15 May 2009

Easing the Financial Strain...

I did have a small chuckle last week as reports emerged from the government that the ‘mortgage rescue scheme’ initiative (which was due to ‘save the world’), has assisted just one family. This is despite suggestions that it would be available to circa 6,000 in the country. In an hour of need, it surprises me that with so many analysts, experts and others in the industry, they cannot come up with a more practical scheme that would actually help rather than just be an apparent PR stunt. Perhaps less concentration on expenses might be a start!
Following the unexpected drop last week, the cost of fixed rate monies increased this week, as have the number of mortgage products in the market. The latter is great news as competition and attractive product options begin to return. Despite being some 70% down on this time last year, the number of available products has increased by 22% over the last two months to circa 3,300.
Much is made these days of the fact that, pre-credit crunch, customers took on secondary borrowings simply because they were available! These are often very expensive and can ultimately lead to financial difficulties which might easily blight their credit file if it is left to fester. In many cases, re-mortgaging may be the right option for customers and the following is a live example of one case where we were able to make a real difference:
The clients owned a property worth £395000 with a standard mortgage of only £47000. However, they had accumulated more than £90000 in secondary borrowings, including car and credit card loans and other similar commitments. These had led to monthly outgoings in excess of £2700! Whilst it is not always wise to convert short term loans to long term borrowings, these clients were gradually heading towards a point where defaults on payments were going to happen soon. A view needed to be taken, and quickly.
Income was fine and a re-mortgage to £140000 was undertaken culminating in a new monthly payment of approximately £785 representing a monthly saving of £1915. This massively eased the financial strain the clients were starting to feel. This would not be the right response for everyone of course and every applicant has different needs demanding individual consideration. Even for those of similar age and financial circumstances! As always, for more information, please visit our website or contact us on the number above.

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