mortgage
Tips for finding the best mortgage
Getting on the property ladder is not easy these days, especially for younger people and first-time buyers. There’s plenty to think about when looking for the right house, let alone finding the right mortgage with so many different mortgage options out there. When thinking of buying a house, shopping around for a mortgage is extremely important; without properly researching what’s out there, buyers risk signing a deal that may not be in their best interests, and could end up paying more.
Before you even start looking to get a mortgage you should always make sure that you are aware of the state of the current housing market. Once you’ve made all the researches about the area you’d like to buy in, only then you should look around the many price comparison websites. This will give you a feel for what sort of mortgage deals are out there and which ones are the most adequate to your situation.
Totallymoney.com for example, returns results from over 3,000 mortgage companies; it searches for deals from the entire mortgage market and displays them objectively.
Note that not all price comparison websites provide every available offer on the market and brokers typically only include mortgages that they can sell themselves, so the best deals may not necessarily be included.
On the other hand, there are certain deals that can only be available through specific brokers this is why it is important to shop around and take your time before making a decision that will follow you for the next 25 years.
It is also worth noting that many online mortgage calculators can only give the approximate costs and will rarely include fees and charges. In reality, these play a significant part on total monthly costs, so having these calculated will prevent any unpleasant surprises in the future.
In the end you may still choose to consult an Independent Financial Advisor, and we would recommend that, but searching first on a mortgage comparison website will give you a good starting point in understanding what your options are and what you are likely to be able to borrow, at what rates and over what period. Most importantly you’ll be able to budget for your total mortgage costs when considering making an offer on your new property.
Scotland Sees The Start of Help to Buy
A major initiative is underway to help first time buyers get their foot on the property ladder in Scotland. The Scottish Government began a three year investment program on September 30th 2013 with an allocation of £220 million financial support designed to ease the difficulties for those trying to buy a home. It is also hoped that the system will help kick start the stuttering property market which has shown some faltering signs of recovery recently.
The shared equity scheme, called ‘Help to Buy’ (Scotland) mirrors a similar scheme that was launched in England. It is open to first time buyers and available to home owners who are buying a new build home from a selection of participating construction companies. In order to qualify the property in question must be a buyer’s only residence and it is not available to anyone that owns another home.
Those that are eligible can access up to 20% of the purchase price of the property and then must contribute the remaining 80%. The figure will allow those involved to overcome the barrier posed in raising the deposit figure required by most mortgage lenders. The scheme will apply to homes ranging in up to £400,000 value in Scotland.
The government have recognised the fact that in recent years the general uncertainty in the market about the value of property and the prohibitively high initial investment costs has prevented many people from taking the first step and buying their own home. Instead high numbers have continued to opt for rental as the safer choice. The news comes on the back of a buoyant period in the Scottish rental market with Scotland’s leading property portal, Citylets, reporting a continued increase in traffic.
The Scottish Government has worked closely with the house building industry body, Homes for Scotland, and The Council of Mortgage Lenders to design a scheme that is best suited to the market in Scotland. All three of these parties will monitor the development of the program.
Speaking about the launch of the scheme Deputy First Minister, Nicola Sturgeon stated, ‘There is no doubt that getting onto, or moving up the property ladder has become tougher in recent years.’ She explained how the initiative would overcome the biggest obstacle to those attempting to get a foot on the property ladder. ‘House buyers are being hampered by the lack of affordable mortgages, with high deposits often a major barrier.’
Mrs Sturgeon added that the impact of the scheme is expected to work on a variety of levels. If successful ‘Help to Buy’ would not just assist those who are buying their first home, but would also aid second steppers to move on to a new property. In addition she underlined the wider impact stating that the scheme would support the housing industry through the government’s commitment to investment in affordable housing throughout Scotland. The head of mortgages from the Bank of Scotland, Nicola Noble, shared in the confidence that the system would make a difference to all of those families in Scotland who were looking for some assistance through a Shared Equity mortgage.
How to save up for a deposit for a house
In today’s budget the Chancellor announced more support for people wishing to buy their own homes, but will it make things easier for you and how can you go about saving up a deposit of your own?
The additional support for would-be home owners comes in two forms. Firstly the New Buy scheme is being expanded. This scheme helps buyers secure a mortgage by reducing the level of deposit that you have to raise on your own.
It’s effectively an interest free loan from the Government which you can put towards your deposit and pay back when you sell the house. This scheme will be available to anyone buying a new home under £600,000. The second support mechanism will be launched in 2014 nd will be a guarantee provided to banks against mortgages, effectively allowing banks to reduce deposits to 5% without taking on so much risk. Think of it as an insurance policy for banks.
So where does this leave you?
If you are thinking about buying a house you will likely still have to raise some kind of deposit – whether it’s 5% or 25% – so how do you go about saving this?
One way is to get an ISA in each tax year so you can put your savings into an interest free savings account.
For 2013/14 the annual ISA investment allowance will be £11,520, of which £5,760 can be saved in a cash ISA and the remainder can be invested in a stocks and shares ISA. If you do not use your ISA allowance for a given year then you lose it, so it can be prudent to use your allowance each year to maximise your tax free savings.
Could You Take Out a 30 Year Mortgage? Thousands Are!
The office for National Statistics (ONS) has revealed what some believe to be worrying figures in regards to the number of 30 year mortgages currently being taken by new borrowers. The statistics also show that the 25 year deal, which is still seen as the standard term, is dwindling fast.
The ONS’ figures show that 23.3% of all new mortgages are now spread over a thirty year period. Meanwhile, the 25 year term, which accounted for 70% of the overall market in the 1990’s, has fallen to around a 30% share.
