24 April 2010

Mortgages with a barcode?

Homeowners rate buying a house more stressful than having a child. House buying tops the table of most ‘stressful life experiences’ with one in four (24%) homeowners finding it the most demanding and worrying thing they have done, according to research from Unbiased.co.uk

It is still First Time Buyers who are particularly hard hit needing a substantial deposit merely to get on the housing ladder and a significantly larger deposit to access the best rates.

According to creditaction, the typical first time buyer deposit in January was 25% (£38,348), with the average first time buyer loan being £115,044 and at an average of 3.08 times their income.

The reality continues with a YouGov survey revealing that 86% of 18-30 years olds could not currently afford to buy a home if they wanted to, despite recent falls in house prices. A massive 83% of 18-30 year olds also thought buying a new home was now more a pipe dream than a reality.

It shouldn’t be so. We have witnessed the suspension of Stamp Duty below £250k, lower property prices, more lenders looking to assist First Time Buyers with higher loan to value mortgages and other options, including Guarantor mortgages and Shared Ownership schemes. You really need to research and explore all the options available to make that important first step on to the property ladder a reality.

Meanwhile, house prices increased by 1.1% in March, partly offsetting February’s 1.6%fall, according to the latest Halifax House Price Index. This rise was the eighth rise in the past nine months. The average price is now £168,521, 9.1% above last Aprils low point.

House price confidence appears to be on the increase; if only the mortgage financing available could support such levels of optimism.

Let’s not be despondent though at the continuing tough market. Tesco Bank has confirmed plans to launch a mortgage range by the end of 2010 as it looks to build the brand into a fully-fledged retail bank. So whilst picking up your cornflakes, butter, bananas and sausages, you can also throw a mortgage in to your basket. I wonder if it will have a barcode so you can scan it in at the self-service check out?

16 April 2010

The value of dealing with a Mortgage Specialist

There’s a new sound certain to gather volume in coming weeks and rapidly overtaking the wailings of politicians on the hustings! It’s the plaintiff sound of heads banging against a wall in frustration! These are the daily trials and tribulations of mortgage intermediaries dealing with some major mortgage lenders in the current climate.

As staff reductions and consolidations continue, mostly below the radar of national press, teams of underwriters, who brokers have established solid relationships, are being replaced by telephone ‘no can do’ teams and who, in most cases, to put it bluntly, are not helpful in the slightest. In fact, one of my colleagues has chased a lender for a response on an application for the last four days being constantly told “we are within our 48 hour service standards.” Perhaps they mean 48 working hours, so nearly seven business days? Some lenders have recently confirmed backlogs are in excess of ten days!

If, for whatever reason, a lenders underwriter decides to request one further bit of information, or needs additional clarification, then the fun begins. It is really frustrating to learn that some underwriters are not allowed to call and establish an answer which might take 30 seconds to resolve. Instead, we receive an automated email detailing requirements and once we’ve provided the information, we re-enter the ‘48 hour’ service standard queue and the cycle begins all over again. Assuming of course that the information returned does not get lost and is directed to the right department!

Whinge over! It could have been much worse (really!) but here I am, hanging on to the phone (20 mins so far) waiting for someone to talk to me. But, they keep saying that I am really important to them, so I will hang on for just a little while longer…!

What this all demonstrates is the value of dealing with a specialist mortgage intermediary as we will take this painful flack on your behalf. Imagine you are dealing with the lender direct and this happens to you! There really is no better time to utilise the expertise and staffing levels we can provide for you. Let us take the strain on your behalf to push the mortgage through to an early completion.

12 April 2010

Few consumers really know what it would cost to replace all of their household goods

So now it’s confirmed. The election will be on 6th May. I will step back from commenting on political issues. There will be enough elsewhere! So, this week I thought I would review home building and contents insurance.

Buildings insurance is compulsory wherever a mortgage is in place. Whilst contents insurance is optional, it is often packaged together with buildings insurance, generally representing better value for the homeowner and value is more important than ever. According to the AA’s benchmark BIP index, quoted premiums in this area have risen for eight successive quarters.

So, why the rise in buildings insurance when house prices have been depressed? Claims experience affects pricing. The harsh winter and last year’s floods has led to an upsurge in claims for buildings damaged by snow, ice and water. The cost of rebuilding and repairing homes to the higher standards required by building regulations has been steadily rising – and it’s the cost of rebuild, not market value, that dictates the sum insured - and the most that an insurer is likely to pay out.

The homeowner has responsibility of ensuring that the sum insured is right. There is a real danger of both over and under-insurance as most homeowners don’t know the full rebuilding cost of their property. A lenders mortgage valuation will provide an estimated rebuild cost, but you should always consider a second opinion.

When it comes to contents insurance there is a persistent issue with under-insurance. Few consumers really know what it would cost to replace all of their household goods, and very few have a full inventory of their possessions. It is worthwhile systematically visiting every room – remember the garage and loft - and listing everything. People naturally think of the bigger ticket items, like furniture, TV and jewelry, but it’s amazing how many forget to include other pricey items like clothes and tools.

When assessing, it is important to identify the valuable items. Most insurers include a reasonable limit for unspecified high risk and valuable items, but do check that it will be adequate and that the single item limits are appropriate. If in doubt, speak to your local independent and whole of market mortgage and insurance provider.

02 April 2010

Guarantor Mortgages, great for First Time Buyers

First time buyers are still struggling to get on to the property ladder. So, this week, I thought I would evaluate an option available to first time buyers in the form of guarantor mortgages.

Some lenders will allow a family member to act as a guarantor. Usually, the guarantor will need to prove they can afford their own residential mortgage and also the proposed mortgage they wish to guarantee. For example, if their mortgage was £100k and the proposed mortgage was £100k, the lender would look to ensure the guarantor could afford the total £200k loan. So, based on standard income multiples of, say, 4 x income, the guarantor would need to prove income of £50k. There are many ways of calculating affordability and every mortgage case is different. Lenders income multiples vary. Some assume the guarantor has no other loans. Some lenders offer a limited liability guarantee, so guaranteeing a smaller proportion of the loan. Although a guarantor mortgage is traditionally associated with first time buyers, there are products in the market that cater for those looking to move home or re-mortgage. You will probably need a minimum deposit of 15%.

The Post Office has confirmed that they will shortly be lending 90% mortgages aimed at first time buyers. At the moment it has not given any more details about the product, but says it wants to target those on low incomes. Let’s evaluate. I’ll make assumptions that they mean £20k (and below) and four times income, so £80k. Add in a 10% deposit (plus solicitors and valuation fees) and you are looking at a purchase price in the region of just £90k! This move was announced by a Government spokesman so the cynic in me asks if the headline was designed to win votes? Rates are likely to be quite high and, interestingly, the funding line is from Bank of Ireland.

Nationwide have confirmed that house prices rose by 0.7% in March, compared to a 0.8% drop in February. Prices sit 9% higher than a year ago, say the lender.

Finally, the WSCT Business Awards 2010 voting deadline is drawing close (9/4/10). If you have not voted yet, please take 2 minutes to do so. Local companies have had a rough ride over the last few months and need your support and your votes!
Have a great Easter!