30 July 2010

Bank of China choose AToM

The debate on where mortgage interest rates are going took another stumble this week. For many months, various economists had predicted that the Bank of England base rate would rise towards the end of 2010 with further rises throughout 2011. However, Ernst & Young have suggested that if the impending spending cuts come through, the BBR will remain at 0.5% until 2013! Another sign that although we all believe rates have to rise, no one really knows when this will occur.

With this in mind, AToM towers has seen a vast amount of people requesting long term fixed rates over the last 3 to 4 weeks. Uncertainty seems to be the only certainty in the market and, quite rightly in my opinion, people want the guarantee of a long fixed rate term on their mortgage so they can plan for the next few years in confidence. There are some great rates to be negotiated currently and some include free valuation and solicitor’s costs, so that re-mortgaging fees are kept to a minimum.

We’ve also seen lenders expanding their distribution. AToM was delighted to be appointed to the Bank of China distribution panel last week. We can now offer lifetime tracker rates for Residential, Buy to Let and Commercial properties. Bank of China have only been in this area of the market for a year and AToM is now one of only five distributors in the UK to offer their products, outside of their branches. Please contact us to find out more.

And finally, I’ve mentioned this before, but its back on the radar. Many dormant lenders are offering customers a discount of up to 30% off their mortgage to move lenders. If your current lender is one of these, then it’s worth a call to see if you qualify for a discount. Normally, they will give you a deadline in which to complete the transfer of your mortgage but I’m sure it’s a timescale that AToM could meet. Just think, up to a 30% reduction on your mortgage - it could be a financially beneficial telephone call!

23 July 2010

The final curtain for Self Cert..and so long Mercury FM!

The final curtain appears to have been drawn on Self Certification and Fast-Track mortgages. With preparations in place to amalgamate the Financial Services Authority (FSA) into the Bank of England in 2012, the regulator is clearing up what it considers to be a few outstanding projects. The Mortgage Market Review papers were distributed late last year and the FSA has now launched its consultation papers, following feedback from various parties.

One major proposal is that all lenders will have to prove affordability on all loans. Therefore, every mortgage applicant will be required to provide accounts or payslips and possibly bank statements so that the lender can deem the loan affordable to the consumer. With the old Self Certification mortgages and on some current ‘Fast Track’ mortgages, proof of income was not necessarily required by the lender.

Other changes also include providing proof of affordability into retirement and on interest only loans (which will be assessed as though they were on a Repayment basis). House price inflation or downsizing to a smaller property will no longer be acceptable as a suitable repayment option.

These, and a myriad of others points, are now at the consultation process and are planned to be implemented later in the year.

The Council of Mortgage Lenders has reported a great month for new lending in June, some 15% up on May and a 7% increase on June 09. However, whilst the market remains delicate, the power appears to be turning from the sellers to those who can actually raise mortgage finance. Whilst market products remains constrained, this could be very much to the benefit of the buyer. Remember, take independent advice before agreeing to proceed on a mortgage.

And finally…it’s the end of an era as Mercury FM changes to Heart FM. I’d like to personally thank all of the staff at Mercury FM for delivering a great local radio station in recent years. They certainly assisted in growing AToM’s exposure in the local area. I wish them all the very best for the future.

16 July 2010

Time being called on Interest Only?

There has been much hype recently regarding Interest Only and Repayment mortgages. With an Interest Only mortgage, you only pay interest and no capital and so, at the end of your chosen term, you still owe the lender the same amount as when you began. Normally with this method, it is recommended that you contribute to a saving or investment vehicle to generate funds to repay the mortgage at the end of the term. However, this is usually optional.

With a Repayment Mortgage, you pay both interest and capital each month. Initially, this appears more expensive, but does mean that you pay back the loan with no debt outstanding at the end of the term assuming you meet the required payments on time.

Many lenders have recently tightened their requirements on Interest Only mortgages. Some will not allow this method above certain loan to value levels. Others charge higher interest rates and many are trying to persuade customers to switch from interest only to repayment.

Why the recent attention to these repayment options? Simply, because many borrowers have stepped onto the property ladder choose the cheaper option promising to review their payment plans at a later date. The problem is that the ‘later date’ never seems to arrive! As we all know, people generally live to their means. Many borrowers on this scheme have no savings or viable plans to pay back the debt and this is worrying!

