Getting a remortgage

If you are thinking of getting a remortgage click here

Getting a remortgage is one of the biggest financial decisions you will have to make. As with a new mortgage, it’s a big financial commitment - but when it comes to remortgaging, it’s possible to save yourself a lot of money each month compared with your existing mortgage agreement.

Why do people remortgage?

End of existing mortgage deal

Most mortgage deals offer special terms that usually last a few years before reverting to the lenders standard variable rate, and once those terms are up, it’s time to remortgage.

You can either remortgage with your existing lender, or with a new lender. The most important thing for you will probably be finding the mortgage deal with the lowest interest rate in order to keep your monthly payments as low as possible.

Debt consolidation remortgage

If you are in debt, you can also use a remortgage to help repay those debts. A debt consolidation remortgage involves withdrawing some of the equity in your home (e.g. any deposit, payments you have made and any increase in your home’s market value) and using it to pay off your debts. You will then repay the borrowed amount on top of your regular mortgage payments.

Tips for getting a remortgage

If you are looking for a remortgage, it’s sensible to take a few simple steps to improve your chances of getting the best deal.

1. Check your credit history

Your credit history is a record of all your credit activity over the past few years. When you apply for credit (including a remortgage), the lender will assess your credit history, based on their own lending criteria, to decide whether or not they can lend you the money.

However, mistakes can sometimes occur - and it’s important to ensure that your credit history is up to date and free of errors in order to give the best account of your credit activity.

All the major credit reference agencies (Equifax, Experian and CallCredit) offer online credit check facilities. If you find any errors on your credit file, all you need to do is call the creditors concerned and ask to have the entry corrected.

2. Take your time

It’s important to give yourself adequate time when looking for a remortgage. Don’t leave it until the last few weeks. Two or three months should be enough to get a reasonable idea of the range of mortgage deals on offer, and where to find them.

Some lenders will allow you to ‘reserve’ your mortgage deal a few weeks in advance - so you shouldn’t have to worry about the best deals being taken off the market shortly before you start your new terms.

3. Get professional mortgage advice

It’s possible to search for a remortgage on your own, but a lot of people prefer to get help from a professional mortgage adviser. Speaking to a mortgage adviser about finding a remortgage can greatly reduce the time and effort involved in finding the best remortgage deals.

A mortgage adviser will be happy to give you free, impartial advice on your remortgage, and may be able to help you find the best deal for your circumstances.

If you are thinking of getting a remortgage click here

UK House Prices 2008

For 2008 as a whole, prices fell 16.2%, the biggest annual decline since Halifax began keeping records in 1983.

Read more: 1, 2, 3

Debt

What should you do if you fall into arrears with your mortgage, or generally need help with your debts?

The below list features some of the people you can call to get help with debt.

• Citizens Advice Bureau - The CAB are a first port of call for many people. They may be able to give you advice on your options.
• Think Money - Think Money can provide you with help on mortgages, remortgages and debt.
• Gregory Pennington - Reputable debt management company who provide various debt solutions.
• Debt Advisers Direct - Debt Advisers Direct specialise in debt consolidation and debt management.
• Shelter - Shelter are a housing and homelessness charity.
• Your local council - Your local council may be able to help with housing and debt related problems.

Best Remortgage Uk: Generates Extra Cash

Mortgage lending falls 70% in one month

Statistics released by the Bank of England yesterday have revealed that mortgage lending fell by 70 per cent between September and October this year.

Read more here

A third of second home owners own less than a quarter of their home

A third of second home owners have mortgages of 75 per cent loan to value or higher, with a fifth owing more than 90 per cent on their home, according to a survey of holiday home owners conducted by holidaylettings.co.uk. Furthermore, three quarters paid more than £100,000 for their second home and 37 per cent have euro mortgages.

These figures tie in with nearly half (43 per cent) of the same survey respondents stating they let their home to paying guests ‘out of necessity to cover mortgage repayments and running costs’. Furthermore, the number of holiday home landlords entering the lettings marketplace has grown 84 per cent in the last 12 months when compared to the previous six.

The hard cash reality of owning a second home, whether in the UK or overseas has hit home in 2008. For example, a €200,000 interest only mortgage on a 6% deal will cost the home owner around €1,000 per month. Paying this via a currency transfer from pounds to euros would in 2007 have been at a rate of around 1.45 euros to the pound, equating to £690. Based on the current pound to euro exchange rate of around 1.2 it would cost £830 – a monthly increase of almost £140 expenditure.

