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Nationwide Back Funding for Lending as House Prices Fall

by Sarah Halloran

The Nationwide Building Society, who have been at odds with house price figures from other sources in the past have backed up the overall view that the market is in decline. The Society showed that property prices across the UK fell by 0.4% in September to an average figure of £163,964 and that the annual rate of decline now stands at 1.4%.

These statistics represent a small drop from that reported in August although the overall pattern will be causing concern in some quarters. However, the Nationwide are another organisation who are hopeful that the new Funding for Lending Scheme (FLS) will shortly start to show a positive impact on the housing market.

Robert Gardner, Chief Economist at Nationwide said that the market had “been impacted by a number of one-off factors this year, such as the ending of the stamp duty holiday that cannot be controlled by the usual process of seasonal adjustment”.

“For this reason the annual rate of house price change is a better guide to the state of the market at present. On that basis, the housing market remains fairly stable, with prices 1.4% lower than September 2011.”

Nationwide were one of the first mortgage lenders to sign up for the FLS and while they remain firmly behind the scheme, Mr Gardner warned that other factors were of equal importance if the property figures were to experience a sustained rise.

“Labour market developments will remain of paramount importance in deciding the trajectory of house prices. There are grounds for caution on this front, as the unusual combination of rising employment and declining economic activity that was evident in the first half of 2012 is unlikely to be sustained,” he added.

Once again, regional variations in the market vary wildly. At the top of the list, the average price of a property in London is now £301,168 while in Northern Ireland that average drops right down to £107,719.

“London continues to defy economic logic. To be just 2% below its peak in a paralysed economy is preposterous,” said Russell Quirk, of estate agents

Mr Quirk was also sceptical over the FLS, suggesting that it would not filter through to first time buyers and make a significant difference.

“I’m less confident than the Nationwide that the Funding for Lending scheme will have a major impact. Yes, it may make credit more available and cheaper, but will it get through to the people who need it?

“Cheap and available is idle chatter if it’s not getting through to higher loan-to-value borrowers,” Mr Quirk concluded.

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FTB Borrowing Recovering After ‘See-Saw’ Year

by Sarah Halloran

Figures relating to mortgage lending and the property market as a whole have been affected by a number of unusual factors this year. Firstly, there was a late rush to beat the stamp duty ‘holiday’ on properties priced up to £250,000 and the subsequent summer lull was exaggerated by major public events – namely the Queen’s Jubilee and the Olympics.

However, figures released today by the Council of Mortgage Lenders (CML) suggest that lending in June 2012 was boosted by the return of many first time buyers to the market but does this mean we can expect a settled period for the remainder of 2012?

The CML confirmed that lending to First Time Buyers (FTB’s) stood at its highest point since July 2010 – excluding the solitary month of March 2010 when the property market saw a late rush to beat the stamp duty reintroduction.

Paul Smee, Director General of the CML welcomed the news but said that he expected further fluctuations in the market. Concern over the Eurozone crisis continues and the statistics have yet to see any impact from this year’s Olympics.

“Lending figures have see-sawed in the first half of the year and we may see more fluctuations in the coming months,” Mr Smee said.

Many property professionals are pleased to see FTB’s return to the market in such numbers but insist that more has to be done to make first time property purchases more accessible.

“It’s good news that ending the stamp duty concession appears not to have held first-time buyers back permanently, but they still need as much support as possible,” said Charles Haresnape, managing director at Aldermore Residential Mortgages.

“It will be good to see more lenders participating in NewBuy and offering schemes to help borrowers who are struggling to find a deposit.”

The Mortgage Advice Bureau confirmed that their own figures were largely in line with those released by the CML but they also predicted an uncertain period ahead.

“MAB’s own figures for May reflect those released by the CML,” said Brian Murphy, head of lending at the Mortgage Advice Bureau.

“However, we expect external factors to play a major part in activity levels in the next few months, with activity levels to continue to fluctuate.”

Overall, it’s impossible to identify any pattern in the figures released by the CML but it has to be a positive aspect to see FTB’s returning to this level. The future may be uncertain in the short term but longer term benefits should be attained by making it easier to make that first step onto the property ladder.

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Thousands Trapped By Generation Rent

by Alison Feemantle

In recent weeks and months, much of the focus in the property market has been on rental properties and the constant argument between buying and renting. Recent surveys have indicated that in pure financial terms, renting is actually a better option and other positives continue to be highlighted.

On the downside, we’ve seen a rise in complaints about landlords to the Ombudsman and while it seems that property rental is a growth area, it’s been suggested that it’s not exactly a preferred option and there are many who would rather own their home but are simply unable to do so.

