) want to prevent a return to risky lending and so have proposed some new rules.FSA report that lenders had behaved with “irrational exuberance” – a phrase first used by the US Fed chairman Alan Greenspan during the dotcom bubble – in the run-up to the credit crunch, and had offered mortgages as loss leaders, subsidised by payment protection insurance premiums.

Ideally they want to force income checks before lending allong with encouraging banks and building societies to avoid making assumptions.

Dangers for new mortgages

The danger in the past is to assume house prices always go up.

FSA claim that its main aim is not to make it difficult to borrow, but rather protect property buyers.

The FSA proposes three core mortgage lending principles:

Lenders should only agree mortgages or loans with a reasonable expectation that the customer can repay without relying on uncertain future house price rises. Banks and building societies must verify income for every mortgage applicant.

Lenders should assess the borrowers ability to repay a loan on the basis interest rates might rise

Interest-only mortgages can only be agreed if the borrower can prove a strategy for repaying the loan from other resources and that the plans do not rely on future house price rises.

This comes on the week where reports show that mortgage repayments are cheaper than rental bills but many first-time borrowers can’t get a mortgage. Its a catch situation that few can break into. Potential home owners are doomed if they do and doomed if they don’t they end up paying more than a repayment mortgage renting, yet they are renting because no one will lend to them.

Are you in a position similar to the above? We want to hear your comments on whether the banks should make it difficult for new new mortgages and first time borrowers?

Mortgage rates may rise from eurozone crisis

Zanet — Mon, 26 Sep 2011 08:15:58 +0000

It seems that the low mortgage rates may change. After 3 years of low mortgage rates, analysts are reporting they may rise due to the so-called eurozone crisis, which has seen protests and unrest in recent months. Yet the Bank of England is planning another reduction!

Bank of England

The changes may occur with Banks offering incredible packages ahead of the crisis. All this despite the Bank of England base rate remaining at its 0.5 per cent record low and considering a reduction to another cut to base rate. The Bank of England is already known to be considering dropping rates to a new record low of 0.25 per cent following the publication of the minutes from its September meeting this week.

This month will see a series of meetings and important data releases which will go a long way to deciding the future of Europe’s troubled currency union and will no doubt impact the UK banks.

It’s presumed that the European discussions could push Britain’s rock-bottom mortgage rates upwards, borrowers are being warned. Private bank Barclays Wealth today became the first lender to make a major move, pushing its best tracker rates up by as much as 1.5 percentage points for new borrowers.

Mortgage for 10 year fixed

Zanet — Mon, 12 Sep 2011 13:21:27 +0000

Is it a good idea to fix your mortgage for 10 years?

The question is currently being asked, as home owners are now being offered this opportunity. I’ve not been aware until now that you could fix your mortgage payments for 10 years, but currently six lenders are offering such. Normally a 5 year fixed is as long as you can commit too, but banks and building societies are now looking to provide home owners more peace of mind with extremely long term commitments.

It said that the offers are in response to home owners asking for long term fixed, and thereby is a response to UK demand. A spokesman from Chelsea Building Society said ”

“This deal won’t be for everyone. Although it is portable, it’s best for those who are sure they want to stay in their home for 10 years, and some may be wary about locking in for a decade,” said Ray Boulger, senior technical manager at mortgage broker John Charcol, “But it will be popular. It’s easily the cheapest 10-year fix on the market, and despite the relatively high fee, for anyone happy to lock in, it offers very good value.”

Current 10 year mortgage deals

The Skipton building society has recently launched a 10 year fixed rate deal at a rate of 5.85% for up to 85% loan to value (LTV) with no fee.
The Yorkshire building society deal is fixed at 5.99% on a 75% loan to value (LTV)
The Britannia deal is fixed at 5.29% on a 75% (LTV)
The Chelsea building society has the lowest rate at 3.99% with a fee of £1,495 but is only available to those with at least a deposit of 30%.
The Co-operative deal is offered at a fixed rate of 5.69% also on a 75% (LTV)
The Leeds building society offer a 10 year deal on a fixed rate of 5.99% but on an 80% loan to value (LTV)

