Best Quote Mortgages Blog

Base Rate Drops to 1.5%… we’re almost there

Best Quote Mortgages — Thu, 08 Jan 2009 12:45:51 +0000

Te Bank of England has dropped the base rate by another .5% to the lowest point in 315 years. This is also the lowest it’s been since the Bank of England inception in 1694.

As with the previous 4 decreases since October, there are mixed reactions. Steve Radley, chief economist of manufacturers’ association EEF says: “Whilst the Bank has indicated it wanted to take a measured approach to cutting rates, this is too timid to deal with the current situation”.

With the always present talk of expectations of another rate drop, some are asking: “Why wait?”

Interest Rates Hit All Time Low - bbc.co.uk

Base Rate Drop on the Cards for January - FTAdviser

100% Mortgages for First Time Buyers

Best Quote Mortgages — Tue, 16 Dec 2008 10:58:03 +0000

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.

The Homeowner Mortgage Support Scheme

Best Quote Mortgages — Thu, 11 Dec 2008 22:27:52 +0000

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

Mortgage Lenders Not Dropping Rates?!

Best Quote Mortgages — Fri, 05 Dec 2008 13:13:44 +0000

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.

Here We Go Again! Base Rate Drops to 2.0%!

Best Quote Mortgages — Thu, 04 Dec 2008 16:54:01 +0000

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…

Northern Rock Takes Repossession Extension on Board

Best Quote Mortgages — Wed, 03 Dec 2008 15:15:24 +0000

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.

6 Months Grace on Repossessions

Best Quote Mortgages — Tue, 02 Dec 2008 22:51:40 +0000

The Royal Bank of Scotland has extended the previous 3 month deadline to 6 months of missed mortgage payments before properties are repossessed. The announcement comes days after the Government took control of RBS having bought 58% of it’s shares. Ministers are beginning to apply pressure to other lenders to loosen the 3 month stronghold.

As repossessions and the amount of missed mortgage payments have been on the rise, this move has given some borrowers some much needed breathing space… Or has it?

Financial analyst Richard Northedge expressed concern regarding the initiative on his Director of Finance blog The Edge yesterday:

Given the time it takes courts to act, that could mean arrears of at least nine months before the bank gets its hands on its collateral.

Simply adding the missed interest to the principal over that period would increase a loan by 5 per cent – which with house values falling by 15 per cent a year would plunge many of the defaulting borrowers into negative equity.

The premise that those in financial trouble now will be in greater trouble later seems to be an ongoing theme among the response to the extension.

Are Banks Treating Customers Fairly? FSA says No!

Best Quote Mortgages — Fri, 28 Nov 2008 16:45:39 +0000

The Telegraph.co.uk is reporting that banks are not ‘treating customers fairly’ regarding Mortgage arrears. The FSA has issued letters to the ‘offending’ lenders that are showing ‘weaknesses in arrears and repossession handling’, especially to those banks that specialise in grant mortgages to borrowers with poor credit histories. Jon Pain, the retailing manager from the FSA says,

Conditions in the mortgage market are difficult and it seems likely that these conditions will persist for some time. In such a challenging operating environment it is particularly important for senior management to ensure the fair treatment of customers including when they go into arrears.

The Pre-Budget report states all major mortgage lenders will not start to repossess homes within 3 months of the mortgage holder falling into arrears. Banks are supposed to repossess home only when all other reasonable attempts to resolve the financial problems have been exhausted.

The FSA proclaims this issue will remain a top priority moving into the new year.

Read more at Mortgage Arrears: banks ‘not treating customers fairly’ - Telegraph.co.uk

Borrowing For a Mortgage? Have a Deposit!

Best Quote Mortgages — Wed, 26 Nov 2008 22:20:43 +0000

You can save up to £2,200 a year if you have a deposit of up to 40% of the property value. Those who have a lower deposit are paying up to this amount on the same loan!

According to new research released by mform.co.uk, on a 2 year tracker mortgage of £150,000, borrowers with a 40% deposit can get rates as low as 3.99%. If the borrower only has a 20% deposit, the rate rises to 5.99%.

Including all fees, this makes for a significant difference in the true cost of mortgage deals. The average cost of a 60% ltv, 2 year tracker is £20,907 compared to £24,746 for 80% ltv. That’s a difference of £1,919 year.

It’s great sign that a couple of these deals are trickling through however it’s still disappointing the options are still minimal for those with smaller deposits, especially First Time Buyers.

First Time Buyers - Not Getting the Full Picture

Best Quote Mortgages — Thu, 20 Nov 2008 15:46:39 +0000

New market analysis compiled by mform.co.uk has revealed that mortgage lenders are not always making their best rates available to first time buyers. With the Bank of England base rate cut, the standard variable rate has come down, however lenders are denying access to the better rates for new mortgage products.

