Mortgages

Amid the financial news today, finance experts have been offering some sound advice to homeowners or those looking at taking out a loan.

Offset mortgages sound like they are a flexible and easy way to lower your mortgage interest costs,  keeping them to a minimum. It seems to be becoming more popular, about 8% of the total mortgage share are offset mortgages, that’s about 170,000 taken out in 2006.

The recent reports on the housing market tell us that the rate of mortgages approved in the UK has dropped by 14.2%. In fact the figures from August show the lowest approval rate in the past seven years.

The tell-tale signs of higher interest rates, stricter lending criteria, lower approval rates and a slowing of house price increases all indicate the housing market could be heading for a slump. There are rumours that this may trigger an interest rate cut before the end of the year to slightly ease the strain being felt by everyone at the minute.

Read more about it at Drop in Mortgage Approvals

The Post Office will be looking at filling the gap in the market left after Northern Rock’s recent decline and will offer its own mortgage service to those in the North East of England after teaming up with Bristol & West bank.

If the trial in north-eastern England shows promise, then the service will begin to be offered nationwide.

Mortgages will only be available to those with no history of credit problems and anyone wanting a 95% mortgage or less.

Read more here at Post Office to launch loans

A very worrying article on BBC News this morning reporting that there has been some evidence of mis-selling in our mortgage market.  The reports claim that people are being ‘advised’ to exaggerate their salaries in order to get a mortgage and a way of finance brokers to close a deal.

The Financial Services Authority (FSA) is planning a full investigation and tough actions when dealing with those involved.

It seems to have affected the sub-prime section of the mortgage market more than any other as most of the applicants tend to be self-employed and need a self-certified mortgage. Some borrowers have tended to exaggerate their income and the lenders haven’t followed up to check whether it is an accurate and realistic statement.

It highlights the problems we are starting to encounter now though with this irresponsible attitude towards lending and borrowing, a family who were advised to report their earnings were double what they were, are now in financial dire straits and have been close to having their home repossessed.

Read the full article here

Abbey has declared it is to offer a 125% mortgage deal. An odd time to be offering such a deal in the present financial climate. In effect the borrower will be getting a 100% mortgage with an additional 25% secured loan, depending on their individual financial situation.

It is thought this will appeal to many first-time buyers, but be warned, the borrower will effectively be starting off in negative equity, the property will need to gain an extra 25% in value before the house will be in equity. This may not have been a problem over the past couple of years, however the continuation of rocketing property values cannot be relied upon as it is not likely to be sustainable in the long term.

Is this is a brave move for Abbey or a foolish one? Only time will tell.

Read more at Abbey offers 125% mortgage

High Street Bank, Halifax, have today revealed they are increasing the interest rates on their mortgage deals.

As the UK’s biggest mortgage lender, some 1 out of every 5 mortgages is with Halifax, it makes you wonder if they will see a fall in the number of mortgages being taken out by new customers.

The decision comes just after Abbey announced they were increasing rates on certain mortgage products.

These decisions not only affect new buyers and first-time buyers but also existing customers. Speculation is rife that other building societies and banks won’t have much choice but to follow suit.

Read the full article here

The number of people moving overseas to live or buy a holiday home has increased over the past decade. The Financial Services Authority (FSA) who act as our financial watchdog, has warned expat borrowers to beware of the exit fees they are being charged by their lenders once their loan or mortgage has been paid off.

In some cases people have been charged more than they were told when taking out the loan - those people will need to claim from the lender to receive a refund.

The FSA has tried to prompt UK Mortgage lenders to get rid of or at least reduce the redemption fee that is charged. Until that happens expats who are thinking of taking out a mortgage overseas should check the facts and figures before signing up to anything.

Read the article in full here.

Interest rates on mortgages issued by some banks have increased recently, while others have taken measures to tighten up their rules on lending, especially to those with a poor credit history.

Fionnuala Earley, of Nationwide building society, says;

“The same person trying to get a mortgage will find the situation more difficult now than three months ago.”

Changes are being made now in the UK to prevent a similar episode to what the US has recently experienced with their sub-prime market.

There are thoughts that this may also now affect house prices - probably no bad thing considering how the average house price has tripled over the past decade.

Read the full article here.

Since the awareness of the troubles America is going through with sub-prime mortgages, the effect within the UK is now becoming apparent. Lenders are tightening their purses and making it more difficult for those with a bad credit history to get a mortgage.

Even those who are self-employed and self certify their accounts and salary may start to notice a change. This a noticeably different attitude from what we have experienced in the past few years, where we have seen lenders offer loans and mortgages in a much more ‘relaxed’ fashion.

Just remember to complete any loan application accurately - don’t overestimate what you need to borrow, what you earn or how much you can afford, as it may cause more trouble in the future and put your home at risk.

Read the full BBC News article here.