Early Christmas Present - A Rate Price War!

The price war continues as three more lenders reduce their rates.  Nationwide, Virgin Money and Precise Mortgages have all cut rates as they try to lure customers to their attractive propositions.   

This is really great news for the end customer as there are some very attractive and competitive rates out there in the run up to Christmas.  Highlights across the market include 5 year fixed rates at sub 3% rates and shorter 2 or 3 year fixeds with minimal or no fees.  This really is a great time to review rates and see if a change of mortgage lender will save you money.

It’s not just the prime side the rate war is affecting.  For those who have had previous financial issues with their credit, the lenders who cater for this sector (normally called Near Prime) have also lowered rates as demand increases for these types of mortgages.   

There are many lenders re-lending in this arena and they will cater for a missed mortgage payment in the last 12 months, historic defaults, County Court Judgements (CCJs).  A limited few will also consider those who are discharged bankrupts, had IVAs or who are in a debt management plan.

There’s no denying that this area of the market took a battering back in 2007 as many, many lenders who offered these types of mortgages were shut down or mothballed.  However, the regulatory lending restrictions are now more stringent than back then and the new breed (some never really left) have a whole new outlook on the term ‘responsible lending’.  But where there is demand, there will always be supply.  Rates range from late 3%s, right up to double figures depending on individual circumstances.

Finally, the Near Prime lender tends to be a ‘stepping stone’.  Most issues usually disappear from a credit search after a few years.  Therefore, the aim would normally be to cater for current requirements on a short to medium term basis with the longer term outlook being structured to enable the customer to get back onto high street mortgage offerings, as quickly and cost effectively as possible.  Terms and conditions always apply and always best to seek professional advice.

An increasing appetite to lend..

The ‘Property Today’ box outside AToM ran out of property papers by Monday lunchtime this week! A new record! And with my neighbours selling their property within three weeks of going on sale, I could be accused of being overly positive about public interest in the current property market, despite what the national press are reporting!

One of the mortgage trade magazines (Mortgage Strategy) this week has revealed that they are aware that 11 new lending institutions have applied to the FSA for authorisation to lend, over the past 12 months. Great news and this shows an increasing appetite to lend. However, with the regulators indicating that they will make a decision within 12 months of receiving an application, some of these new lender opportunities could be a way off just yet!

Inflation has risen to 4.5% for April, from 4% in March, state the Office of National Statistics. Easter and the numerous Bank Holidays had a significant impact. Although, this probably won’t have an impact on the Bank of England Base rate with any rise unlikely to occur until November at the earliest, reports an economist for Cebr. Who knows!?

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 away. If your current lender is one of these (not actively lending), 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!

And finally, remember that financial institutions evaluate your mortgage application based on your credit history. In fact, every financial outlay you have, or have had, may be reported upon. Most institutions will use either Experian or Equifax to review your financial status. 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 could be limited.

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!