Typically, the SVR deals acted as default products for those who couldn’t or wouldn’t search for better deals, ie they were a last resort but were still attractive due to the lack of fees attached. Not only are some lenders not reflecting the base rate cut in their mortgage options, arrangement and early redemption fees have started to pop up on these SVR products, making it even more unappealing to first time buyers.

News in the Wake of the Base Rate Cut

Best Quote Mortgages — Wed, 19 Nov 2008 22:40:59 +0000

Ever since the Bank of England dropped the base rate 1.5%, there has been a plethora of news in the mortgage and finance industry. Here is a quick list of some of the top stories we’ve recently come across:

B&B chair Pym tells MPs buy-to-let market “now closed” - MoneyMarketing

Shareholders approve Lloyds takeover of HBOS - MoneyMarketing

Tracker mortgages back on the market - MoneyHospital

Banks to Lend More - Nick Robinson’s Newslog

Deflation Looms as Next Challenge on the Horizon - gaurdian.co.uk

One Million Without Clear Mortgage Payment Plan - Telegraph.co.uk

Interest Rates Drop 1.5%

Best Quote Mortgages — Thu, 06 Nov 2008 21:39:54 +0000

Wow, didn’t see this one coming, and neither did other industry leaders…

Ben Thompson, mortgages director at Legal & General said:

If you consider that just six months ago Mervyn King was saying that there would be no rate cuts until 2010, the mindset now is completely different.

The size of the cut, the biggest since 1981, is an effort to boost the economy, however, the message it is also sending is to the UK public is that a recession is coming, so we need to protect our finances.

For mortgage owners, this means:

Fixed Rate Mortgages - Nothing, you are on a fixed rate that is not affected by base rate changes
Tracker Mortgages - Your rate should drop by 1.5% until you have a minimum rate clause
Discount or Variable Rate Mortgages - soley at the discretion of the lender, they will probably drop the rate .5 or 1%.

Pros & Cons of Fixed Rate Remortgages in Credit Crunch

Best Quote Mortgages — Mon, 03 Nov 2008 15:03:36 +0000

Of those borrowers that bought their homes 3 or more years ago, 47% chose fixed rate mortgages compared to 76% in 2007 - 2008. Clearly there has been a shift towards the more ‘appealing’ fixed rate deal rather than variable rate mortgages. As our economic climate changes, will this continue to remain the case? Here are a few things to consider…

Fixed Rate Mortgages

Pros:

Security! Homeowners know how much they will pay each month making budgeting much easier.
Secure a rate you are happy to pay for couple years or the duration of the mortgage.
Changes in the Bank of England’s base rate do not affect your rate.

Cons:

If the base rate falls, your fixed rate mortgage may cost more than the equivalent variable rate deal.
There are likely to be arrangement fees and early repayment charges.
Upon completion of the fixed rate term, you will have to default to the lender’s standard variable rate (SVR) or remortgage.

Variable Rate Mortgages

Pros:

If the Bank of England base rate falls, your monthly payments will fall as well.
Early redemption fees are unlikely if you decide to move onto another product.
Initial rates are usually lower than the fixed rate product on offer so you will pay less in the onset.
You are unlikely to be charged arrangement fees.

Cons:

If the base rate goes up, so will your monthly payments.
Variable rate mortgages are more difficult to budget for.
After the initial fixed rate period, your rates will probably increase.

House Prices to Recover in 2013

Best Quote Mortgages — Mon, 27 Oct 2008 15:09:56 +0000

BBC.co.uk is reporting that house prices won’t get back to where they peaked in 2007 until 2013. The source of their information, the Centre for Economics and Business Research (CEBR), is also predicting prices will fall another 25% by the end of 2009 and then level off.

If this forecast is correct, this means that we should expect the average house price to bottom out at close to £157,000, £50,000 less than at it’s peak a year ago before it begins to rise again in 2010/2011.

The finanial crisis that has evolved into an economic crisis with more unemployment and falling household income, has crushed confidence in the housing market. Few mortgage options have left a small amount of sellers chasing an even smaller number of buyers.

I think Daniel Lee of Property Search Engine, summed up the situation well:

“Mortgage finance is a lot tougher to secure and many sellers still are not dropping their prices to realistic levels. They are in 2008 but have a 2005 mindset,”

Mortgage Fraud Double in Last Year!

Best Quote Mortgages — Tue, 21 Oct 2008 09:35:53 +0000

IFAonline.co.uk is reporting today, that Mortgage Fraud has increased 100% in the last year as a result of increased cases of identity theft and the lax lending criteria of recent years.

Some interesting stats:

The amount of funds paid out to lenders on fraudulent purchases rose from £2m in 2006/2007 to £4m in 2007/2008.
Up to 60,000 UK properties were bought with fraudulent loans.

The FSA has begun an investigation into brokers that have participated in mortgage fraud with more fines and penalties to come. It is also estimated that a minimum of £7bn fruadulent mortgages are currently in lenders books.

Read the article here: Mortgage Fraud Up 100%