Make the most of today’s mortgage market
February 3, 2009 by admin
Filed under Mortgage Advice, Remortgages
It’s no secret that it is harder to get a mortgage than it was, say, 18 months ago. Fears of losses amongst banks and other financial institutions, partly due to the ‘relaxed’ lending of recent years has caused them to tighten their lending criteria - and that means fewer mortgages on the market.
That said, it’s by no means impossible to get a mortgage - in many cases, it can just take a little more searching to find a suitable deal. And due to many lenders recently cutting rates, buying a home in the present market can be a good financial move.
First-time buyers
In many respects, first-time buyers are the ‘winners’ in the current mortgage market. Providing they are offered a mortgage, first-time buyers are faced with lower house prices, lower interest rates, more sellers than usual, and because they don’t have an existing property to sell, the sale can often go through much more quickly than sales by existing homeowners.
Some first-time buyers are hesitant to enter the mortgage market, knowing that their home is likely to lose value from the beginning. While this is quite often the case at the moment, it is not necessarily a reason to stay away from the market.
Most lenders currently require a 15-20% deposit for their most basic mortgage deals. Very few analysts predict an equivalent drop in house prices, so it’s unlikely that new buyers will fall into negative equity in the near future.
Even if new homebuyers do fall into negative equity initially, this will only a significant issue if they are looking to sell their home or remortgage in the short term.
Existing homeowners
Existing homeowners potentially face a slightly more difficult situation when trying to remortgage, especially if they have fallen into negative equity.
If a homeowner is in negative equity, it can be difficult to move house or remortgage. Since selling their home will not cover the existing mortgage, homeowners must make up the difference, whether in a lump sum or instalments. Homeowners who choose to stay put while in negative equity will have to pay their lender’s standard variable rate (SVR) at the end of any fixed term deals.
Providing current homeowners have avoided this situation, they should be able to benefit in much the same way as first-time buyers. In particular, the lower interest rates will mean that homeowners who remortgage are likely to enjoy much lower monthly mortgage payments.
Get mortgage advice
Above all, good mortgage advice is essential to getting the most out of the mortgage market.
With lenders more cautious about their lending, the best deals can often be difficult to find. By speaking to an expert mortgage adviser, you will benefit from the knowledge of someone with experience in the mortgage market, as well as cutting out the long hours you could spend searching for the best deals yourself.
Overview of Remortgages
February 2, 2009 by admin
Filed under Mortgage Articles
Property owners are always on the lookout for ways to save money, and with remortgages being relatively simple to organise, it has emerged as a popular method for helping home owners restructure their personal finances.
Remortgages are continually growing in popularity, with property owners rarely keeping the same mortgage product for more than five years. Remortgages may be a suitable option for various reasons, including; securing a better interest rate, freeing up equity, or consolidating debt.
Remortgages are also popular with people who wish to keep the same mortgage when they move home but will have to either increase or decrease the mortgage’s balance. Property owners move home every seven years, on average, which is another contributing factor to the trend of people rarely sticking with the same mortgage product for a long period of time.
Mortgage lenders are always on the lookout for new customers these days as the mortgage market has become highly competitive. For this reason, remortgages are usually offered with incentives such as low arrangement fees, discounted interest rates for a short period of time, and free gifts.
The competitiveness of the remortgages market is good for consumers as they have plenty of choice when looking to find a better mortgage deal for their home. Borrowers are no longer restricted to several high-street banks who offered products that were virtually identical to each other before the banking industry was deregulated.
Home owners should therefore not feel as though they should be locked in to their current mortgage deal if they feel the interest rate is too high. Instead, they should contact an independent mortgage adviser who can source remortgages from the entire mortgage market.
An independent mortgage adviser will use special software to locate the best remortgages on offer for the homeowner’s personal circumstances.
Home owners should therefore take advantage of the competitiveness of the remortgages market and ensure that they always have the best mortgage product possible secured on their home.
If you are looking to remortgage your property and are confused by the sheer volume of remortgages on offer, contact an independent mortgage broker for expert and impartial advice.
Buy-to-let Mortgage Market in Trouble
December 24, 2008 by admin
Filed under Mortgage Articles
Paragon, one of the country’s leading buy-to-let lenders, recently revealed that is unable to secure the wholesale funds that it needs to continue trading. As a result, it has been forced to half the number of buy-to-let mortgages it intends to offer in 2008 and other lenders are expected to follow suit. Indeed, the UK’s biggest buy-to-let mortgage lender Bradford & Bingley is taking drastic action in order to raise the funds it has earmarked for mortgage lending. In what could be interpreted as a panic measure the bank has decided to off-load some of its commercial property and social housing loans worth over £4billion in an attempt to increase its cash balances.
This significant reduction of the number of buy-to-let purchasers is expected to impact on the housing market, prompting house prices to fall in many regions as overall demand for all property drops. The main difference between high street financial institutions and companies such as Paragon is that the banks and building societies fund a proportion of their lending with savings deposited by customers. Solihull-based Paragon has to rely on securing funding for their borrowing on international markets, and that is in short supply, especially for institutions whose credit rating depends upon the quality of their loan book.
