29 October 2010

Buy to Let is a growing arena.

Political and economic commentators seem to be divergent over the outcome of the recent Spending Review, though it is likely to be some time before its full impact reaches the high street. The doomsayers predict that much damage to confidence may have already been done, psychologically at least! I prefer to look at a more positive outcome. If the overall reduction was intended to be 8% that leaves 92% still to spend! It seems more sensible to major on that number now and discuss how best to use it to the benefit of the country as a whole.

There may well be some pain to come but, as the saying goes, no pain, no gain and we cannot ignore the financial mess that the country is in. So far, investment markets have not meandered much suggesting that the details of the review have been well received, in principle anyway! The current base rate structure is good for those with mortgages on base rate trackers, but it is not so good for savers or pensioners who look to higher rates to boost their income. I have regularly encouraged readers to be ahead of the mortgage rate game and, putting my reputation on the line, I am leaning towards a rate rise sooner than many pundits predict.

One area of the mortgage market which continues to gain momentum is Equity Release. Put simply, this is a scheme through which the asset rich can release funds from the equity in their property. This scheme normally applies to applicants approaching the twilight of their life although it is not uncommon for the newly retired to participate. Equity Release is highly regulated to ensure no high pressure selling and we always encourage offspring involvement. After all, the equity is likely to form a major part of their inheritance and they should always have the opportunity of finding alternative methods of funding their parent’s lifestyle first.

Another rapidly growing mortgage arena is in Buy to Let and lenders are introducing more competitive products almost daily. As problems for first time buyers continue, the Buy to Let area is wide open for investors, especially as rental incomes become increasingly attractive. Whatever your interest, talk to an independent mortgage advisor.

22 October 2010

It's nearly 3 years on...

Just think, in two months time, we’ll be winding down for Christmas! So I thought I’d get in quick as most of the shops already have decorations to hand and even some of the advertisements on TV are now Christmas orientated! I think most would agree that this year was a year of hope and expectation that we’d see some light at the end of the tunnel. But unfortunately it has remained lacklustre despite all the effort and I for one will certainly look forward to closing the door on it !

However, as we enter the final months of the year, we are starting to see positive movement from some lenders as they relax their strict underwriting criteria and are lending slightly more. One lender this week, on a conference call, asked us if we could help them double their business volumes. There is an appetite to lend, hoorah! I suspect others will make a last ditch attempt to end the year on a high by offering lower rates to attract decent volumes of business in order to hit targets. Watch this space!

Finally, can you believe it’s nearly three years since the first public signs of a credit crunch/major recession were emerging? Northern Rock was the first real public player to go in to financial difficulties in late 2007, with many others following thereafter (many had already vanished from the radar prior to public awareness!).

Long term rates, in 2007, were considerably higher than where they are now. If you are on a long term fixed rate, in excess of 5%, then it may just be worth having a review to see if remortgaging now could save you money. With many lenders offering low rates and some offering fee free remortgage deals, there’s no harm in reviewing your current mortgage product to see if money can be saved. Even if you are to incur redemption penalties to change lenders, a new mortgage could still work out financially beneficial. Speak to your local independent mortgage advisers to find out more. It could be a very worthwhile conversation in the run up to Christmas and looking to the future!

15 October 2010

Don't be fooled by the 'Bar room adviser' !

A report from the Halifax has suggested that house prices dropped in September by a huge 3.6%. According to the lender, the average price of a home in the UK is now £162,096. The fall equates to an average drop in price of £6,000.

Despite this disappointing, but unsurprising report, one National Mortgage Brokerage reported that mortgage applications were up 14% in September and numerous lenders have recently reduced rates, including the Coventry who reduced some products by up to 0.9%.

The Royal Institute of Chartered Surveyors (RICS) also reported an influx of new valuation instructions in September. RICS say this was due to homeowners testing the market ahead of further public spending cuts, or trying to sell before a possible deterioration in the economy.

