100% Mortgages for First Time Buyers
The governement has announced an extra £100 million will be pleged to tempt up to 18,000 First Time Buyers to buy empty new builds. Forming part of the Government’s £400 million HomeBuy Direct scheme, households with incomes less than £60,000 are helped to purchase new homes sitting empty after the housing bubble burst.
- 15% of the value of the property will be lent by the Government and 15% by participating property developers
- Interest on the loan doesn’t kick in for 5 years
- If the property value decreases, when the owner sells, the 30% loan will not have to be paid back
- If the property value increases the homeowner must repay the loan but can keep any profit
Experts welcomed the announcement, but are warned it must be combined with wider measures to help first time buyers get on the property ladder.
Housing minister Margaret Beckett said: ‘We are determined to give families real help in the current economic climate.’
But critics said that the government risked driving thousands of young home buyers into negative equity pointing to predictions that house prices will still continue to fall into next autumn.
Read more…
A 100% home loan on taxman - Metro.co.uk
Government announcees £100 million for First Time Buyers - Telegraph.co.uk
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The Homeowner Mortgage Support Scheme
Announced on December 3rd, the Homeowner Mortgage Support Scheme has been introduced by the government to provide homeowners with more assurances that they will be able to remain in their homes if they experience a temporary fall in income.
The scheme allows lenders to lower a borrower’s current monthly mortgage payments, with the deferred payments added to the principal, and paid when the borrower’s financial circumstances have improved. If the borrower defaults, the Government will guarantee the lender against a proportion of any loss incurred on the deferred interest payments.
This is a voluntary plan however there are qualifying factors including:
- the loss of income is not permanent
- the loss of income prevents the borrower from paying the monthly mortgage payment
- have taken out a mortgage of up to £400K
- have savings below £16,000
- the borrower must be the owner - occupier
- able to remain paying a certain monthly amount on an ongoing basis
The scheme is initially open for 2 years pending a review.
To learn more, visit the HM Treasury
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Mortgage Lenders Not Dropping Rates?!
It has come to light that first time buyers and people who have recently remortgaged are still being charged up to and above 6% interest despite the recent base rate drops. That is now 3 times the official Bank of England interest rate!
The vast majority of deals reflecting the base rate changes require a minimum deposit of 25% of the purchase price, leaving the majority of borrowers outwith this criteria and therefore faced with mortgages at 6% or higher. If the lenders don’t loosen these restrictions and create better deals for first time buyers and those coming to the end of remortgage terms, the housing market will not recover.
Gordon Brown has acknowledged this problem by stating:
“I think banks should really pass on the interest rate cut. We are talking to the banks. Remember last time there was a cut, we had to speak to them before it was passed on and we will be speaking to them again.”
It has been announced that Halifax and Nationwide will only be passing on a fraction of the cut.
Read more…
Gordon Brown promises to push banks on interest rate cut - Telegraph.co.uk
Mortgage rate rip-off: banks stand accused - thisismoney.co.uk
Rate cuts alone cannot help mortgage market - AMI - ifaonline.co.uk
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Here We Go Again! Base Rate Drops to 2.0%!
The Bank of England has done it again. Following on the .5% drop in October and the 1.5% drop in November, they have decreased the rate again by 1%. This is great news for borrowers but not the best for savers…
Borrowers with tracker or variable rate mortgages will probably see their monthly payments decrease to some degree. Savers and pensioners on the other hand, will be feeling a pinch as they rely on savings interest for income.
The Fool.co.uk has posted a very comprehensive article on the advantages and disadvantages of this historic change.
But I guess the question on everyone’s mind is, will it drop further? This drop is a clear sign that the Monetary Policy Committee believe that in order to stave off a long recession, drastic measures must be taken. If the economic conditions continue to decline, they will go further. However, this will mean the Pound will lose more value and could possibly result in an inflation rise. It seems the unprecedented 1.5 % drop in November wasn’t a drastic enough move, will this further decrease do the job? Watch this space…
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Northern Rock Takes Repossession Extension on Board
Following on from yesterday’s post regarding the RBS extending the allowance of missed payments prior to repossession, Northern Rock has followed suit. Although they are clear that this will not greatly impact their current processes as on average, they work with their customers for a period of 15 months from when they first fall into arrears. Northern Rock chief executive Gary Hoffman states:
“In the vast majority of cases, where repossession regrettably does take place, we have been working with the customer for well over six months. We will now formalise our policy and agree not to repossess a property for a period of at least six months from the point of arrears.”
RBS has recently been critisized in the press for the 6 month package being regarded as a marketing ploy.
Read more - Northern Rock follows RBS with six-month reprive
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