A recent survey was conducted by YouGov on behalf of Countrywide, who include an estate agency, a lettings arm and a mortgage broker within their business and are therefore ideally placed to offer an unbiased view of all sides of the market.

The survey of 18-34 year olds found that 45 per cent claimed that the issue of deposit affordability was the biggest stumbling block to buying a home. More tellingly, of the private tenants surveyed, only 32 per cent declared that they were happy where they were and just 5 per cent of tenants claimed that they were delaying a property purchase because they believed that house prices would fall.

“We see first-hand that mortgage deposit and repayment affordability remain the biggest issues facing homebuyers in the UK,” said Grenville Turner, Chief Executive of Countrywide.

“These findings confirm that we are at a crossroad for homeownership, where we could see the next generation becoming a nation of renters without the right intervention from Government.

Mr Turner went on to claim that movement in the property market was so slow that it could go on to have serious implications for estate agents all over the UK.

“Based on current levels of activity, the average home owner moves house once every 25 years as opposed to once in every 12 years,” he added.

“These levels are unsustainable and we call for further support as a strong, vibrant housing market contributes to gross domestic product growth and will dramatically improve the economy.”

In amongst all of these statistics Countrywide maintain that the desire to own one’s own home remains high right across the UK. Throughout the first few weeks of the year we’ve seen figures released relating to property market activity but we seem set for a long period of stagnation if those potential buyers remain trapped in unwanted rental arrangements.

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A Good Time To Remortgage?

by Alison Feemantle

Is Remortgaging for You?

It’s true that interest rates are at their lowest levels in years and this has led to many homeowners remortgaging in a bid to save on their monthly mortgage payments.  The good news is that many lenders are offering low interest products and products especially designed for those looking to remortgage.  Whilst many homes have dropped in value, you may still have enough equity in your home to consider a remortgage.  You may also want to take advantage of the low interest right now – this rate is not expected to rise until at least the end of 2012.

What Is A Remortgage?

A remortgage is simply a new loan which in effect replaces your existing mortgage.  You can obtain your new loan through your existing lender or you can choose to use a different lender.  There are many great deals around right now so it’s definitely worth shopping around for the best deal.  The remortgage process involves your old mortgage loan being paid off and any remaining monies made available to you to do with as you wish.  Before you rush off to remortgage, read about the penalties for early repayment of your loan below.

Why Would I Want A Remortgage?

There are many reasons why homeowners may wish to remortgage:

To make the most of lower interest rates

To pay for expensive items such as home improvements or a wedding

To consolidate debts such as car loans and credit cards

It’s important to remember that your mortgage loan is secured on your home so it’s essential that you are able to meet payments on time.

When is it Not a Good Idea to Remortgage?

Whilst many can benefit from remortgaging there are some circumstances where this won’t be a good idea.  For example, you may still be tied in to a fixed term deal and that means you will probably be liable for a penalty payment for paying off your mortgage early.  This can often amount to thousands of pounds in early repayment charges.  Also, if the balance of your existing mortgage is low you may find that many lenders are not willing to underwrite a remortgage or that the fees involved will be more than the savings you make by remortgaging.

Another reason to avoid remortgaging is if your employment has recently altered and especially if you have recently become self-employed.  Lenders need to know that you are able to repay your mortgage payments and they can often hold back when it comes to more uncertain incomes.  The good news is that there are many lenders relaxing these rules and there are also lenders offering specialist mortgage products for the self-employed.

How to Remortgage?

It’s a good idea to stick with your existing lender in many cases.  They often have great offers for existing customers and you may find the application process a little easier too.  Do check out the rest of the market though as more and more mortgage products are being released onto the market each week.  It’s a good idea to speak to a mortgage broker for free mortgage advice on the latest deals and products.

Once you have found the lender you want to use, the process is as follows:

The lender will need to know the value of your home

You will need to complete a new loan application

The lender will need some conveyancy work to be carried out to secure a title report

You will also need to engage the services of a solicitor to arrange repayment of the loan to your existing lender

The Cost To Remortgage

It costs varying amounts to remortgage depending on the lender, but it should usually cost you less than when you first took out a mortgage.  It’s essential to find out what other costs are involved in remortgaging.  Some lenders may waive fees and charges or at the very least reduce them if you are taking out another product with them.

Many homeowers reap the benefits of remortgaging by enjoying lower payments and if they have equity available in their homes, a little extra on the side.

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How to Avoid Mortgage Arrears

by Alison Feemantle

If you feel you are about to fall out of the black and into the red, read our guide on how to avoid mortgage arrears.