Readers will appreciate that we regularly meet with all types of clients and endeavour to find the right mortgage for their particular needs. We are amazed how often clients advise us of the fantastic offerings which are apparently available according to 'a mate in the pub'. A story we recently heard about was the client who was selling and buying and who was advised by their 'friend' not to make the last two or three mortgage payments. Allegedly, it didn’t matter because they were leaving that lender anyway! Very worrying, totally incorrect and certain to place a big black mark on their credit file and stop any chance of getting a new mortgage!

Another recent instance included a client who was advised to surrender their life and savings plan early, when it was within touching distance of maturity. This has lost them the opportunity of a potential maturity bonus, the continuation of life cover and, in our view, there may have been other and better ways of making use of their plan when their full circumstances were known.

Qualified advisors have to stand behind the advice they give. Will you be able to sue your 'bar room adviser’ if the advice they give turns out to be faulty! I doubt it, so play safe and only listen to the professionals who have the qualifications to back up their advice and recommendation which will only be made after a full and thorough examination of your circumstances.

08 October 2010

Understand the different types of mortgages?

A worrying report was recently released by First Direct, the online lender of the HSBC group. Following a survey of 2,000 customers, 92% of those planning on taking out a mortgage during the course of the next year don't understand the difference between the types of deal on offer. Only 26% of existing mortgage borrowers said they completely understood how the main types of mortgages work and, on average, only 22% completely grasped the difference between fixed rates, variable deals and tracker mortgages. The research also concluded that men are more likely to appreciate the difference between types of mortgage than women, at 26% compared to 18%. In short, the cynic in me would suggest that this shows the severe lack of advice taken and understanding provided for customers who buy mortgages online, or from a source only offering their own brand products.

Confidence amongst homeowners about the outlook for the property market has fallen sharply amid growing concerns over the availability of mortgage finance, say Zoopla.co.uk. According to the survey of 6,149 homeowners, the average growth predicted for house prices in the next six months has also dropped to only 3% from 5.5% three months ago. And the number of respondents who expect property prices to fall over the coming six months is up sharply to 1 in 4 (25%) from 1 in 10 (11%) only three months ago.

According to creditaction, at the end of June, there were 1.25 million buy to let mortgages outstanding, accounting for 12% of all mortgages, the highest proportion since records began. In addition, the lettings market remains buoyant, reports the latest RICS Residential Lettings survey, due to increased tenant demand and a shortage of properties pushing rents higher.

First Time Buyers accounted for 52,200 mortgages between April to June, up from 43,400 from January to March, according to the Council of Mortgage Lenders. The typical first time buyer deposit in July was 24% (£39k). The average loan was £123,711 and the average first time buyer borrowed 3.14 times their income.

01 October 2010

Lender re-enters the market!

Good news this week! One lender who stepped back from new business lending back in February 2008 is lending again. Paragon Mortgages were renowned specialists in the buy to let arena with professional landlords, houses of multiple occupancy and properties in limited company names. Their re-emergence in the market is positive news, especially for landlords with an established portfolio of properties. Paragon offer a non credit scoring approach to prudent lending, design their products to attract experienced landlords and, even better news, they are initially launching through a limited panel of distributors including AToM.

In the residential market, remortgage applications appear to be on the increase. Borrowers tend to be looking to secure long term fixed rates. Others are releasing equity to acquire Buy to Let properties in the current cheaper climate or releasing funds to help siblings step on to the increasingly tough property ladder. Whatever the reason, make sure you do your homework. As we move in to the final quarter of the year, some lenders will be looking to end the year on a high and attract volume business. There are some great rates available to cater for all requirements, whether you require a fixed rate, tracker/discounted, or a capped rate, etc.

I’ve said this before, but it needs constant review. If you have plans to apply for a mortgage in the not too distant future, keep your eye on your credit. Don’t miss or make late payments to any provider. All financial institutions will base their decision initially on your credit history. If you have missed or late payments, or even a lot of recent searches (from multiple finance/mobile/car/home insurance applications), this could be detrimental to your ability to obtain finance, at a competitive rate. If you have not reviewed your credit search before, get it for free (30day trial period) from Credit Expert (see www.atomltd.co.uk for a link). It’s well worth a review and a good insight on how attractive you may, or may not, look to a lender.