But, it’s not just the buy-to-let market that is feeling the pinch; residential property owners coming to the end of their fixed-rate or discounted mortgage deals are discovering that financial institutions have strictly tightened their lending criteria, and also that fixed rate deals are now much more expensive. They have found that unlike when they took out their previous cheap mortgage, there is now a limited choice of products. Unable to compare mortgages in the numbers that they did a couple of years ago, many will have to settle for a more expensive alternative.
So, although there appears to be mortgages doom and gloom all around, Paragon’s chief executive Nigel Terrington is hoping that the markets soon recover and acknowledges that timings are critical. He said: “While we expect credit markets to bounce back from their current distressed position at some point during 2008, it’s the timing and extent of the recovery that will impact on our outlook.”
Government Action in Mortgage Market
November 28, 2008 by admin
Filed under Mortgage News
The collapse in mortgage lending is becoming a real concern. Next year, the Association of British Bankers predict net mortgage lending could be negative. Despite lower interest rates, it is still as difficult as ever to get a mortgage. As a result, housing sales are at their lowest level on record.
When the government suggested banks should return to 2007, lending levels there was many raised eyebrows. Surely there is no sense in returning to lending levels that caused the housing boom in the first place?
However, the mortgage market has become so constrained that it now appears there is a case for government intervention to overcome the almost paralysis which afflicts the market. We are not suggesting we want a return to interest only, 100% mortgages - far from it. But, the banks have gone from one extreme to another. From freely offering mortgages, they are now being very conservative.
You could argue there is good reason to be conservative. Banks will correctly point out we are facing:
* Rising repossessions,
* Economic recession and rising unemployment
* falling house prices creating negative equity.
* Banks need to improve their balance sheets after years of over lending.
With these factors in mind, it is hardly surprising that banks are being more cautious in their lending. But, if the mortgage industry faces continued constraints we could see a market devoid of buyers; this will cause more problems. It also must be remembered that with low interest rates and falling house prices, the cost of mortgage repayments has fallen significantly. Although repossessions are rising they are still less than 1% of total mortgage loans. It is not that the government should try to stop house prices falling or return to 2007 lending. But, the market is showing signs of market failure, with banks wanting to retreat into a shell. Therefore, there is a case for governments offering some temporary incentives for mortgage lending, and more than just a stamp duty cut.
Mortgage Approvals Fall
November 27, 2008 by admin
Filed under Mortgage News
Think Money report that mortgage approvals fall.
The UK Housing Market - What’s Happened?
November 18, 2008 by admin
Filed under Mortgage Articles, Remortgage News
There are a number of reasons for the fall. Crucially the credit crunch means that banks are less able to raise funds from wholesale markets and therefore do not have the funds to lend on. In addition, whereas this time last year banks were keen to invest in the housing market, they now see the housing market as a risky investment and want only to lend to buyers who are safe bets. This equates to buyers who have a large deposit plus a good credit score. Long gone are the 100% mortgages and the large salary multiples.
For the potential buyer household incomes are squeezed with higher costs for food, energy and fuel, and with a recession looming employment may not be secure. Such pressures have not been seen for a decade. Furthermore, of the buyers that have secured mortgages they may wait to see how much the market falls.
In a nutshell, there are fewer buyers who have secured mortgages and with fewer buyers there is less demand for housing and so prices have fallen. Some experts predict that prices will fall by as much as 25% in total from peak to trough and the market will begin to recover in 2010. In contrast, the Centre for Economic and Business Research predict a total fall of 15%.
So what will stop the freefall? The UK government announced some, in effect, minor measures: interest free loans, a stamp duty level rise and help for those not affording their mortgage. This was a welcome help but is unlikely to stabilise the market significantly as the key problem is the banks having funds to borrow and then those banks taking the risk to lend.
Hope glimmers as the US Treasury has in effect nationalised the US’s two largest mortgage providers, Fannie Mae and Freddie Mac which will protect millions of mortgages and indeed, banks worldwide who are exposed to them. This hugely costly intervention is expected to stabilise the US housing market which in turn will stabilise the US economy. As a result UK banks will be able to secure funds to lend to consumers. However, return to the previous easy lending criteria is unlikely and even when banks have funds to lend they are likely to require the borrower to show that they are a good investment: with a deposit and affordable repayments.
The housing bubble has burst, but the fact remains that the property market in the medium and long term will be backed by the sheer necessity of housing requirements. The population is increasing and there is not enough housing to home everyone. With less sales, property developers are currently short of cash and are putting their projects on hold. As a result new building will be well below the government’s targets and as demand outstrips supply prices will go up. Indeed, the Centre for Economic and Business Research (CEBR) expect house prices to rise by 30% between late 2009 and 2012.
And so the UK housing market is expected to be slow into 2009 but as the economy recovers so too will the housing market.