That said, Interest Only mortgages can be right for certain professions - people entitled to annual bonuses: the fluctuating income of self employed: or employments where lump sums are received after a number of years in service.

This debate is gathering pace so expect to read more in coming months.

Finally, do you know the full details of your own mortgage? A recent Consumer Financial Education Body report suggests that 15% of mortgage holders are unaware of their current repayment style or interest rate! As this is the largest debt you are likely to take, it seems crazy not to understand it! We are quick to change mobile, broadband or utility provider the minute rates start to increase. This mentality should also be applied to mortgages. Always be on top of your mortgage. Otherwise it could cost you a small fortune.

12 July 2010

June was a great month, but was it a fluke?

AToM can report a bumper month for new business in June. Our best month for mortgage applications and completions for over a year! Fantastic news which shows that, even in a dire market, consumers are turning to independent mortgage advisers for assistance for advice and support. Now, more than ever, independent advice is key. There are many mortgage options available, but finding the right one to suit your requirements can be difficult, especially as some lenders only offer their special mortgage products through a select panel of distributors, like AToM.

Despite such positive news, market conditions, and national debt statistics for June, from creditaction, do not paint a pretty picture. In brief:

- 107 properties were repossessed daily during Q1, 2010
- 203 mortgage possession claims will be issued and 158 mortgage possession orders will be made today
- 391 people are declared insolvent or bankrupt every day. Equivalent to 1 person every 51 seconds during the working day.
- 1,000 people seek some form of formal debt rescheduling every working day.
- 1,896 people were made redundant every day during the 3 months to end April 2010.
- £131.5m is the interest the Government pays each day on the UK’s net debt of £903bn. Estimated to rise to £182m a day in 2015-16!
- Shelter estimate that more than one million householders have used credit cards to pay their mortgage or rent in the last 12 months and moneysupermarket.com advises that almost 5m UK adults regularly use their credit card to pay household bills. Another 2.5m withdraw money using their cards!

Scary figures! The recent emergency budget is trying to tackle the scale of some of these and only time will tell if it succeeds.

In the meantime, remember that financial institutions evaluate your mortgage application based on your credit history. In fact, insurance companies will also credit search you before agreeing to cover you. Most will use either Experian or Equifax to review your financial status. In short, every financial outlay you have, or have had, will be reported. If you have too much credit, not enough credit, or missed payments on any credit or utilities (including Gas bills or Mobile phones), you may find that mortgage availability to you will be limited.

03 July 2010

Are you loyal to your current Lender?

The Bank of England has released figures reporting that 49,815 loan approvals for house purchases occurred in May, slightly lower than April’s figures and below the last six month average of 51,856.

May’s remortgage approvals were also lower than Aprils at 25,759, and below the six month average of 26,443.

Neither report is much of a surprise due to the uncertainty of the emergency budget held in early June and the limited availability of attractive long term mortgage products. I suspect Junes figures may be little better.

The Land Registry House Price Index has confirmed that house prices dropped by 0.2% from April to May this year despite an annual rise of 8.2%.
The average property price in England and Wales is now £165,314 with all regions experiencing increases in their average property values over the last 12 months. London has had the biggest increase of 14.2% while the North East saw just 1.8%. The South East also had the biggest monthly rise at 0.9%. Great news for sellers, not so much for purchasers.

However, now that we know the full details and probable impact of the emergency budget, the pundits are predicting that we could see a bank base rate rise in the 3rd quarter of this year.

So, with rates relatively low and some longer term fixed rates being launched recently, now is probably a good time to review your current mortgage and see what options are available.

Most lenders want new customers, but are less likely to offer you attractive options to stay with them. This, in the main, is due to the different fees and charges that can be added to the new mortgage at the outset. In the current climate, the lenders bottom line tends to be more profitable with new clients, rather than old. So don’t feel loyal, if a better option is with another lender, then think of number one!
However, we’re still stuck with the fact that many lenders do not want to lend in huge volumes. Therefore, you may find that actually getting a mortgage becomes the main obstacle and you may have to stay with your current lender anyway! Seek advice……