It can be quite tempting to ignore problems with finances and push them to the back of your mind, but this is the worst thing you can do.  Long-term arrears can lead to the possession of your home and a huge black mark on your credit rating.  You will find it very hard to get a mortgage in the future and this black mark will follow you around for at least 6 years.

The most important piece of advice we can give if you are falling into arrears is to ACT NOW.  Acting quickly can help you to address the balance, stop the worry and get your finances back under control.

Switch Mortgage

If you can, try to find a mortgage on a better rate.  You can get lots of valuable advice by speaking to a mortgage advisor and they will be able to show you just how much you will save each month.  Switching mortgages can be one of the most effective things you can do to save your home and your credit report.

Switch to Interest Only Payments

Switching from a repayment to an interest only can reduce your mortgage payments dramatically.  However, this ploy should only be used as a short-term measure.  Lenders can become difficult – they want their money paid after all and you won’t be making a dent in your overall debt so this should never be a long-term arrangement.  Most lenders would rather you switch than fall into arrears so you should not find any problems in requesting this change.

Extend Your Mortgage Term

Adjusting your mortgage so that you are paying it over a longer period can help you to save every month.  Of course, overall you will be paying back more money, but as your situation improves perhaps you can recoup the difference by making overpayments in the future.  You can also choose to shorten the mortgage term once you get back on your feet.

Sell Your Home

Okay, this is the most drastic measure of all, but perhaps you cannot afford your home after all.  Perhaps you overstretched yourself and it’s only just becoming apparent.  Downsizing can therefore be a sensible option and give you a bit of breathing space.  Moving to a financially manageable property will help you to get back to a better position and meet the payments on your mortgage.  You will need to also factor in the cost of moving and any early repayment charges on your current mortgage.  You might also want to consider renting for a while until the property market recovers and this can often be a more affordable option.

Payment Protection Insurance

And finally, many banks and building societies will offer you payment protection insurance if you are worried you might fall into arrears in the future.  It’s always a good idea to read the small print before you sign any of these agreements as these policies are often expensive and are becoming harder to claim on as employment rates rise.  Payments tend to be for a maximum of two years, though many policies stop paying after 12 months. Premiums also vary.

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Top 10 Mortgage Tips for First Time Buyers

by Sarah Halloran

Finding your first house is an exciting time.  Opening the front door to your new home will be one of the happiest and most memorable times of your life, but there are lots of hurdles you need to jump before you reach the finishing line.  We’ve given you 10 tips to help you get the best out of the property buying game so that you experience less stress and get a great mortgage deal.  The home buying experience is different for everybody, but following our basic tips will ensure you buy your first home with confidence.

Shop Around

Once you have found your dream home and had an offer accepted it’s time to find a mortgage.  In fact, this should be the first thing you consider before you even view properties.  Knowing how much you can afford and what your monthly payments will be will prevent nasty shocks later.  There are literally thousands of mortgage deals on the market at the same time so it’s important that you research the market as much as you can.  You can use mortgage comparison websites or seek the help of a professional mortgage broker.

Seek Professional Advice

Feeling lost and confused is something many people experiencing when looking for a mortgage.  You may have been refused a mortgage or told your credit score is low.  There is usually a product that is suitable for these situations and a mortgage advisor can give you the lowdown on which product to go for.

Make Up Your Mind

Again, a mortgage advisor can assist you here.  Decide whether you want variable or fixed rate payments – it’s all about risk and whether you want the security of fixed payments each month or variable payments which follow the Bank’s interest base rate.  Interest rates are very low right now and many mortgage advisors will advise you to fix your mortgage for as long as you can.

Ask Questions

Make sure you understand everything you can about the mortgage application and home buying process.  If there is anything you aren’t sure about, ask.  As a first-time buyer you aren’t expected to know it all and with a mortgage being a huge financial commitment it makes sense to ask questions before you sign on the dotted line.

Read the Small Print

Boring, we know!  However, the small print might contain something that you weren’t aware of or a clause that you need more clarification on.

Keep it Real

Never attempt to borrow more than you can afford to pay back.  Whilst that 5 bedroom house with the swimming pool might be the home of your dreams, you won’t think so when you’re struggling to meet the demands from the mortgage company when you miss your first repayment.  The good news is that many mortgage lenders have tightened their lending requirements to ensure you don’t bite off more than you can chew.

Honest is Always the Best Policy

All lenders will lend to you based on your income and your outgoings.  Don’t be tempted to lie about your income or exaggerate the truth about bonuses.  Don’t play down your debt commitments either.  The mortgage application process is very thorough and your lender will check everything to verify the truth.  It’s so much better and easier to be honest.