The fors on a 10 year mortgage

You can know what your payments are for the coming 10 years!
The rates aren’t too outrageous when you consider mortgage rates have been as high as 13 per cent in the past
Offers good value for home owners who are looking to change mortgage deals

The againsts – on a 10 year mortgage

You are paying more than the current variable for the priveldge of being fixed
Very long commitment
You may be in a deal where you can’t over pay the mortgage
Requires a loan to value (LTV)
May have a large exit fee
No benefit from Bank of England reductions

Conclusion:

To commit a mortgage deal for 10 years, may be the perfect deal for you under these difficult times, with the chance to budget for a longer period knowing the monthly amount. These deals do mean that with payments fixed till the end of the deal they will not be affected by interest rates going up or down. Personally a 5 year commitment still seems a balanced view, but if 10 years proves popular, then it may well become the choice of home owners in the coming years ahead.

No deposit mortgage is back

Zanet — Tue, 06 Sep 2011 16:36:56 +0000

Oh dear, it seems 100 per cent mortgages are back!. Relatively new bank Aldermore which was set up at the start of the credit crunch is making headlines with its new offer of 5% savings and no deposit mortgages.

Bringing back 100% loans for first-time buyers to get on the housing ladder without saving a penny will certainly cause controversy since it’s been 3 years since being scrapped.

first time buyers now with 100 per cent mortgage

Aldemore claim that they reduce their risk as to obtain the loan, potential homebuyers will need to secure a guarantor, such as a parent, grandparent or guardian, who is willing to support it.

Surely this 100% mortgage offer in effect means a likelihood of more repossessed properties if the recession keeps biting and therefore the guarantors also face losing the roof over their heads.

Who is Aldemore? Aldermore is effectively the only bank to launch in Britain since the onset of the credit crunch. Aldemore was launched in 2009, is officially the first lender to offer a new mortgage at 100 per cent since the widespread withdrawal of these high loan-to-value (LTV) deals during the financial crisis.

Sellers drop asking prices

Zanet — Mon, 25 Jul 2011 10:07:21 +0000

It seems that sellers are dropping their asking prices by 1.6%. This is apparent from the current Rightmove monthly report.

What is the report based on? Rightmove take there property base which is estimated to be around 90% of the property market. The results provide useful figures for residential property prices in England and Wales.

Rightmove produce a monthly report for the UK housing market based on a survey of its properties. This months reveals some interesting trends.

For example this month sees the first fall recorded in 2011 as new sellers drop asking prices by 1.6% (£3,797)
Number of new sellers down 12% on July 2010, as many owners are unable to raise the deposit required to fund their next move
Retail price inflation outstripped property prices by 14% over the last four years, improving buyer affordability but undermining perception of bricks and mortar as a hedge against inflation
7 out of 10 properties marketed so far in 2011 are still on the market, indicating that many equity-poor sellers are unwilling or unable to reduce their prices further—an opportunity for the equity-rich to cut their prices and do deals

Other reports this month suggest things aren’t moving as fast as first predicted. For example, the Council of Mortgage Lenders (CML) reports, Mortgage lending was still lower than a year ago and total mortgage lending was only slightly down on last year’s figure, at £63.7bn.

Rightmove reports - Sellers drop asking prices

Will the property market turn around?

Rightmove director Miles Shipside comments:

“The proportion of those people expecting prices to be the same one year from now has grown for seven consecutive quarters to reach the highest level we have ever recorded. The most common view, therefore, is that we have seen the end of price falls, though there are many different local permutations. Overall, the proportion expecting prices to be higher in 12 months’ time stands at 26.2%, while 26.9% forecast lower prices, again reflecting the mixed picture depending on location. Rightmove’s detailed analysis of price confidence at a local level reveals some more extreme views, which serves to highlight the patchy and very local nature of the market in this downturn.

For example, 11.8% of respondents in Central London forecast that prices will have increased by 10% or more in a year’s time. By contrast there is an expectation of falls of 10% or more in the more northerly locations.

