28 January 2011

What about a secured loan?

With all the recent headlines appearing in the national press on mortgage rates, are you looking to remortgage? Most lenders look to attract new customers, but are less likely to offer 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; 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!

The other option, if you’re looking to raise cash for home improvements, to consolidate debt (although not encouraged) or for another legal purpose, is a secured loan.

A secured loan is a 2nd, or subsequent charge, designed for homeowners which allows the equity in their property to be used as security. Loans are usually between £3.5k and £100k. There are also no 'up-front' fees to find.

We tend to find that many customers looking to remortgage to raise additional funds are already on an attractive rate with their lender. To move away could be costly and they could end up on a much higher interest rate. Depending on the amount already lent as a mortgage, compared to the value of the property, most lenders will allow a secured loan to be added as additional borrowing.

The secured loan is usually repaid over a shorter term than a mortgage, circa 3-7 years, but the term can be longer, although this will increase the amount of interest repaid. Rates vary depending on the customer’s circumstances and current level of borrowings.

As with all finance, seek advice and think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other loan secured on it!

21 January 2011

Under pressure...!

SWAP rates (mechanism through which lenders can acquire a fixed price for funding over a specific period of time) have risen sharply over the last week. As a result, some lenders have withdrawn fixed rates and launched new products with higher interest rates. Many are predicting that whilst tracker rates (following the Bank of England Base Rate, BBR) will remain pretty low, fixed rate products, once raised, will not come back down. This is despite the BBR remaining at 0.50% for yet another month. The pressure of rising inflation (3.7% in December) is said to be worrying the money markets and pushing up SWAP rates. In addition, rising inflation puts pressure on to the Bank of England to raise interest rates to curb spending. Are we set for a BBR increase in February? Should you fix before it’s too late?

We are three weeks in to the New Year and that can only mean one thing - the arrival of bank statements, credit card bills, store card bills, and so on, showing the Christmas spends. Depressing, I know! But I can’t stress how important it is to make payments, even if it’s the minimum required. If you miss a payment to any financial institution, this will affect your credit score and could affect your ability to obtain a mortgage, whether you are a first time buyer, home mover or looking to remortgage.

Specialist lenders will look at those with missed payments (to unsecured credit), defaults, and/or CCJs, however these lenders price for risk and as such their interest rates are somewhat higher than those offered on the high street.

These lenders tend not to be household names and carry out a manual underwriting approach, rather than a credit scoring decision. Deposit requirements are a minimum of 20% depending on the customer’s credit issues. The higher the financial issues, the higher the deposit required and the higher the interest rate offered. Rates range from early 5%s and go right up to and over 10%. Each application is assessed on its own merits and individual circumstances may differ. For further information and detailed terms and conditions, speak to your local independent mortgage brokers!

14 January 2011

Lenders are showing an appetite to lend!

2011 has started with a bang! The Bank of China have reduced their Residential Life Time Tracker rate to just 1.80% above the Bank of England Base Rate. Currently, the pay rate is 2.30% (APR 2.50%). This is available to home movers, those re-mortgaging and also to First Time Buyers, up to a maximum loan of 80% of the property value. A very good rate and a positive step forward from this lender.

BM Solutions, part of the Lloyds Banking Group, have launched some fixed rate Buy to Let mortgages with arrangement fees of just 1.5%. Compared to some in the market, the fees alone might save up to 2% in costs! Many believe the Buy to Let / Investment property market will boom in 2011.

However, with regards to fixed rates, we’ve seen some lenders already increasing their product rate offerings. Whether ‘to fix or not to fix’ your mortgage rate, will be an ongoing debate throughout 2011.

Lenders are showing an appetite to lend. One lender on the AToM panel has allocated a tranche of £10m in funding to be distributed in January. This is great news for the market and in addition, this lender does not credit score. So if a high street lender has declined your application due to a low credit score, or because you don’t fit their particular requirements, you may be exactly the type of customer our lender is looking for. However, please note that they are not looking for those who have had previous credit issues.

Finally, First Time Buyers are likely to be in need of most support throughout 2011. So far, there have been some small glimmers of hope with a couple of lenders revamping their 90% loan to value products, so requiring just a 10% deposit but this is still not enough! The interest rates are relatively high and as such the monthly payments on this type of mortgage won’t be attractive to many prospective borrowers. Those with a higher deposit will attract a lower interest rate. But in current climates, that tends to be difficult to achieve. More still needs to be done to help first timers get onto the property ladder and I hope that lenders take action to assist. Sooner, rather than later.

07 January 2011

A positive start to 2011!

A very Happy New Year to you! This is my first day back in the office following the festive period and already I’m struggling to keep up with the number of product changes from various lenders. They are positive changes though!

The Bank of China have reduced their Residential Life Time Tracker rate to just 1.80% above the Bank of England Base Rate. Currently, the pay rate is 2.30% (APR 2.50%). This is available to home movers, those re-mortgaging and also to First Time Buyers, up to a maximum loan of 80% of the property value.

The Coventry has focused on Buy to Lets. With rates from 4.25% and zero arrangement fees, they are well worth a look if you are considering taking a step into the Buy to Let arena in 2011. Many believe this will be a buoyant area generally as First Time Buyers continue to struggle to get onto the property ladder and surrender to renting instead.

The Bank of England has released lending figures for November, stating that re-mortgaging levels increased by some £400m compared to that of October. Approvals stood at 34,262 compared to 30,429 in October with a six month average 28,210. Purchase approvals amounted to 48,019, higher than Octobers figures, but below the six month average of 48,145.

And finally... if there is one New Year resolution to maintain, resulting from the dire year that was 2010, it is to be on top of your finances! By this, I don’t just mean mortgages, although as this is inevitably your biggest debt it should be a priority! Do you have enough life cover? Have you made financial provision to cater for an unfortunate redundancy? Have you written a will? These are all matters that may seem small in isolation but which could prove to be very worthwhile at a later date.

Let’s hope that 2011 see's the beginning of a recovery in the financial world. Last year was depressing financially and this year will be tough too but there are some good signs that the property market, at least, will hold its own. Let’s hope so!