Think About the Future

When choosing a mortgage, think about your next likely house move and your next mortgage.  This might be the last thing on your mind right now, but it might help you to choose your mortgage and the lender you go with.  Find out whether your lender will give you a good deal when you decide to move or whether they save their best deals for first-time buyers.

Shop Around Again

Once you have found the mortgage deal you are happy with, it’s time to shop around again for your home and contents insurance.  Building insurance is compulsory when buying a home and you are strongly advised to also take out contents and life insurance policies. Mortgage payment protection might be another option to consider.   Mortgage lenders may be able to offer you advice, but they are not insurance specialists and may recommend you seek professional assistance from an expert in that field.  Shop around online.

Keep Focused and Be Happy

The trials and tribulations of moving home may stay with you long after you have moved, but once you are in your home and happy with your mortgage payments it’s time to take a big deep breath and think ‘I did it’.  Congratulate yourself on jumping through all the buying your first home hoops and enjoy your new home.

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One Fifth of Kids Expect to Own Their Dream Home by 25

by Sarah Halloran

Remember when you were young and adults asked you what you wanted to be?  Perhaps your answer was a fireman, or maybe an astronaut.  I don’t actually remember anybody asking me when I thought I would own my dream home, or even knowing what my dream home was!  Had I been asked, I probably would have wanted some kind of Barbie’s caravan and Millennium Falcon fusion home!

It seems that many children across the UK have a very optimistic view of when they will become homeowners.  The research carried out by Clydesdale and Yorkshire, found that 19% of children questions believed they would own their dream home by the age of 25.

The research also revealed that 68% of children of primary school age expected to own their dream home by the age of 35 even though 33% thought their dream home would cost them between £500,000 and £1m.  Hey, it’s good to have ambition!

It seems that children in Yorkshire have the brightest outlook with 38% aspiring to own their dream home by the time they turn 25 and 83% by the age of 35.

Steve Reid, retail director for Clydesdale Bank, said: “As any parent knows, children can be very ambitious and it is always refreshing to hear about their hopes and dreams, however optimistic they may be.

“With 59% of kids hoping for a swimming pool and 25% wanting their own private theme park within the grounds, it is unsurprising that over a third of children think that their dream home will set them back in excess of £500,000.”

The study also revealed how 71% of children believe they will earn anything up to £100 a week in their first paid job and 22% thinking they will only earn £10 a week which would mean it would take them over 100 years to save up a deposit for that dream home costing £500,000!

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Quickie Guide to Fixed Rate Mortgages

by Sarah Halloran

Following our recent article on the expected freeze on interest until 2014, we thought we would give you a brief guide to fixed rate mortgages.  If you’re thinking of buying a new home now then a fixed rate mortgage could give you peace of mind about your monthly payments for up to five years.  More companies are now releasing 5 year fixed rate products as well as tracker mortgages which track the Bank of England base rate.

When you take out a fixed rate mortgage your rate, as the name suggests, is fixed for a set period of time.  You can usually choose to fix your mortgage for 2,3,5 and in some cases 10 years.

To find the best mortgage product for your situation we always advise speaking to an independent financial advisor or mortgage broker.  They will give you a ‘whole of market’ view so that you get the best deal.

Advantages of a Fixed Rate Mortgage

Choosing a fixed rate mortgage will ensure that your monthly mortgage payments are the same over the fixed rate period.

Let’s say you took out a 5 year fixed mortgage in 2011 and interest rates increased in 2014, as they are predicted to do, your mortgage payment would not rise as a result and would stay the same until 2016 when your fixed rate runs out.  It really is that simple and for many people, a fixed rate mortgage is a blessing.

Disadvantages of a Fixed Rate Mortgage

Naturally, there has to be a little bit of a catch and here it is. Fixed rate mortgages do incur set up fees and these can be quite high.  That makes it even more important to shop around for the right mortgage at the right price.  The set-up fee can usually be added to your total balance and monthly payments.

It’s usual with a fixed rate mortgage that you will be tied to that product until the fixed rate period expires.  If you find a change in your circumstances causes you to review your current mortgage, or that you need to end the fixed rate term early, you will normally be forced to pay a redemption charge.  This can sometimes equate to thousands of pounds depending on your mortgage amount and the terms of the product.   Again, obtaining mortgage advice at an early stage could help you to avoid this type of situation.