Ross Elder, managing director of holidaylettings.co.uk comments: “It has been a tough year for any second home owner with a mortgage, which in part explains the growth in the number of owners letting out their properties in the first 10 months of the year. However, I believe there is also a transition of appreciation for the added value a second home has, not just as pension or capital gains income, but ongoing rental income.”

Avoid Boom and Bust in Housing Market

The past two decades have seen two spectacular boom and busts in the UK Housing Market. Whenever there is a bust, it is hard to imagine that we could return to yet another period of spectacular house price growth. But, with housing supply falling woefully short of government targets for population growth; there is every chance of another housing boom. - perhaps not for another 2-4 years; but, it could definitely happen again.

The costs of allowing housing boom and busts are too great, there needs to be effective policies to moderate unsustainable booms in lending, house price growth and the consequent adjustments this causes.

What Should Government Do?

1. Change Monetary Policy

At the moment, monetary policy is primarily targeted at the control of inflation and stable economic growth. If the MPC were given two targets inflation and avoiding asset bubbles, then maybe we could avoid booms in the Housing market. i.e. they would raise interest rates if house price growth was too high. However, there are problems with this.

* It is hard to target two things at once. During 2004-07 House price growth was frequently over 20% a year, but, CPI inflation was averaging 2.7%. To reduce house price growth would have caused a painful decline in output. It could even have caused a premature recession; the MPC would have been widely criticised for causing unemployment just to prevent house prices rise.
* Interest rate increases would have had to be very high.
* Difficulties of Knowing why House prices are rising. It is difficult to know when house price growth is a consequence of excess lending / speculation and when it is due to economic fundamentals of demand greater than supply

As Charles Bean (deputy governor of MPC of Bank of England), commented in a recent speech on 22 Nov 2008 :

“It is simply not credible to believe that the UK house-price boom that is now unwinding would never have happened if only the Bank’s Monetary Policy Committee had set official interest rates just a little bit higher. “

Banks were really keen to lend, and I doubt slightly higher interest rates would have discouraged many homeowners from taking out mortgages. - It is similar to the fact that cuts in interest rates have failed to stimulate the housing market.

2) Regulation of Banks.

One policy suggested by Anil Kashyap, Jeremy Stein and Raghuram Rajan [1], is to get banks to purchase private capital insurance from a suitable ‘deep pocket’, such as a sovereign wealth fund, that pays out if aggregate financial conditions deteriorate sufficiently. The idea is in boom conditions to make banks save more and reduce the growth in their credit lending. Then in a bust, the banks can rely on their own private insurance schemes to meet shortfalls - rather than rely on government bailouts. This scheme is not aimed at reducing overall bank lending. But, making bank lending less cyclical and volatile. It would mean less 125% mortgages in the boom years. But, it would also avoid some of the freezing of mortgage markets we see at the moment.

3) Spanish Example

In Spain, banks are required to build up a general reserve equal to the difference between an estimate of long-term losses and specific provisions on currently impaired assets. It is noteworthy that Spanish banks have largely avoided the credit crunch. Abbey owned by Spanish group Santander have been one of the few banks to lend more. (Though Spanish house prices still rose too much and are now falling)

Traditionally the idea of government regulation of banks is dismissed by free market economists. They argue that it will reduce investment and anyway banks can get round the regulation.

However, these are not good reasons.

4) Increase Supply of Housing

Whilst there is a shortage of housing, the scope for rapidly rising house prices always remains. However, in the US, the supply of housing increased in response to the boom, but, the massive homebuilding didn’t prevent the boom. (in fact many houses were still coming onto the market at the end of the boom - when it was too late.) this shows that addressing supply issues will not on its own solve the propensity to a credit boom and bust.

Also, of course, the UK is notoriously bad at meeting targets for building new houses. Everybody agrees new houses should be built - just as long as they are not anywhere near where they live.

Conclusion

We cannot rely on monetary policy to prevent house price volatility. The MPC should be free to target inflation and output directly, without trying to solve micro economic housing problems as well.

Nor can we leave this issue to the dynamics of the free market. The consequences of housing boom and busts are too painful for the economy. It will not be easy to regulate the banks; but since they have been humbled and forced to come begging to the government, we will never have a better chance to force them to take responsible steps to moderate boom and busts in credit / mortgages.

[1] See Anil Kashyap, Jeremy Stein and Raghuram Rajan, ‘Rethinking Capital Regulation ‘, presented at
Federal Reserve Bank of Kansas City Symposium on Maintaining Stability in a Changing Financial
System, 2008.

This article was taken from the Mortgage Guide blog

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Mortgage Approvals Fall

Think Money report that mortgage approvals fall.

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