Santander Customer Service

Zanet — Sun, 10 Jul 2011 08:21:37 +0000

Does Santander deserve a second chance? Simon Read from the Independent believes so, as his article this week reasons the Spanish-owned company has good reasons why it’s failed and will turn things around in the coming months. A response too late for many customers who have overwhelmingly rated the Spanish giant bottom in a customer service poll on Martin Lewis’ money saving site.

Santander announced this week it was moving from Bangalore to Glasgow creating 500 jobs. Is this a response to the negative press Santander has received, being voted the 3rd worst customer service last year? Some say this move is to avoid rising costs in India as the average wage there is experiencing a 12 per cent rise.

Santander Customer Service - Not Great

Personally, I bank with Santander, actually Abbey, or go back further Abbey National. I have found though, the last few years have been appalling. Just getting my account on-line took the customer service and local branch several months due to the age of my business account and lack of knowledge in the branch. Then the queues always seem longer than any other branch in my local high street, overall if they put a slice of the marketing budget towards service, things would improve.

In the past, I hadn’t take out an Abbey / Santander mortgage, even though it was most appealing . I admire the clever marketing from Santander, especially as a huge F1 fan, but I also understand a mortgage should be judged ons what payments come out my pocket over the term, not how big the cash-back is for taking a mortgage with them. No doubt about it you cant ignore the marketing power and influence Santander has on the high street.

Simon Read brings out all high street lenders need to improve there customer service due to the amount of negativity since the credit crunch. A main part of the reason is the problems arising from merging Abbey, Alliance & Leicester and Bradford & Bingley. So it was good to hear new UK boss Ana Botin say this week that “Improving the service we offer is my top priority.”

Will Santander get customer service right? It will need to, if it wants to survive on the high street. Peoples perception is changing, television programmes like Mary Portas Secret Shopper, her web site claims, “I have been challenged by the Prime Minister and Deputy Prime Minister to undertake an independent review on the Future of the High Street – to help ‘bring back the bustle’ to our town centres”. Customer service is always top on her agenda and it is becoming large on banks too, if they want customers support in the coming months.

Should you pay off UK mortgage early?

Zanet — Tue, 14 Jun 2011 10:50:53 +0000

A few years back there was a superb television series on BBC2 entitled Pay Off Your Mortgage in Two Years.

It looked at several families and with some good advice and a lot of hard work they aimed to pay off there mortgage. But it begs the question why should you pay off your mortgage, and if you do have a lump sum does it make sense to end your mortgage early?

There are two ways of thinking in the UK:

Pay off your mortgage quick as its a loan around your neck.
Don’t pay it off in total, just overpay (if your mortgage allows it) the loan to the point of making it so small that the interest is minimal, in that way you get the deeds looked after for free.

So what is the correct way to deal with such a pleasant dilema? In both cases we are talking about a repayment mortgage, not an endowment.

Choice Do you pay off UK mortgage

Advantages of paying off your mortgage

It will reduced your monthly cost of living.

You will have more disposable income if its paid off.

Disadvantages of paying of your mortgage early

A mortgage is probably one of the cheapest loans available, so over-payment without paying the mortgage off in full is a great way of keeping a large amount of money on hand for a quick low interest loan (assuming your mortgage company allows this)

Some say there is a tax advantage keeping a small amount outstanding on your mortgage, I beleive this is an old idea that is no longer true.

Advisors suggest that keep your mortgage open for its full term and it will provide you with the security of knowing the lenders are keeping the house deeds safe. This makes some sense as some suggest just keep your mortgage to £1 and paying a few pence interest a year is a very cheap way of having the deeds safe.

Conclusion

No one can really make the correct decision for you as only you know your terms and conditions, only you know how much the money is that is outstanding, how much you can afford to overpay, remember that inflation makes the debt get smaller quicker as the years pass, so even that can have an effect on your decision.

The general thinking is mortgage rates are low at the moment (2011) and savings interest is lower still, now is a very good time to pay off as much as you can off your house loan. Then, when interest rates rise you will have less of a financial burden.

Mortgage rates can change as can rates for savers and investors, for most of my mortgage years, over payment of my mortgage it is always the best form of saving, but this can change.