If you’re looking for protection against a rise in interest rates then a fixed rate product is for you.  However, it’s also important to understand that interest rates can go down and that if they do, you won’t be able to take advantage in the lower rate.  Right now, interest rates are at a record low 0.5% and have been that way for 28 months now.  This rate is now not expected to rise until 2014 so it’s a great time to look into fixed rate products or even tracker mortgages which track the Bank of England base rate.

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Debt in the UK – Perception Versus Reality

by Sarah Halloran

You can’t open a newspaper these days without reading articles about debt and how the UK is drowning in it.  Of course dramatised stories and over-egged reports sell newspapers, but what do the general public think?  What is the perception of UK debt versus reality?  It’s true that many people are struggling with debt and it’s fair to say the reccession has been the catalyst of many a personal debt problem.

In the UK we are quite secretive about our debt.  It’s one of those taboo subjects that never really comes up.  It’s considered crass to wave a platinum credit card around these days and we tend to keep any debt problems to ourselves or at least within our own four walls.  Perhaps if we were more open about debt and debt problems we could find a way to get help more easily.

A recent survey conducted by Payplan asked a section of the UK public seven questions about their perceptions of debt.  The short survey was designed to explore our thoughts about gender, marital status, housing status, total amount of unsecured debt, monthly income, the regions where debt is more prevalent, and how long it would take to pay back their debt.

Let’s take a look at those questions and the results.  In some areas the perception is pretty close to reality, but in others it’s way off!

For example, a large percentage of those questioned thought that renters were most likely to have debt problems when the reality is it was the homeowners that came out on top.  Of course, homeowners usually have more secured debt in the form of mortgages, but the survey was focusing on unsecured debt and particular debt problems.

Another question asked how many years it would take to pay off a debt management plan to clear a debt.  21% thought it would take 13 years whilst 18% thought it would take 5 years.  The reality is 9 years for most people.

Marital status was also an interesting question.  A lot of those surveyed believed divorced or separated people to be most likely to have a debt problem when it was in fact singletons who came out top.

The infographic below shows perception vs reality in clear detail.  It’s interesting to see how much of the UK is affected by debt and it’s clear to see that our perception is a lot different to what is actually happening out there.

Of course, it goes without saying that you should only take on debt if you can afford the repayments.  Debts like mortgages and personal loans will usually take years to pay off so know what you are getting into before you sign on the dotted line.

Payplan Debt Perceptions Infographic 2011

Source: Payplan – IVA and Free Debt Management Plan provider.

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Google Gets in on the Mortgage Game

by Sarah Halloran

Do those clever people at Google ever sleep?  It’s been reported that Google is piloting a UK mortgage comparison website.  You may have already seen its online advice service called Google Advisor and Mortgage Strategy.  This was launched in May in the US and the new pilot scheme in the UK, called Compare UK Mortgages is thought to be very similar.

The website works in much the same way as any other comparison website although Google has ensured you get to see their website before any others of the same nature.  If you were to search for ‘mortgage’ or ‘compare mortgage’ in Google for instance, you would see the Compare UK Mortgages link at the very top of the search results.  Just where you would expect to see any Google service in fact!

Many big names have got in on the ‘sponsored links’ action with Woolwich, Royal Bank of Scotland, ING Direct, NatWest and Lloyds TSB all showcasing their products with many more expected to follow.

In order to gauge feedback on the website, participants are able to take part in a customer survey.  Some of the questions featured include their thoughts on using a mortgage broker and how they have searched for a mortgage in the past.  Google seems to be taking this quite seriously and with good reason.  More and more consumers are using comparison sites for a wide range of financial products these days, but in an ocean of similar sites it’s still early days and Google has a lot of competition from established comparison sites.

Justin Rees, director of marketing and partnerships at LeadPoint UK, says: “Only time will tell how successful this service will be and what other products will be arriving in the UK.

“It will also be interesting to see how many of the direct marketers that spend millions of pounds each year generating financial services leads through Google react to this latest development.”

However, he did add how it will be a good initiative for the lead generation market as a whole.

“Usually when Google enters a new market it requires all the incumbents to step up in order to compete so hopefully this innovation will be good for consumers and the adviser community as the current lead generation companies will have to work even harder to improve their services.

“The UK has a strong tradition of intermediary-based advice and long may this remain so.”

Earlier in March this year Google bought for almost £40m.  When you consider how many consumers now use comparison websites it was only a matter of time before Google took the initiative to start offering their own mortgage comparison services.

It makes sense if you are looking to buy your first or next house to weigh up all the mortgage options.  More and more products are being released on a daily basis and you could find an excellent deal by spending five minutes entering a little information on a comparison website.  We’ll be keeping an eye on Google and will let you know of further developments and services they may be releasing.  Watch this space…

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