The thirty year mortgage numbers have increased since the financial crash back in 2008 and at that stage, borrowers seemed more concerned about taking on more debt over a longer period of time. In the four years that have followed however, mortgage affordability has been one of the factors behind the steady rise.
Bob Pannell, chief economist at the Council of Mortgage Lenders confirmed that the rising costs of home loans were a main contributory factor. Elsewhere, some property experts are concerned at a repossession time bomb that is currently ticking due to homeowners deferring debt in the short term.
Meanwhile, the question of overall mortgage availability has also been highlighted by these figures and in a survey carried out by Canadean Consumer for the Building Societies Association (BSA), it was shown that financing and general availability of home loans was improving.
“Results from our Property Tracker report indicate that the barriers to purchasing property may be largely down to perception, rather than actual experience,” said Paul Broadhead, head of mortgage policy at the BSA.
If, as Mr Boradhead suggests, there is an issue with the public’s perception of the mortgage market, is there a significant proportion of borrowers who are taking out 30 year mortgages unnecessarily?
Meanwhile, there have been several stories highlight beneficial rates from some of the lenders but the issues over raising deposits for first time buyers (FTB’s) still remain. A recent survey has shown that around 47% of FTB’s believe that it will take them ten years or more to save sufficient funds for a suitable deposit.
“Prospective first-time buyers believe they will be 35 years old by the time they get on the housing ladder,” said John Willcock, head of Post Office Mortgages.
As always, there is mixed news for borrowers but it does seem that those who are remortgaging or who have a sufficient deposit for a new home, may have more choice from the market than they may think.
Attractive ‘Swap Rates’ Can Boost the Subdued Mortgage Market
With Santander set to increase their Standard Variable Rate (SVR) Mortgage next month, it may already be too late to take advantage of the lender’s lower option but, according to industry experts, there are some attractive alternatives on the market.
The levels at which the banks lend to one another (swap rates) are very low and in turn, this has led to a number of impressive remortgage deals. Providing the financial penalties for transferring your mortgage are either low or non-existent, these deals could be well worth considering.
“Swap rates are very low, which has led to fixed-rate mortgages improving significantly in recent months,” said David Hollingworth of London and Country Mortgage Brokers.
Mt Hollingworth went on to advise anyone facing an increase in their SVR to consider a transfer as soon as possible.
“Getting a mortgage offer can take at least a couple of weeks, and often more for those lenders with the best rates as they deal with higher volumes of business,” he added. “It therefore makes sense to get the ball rolling sooner rather than later and to be sure to provide any supporting documentation promptly to ease the process.”
New boys Tesco Bank are offering a 3.39% fixed rate while HSBC have a tempting tracker which as set of 2.14% above the Bank of England base rate for the life of the mortgage. Fees and minimum deposits are naturally involved and it is always advisable to check these but for anyone in a position to remortgage there are plenty of options around.
As far as new mortgage lending is concerned, figures released at the end of August showed an increase in approvals of around 44,000 from June to July amidst claims that the market remains subdued.
“The month-on-month numbers jump up and down but the overall trend is one of extremely low borrowing levels and a market that’s flatlining,” said Ashley Brown of mortgage broker Moneysprite.
With swap rates continuing at low levels, perhaps those month-on-month numbers may start to reveal a steady increase from this point onwards.
Shop Around to Beat the Base Rate Rise
There was more bad news for homeowners and potential property purchasers alike when Santander announced an increase to its Standard Variable Rate (SVR) last week. That increase was, in percentage terms, quite significant with the rate changing up to 4.74%.
Santander claim that the rate change will add around £26 a month to a £100,000 mortgage but insisted that it had no further plans to increase the SVR again. The rise will affect all existing Santander customers along with those acquired from other providers with the exception of Alliance and Leicester. It’s thought that the move will see an increase in monthly payments for a ‘few hundred thousand customers’.
“For the last three years the amount it costs us to provide mortgages and the rates we offer our savings customers have been increasing, despite the base rate remaining static,” a Spokesperson for Santander said.
“Additionally, the cost of running a bank in the UK has increased dramatically through a combination of increased liquidity, capital and funding requirements,” the company added.
Santander have, however, been accused of profiteering by some who have deemed the increase unnecessary. It’s been suggested that this was a profitable area for the lender and they have merely increased their SVR in order to take further advantage.
Mark Harris of SPF Private Clients said that this was ‘profiteering, pure and simple’.
“The move puts its SVR towards the upper end of the scale when compared with other big lenders such as Halifax, Woolwich and Nationwide,” Mr Harris added.
Following the increase, advice has come from many quarters, urging those affected to shop around. For those in a variable rate mortgage with no penalties for settlement, such a move could bring monthly payments back to more affordable levels.
“Any homeowners worried about their mortgage payments should make sure they do their homework to make sure they get the best deal possible to suit their needs,” said Michael Ossei of financial comparison site uSwitch.
Mr Ossei also warned that further hikes in the SVR from other lenders were likely.
“This latest increase should serve as a warning that mortgage payments could go up at any time and with very little notice. If you are enjoying lower mortgage payments at the moment it may be worth overpaying, or putting aside the extra cash you’re saving while rates are so low. And although it may be another year or more before the base rate rises, the only way for mortgage rates to go in the long term is up,” he concluded.
Are House Prices Finally Being Slashed?
Throughout 2012, we’ve seen property prices fluctuate but the overall trend seems to be one of minor falls, depending on which set of figures you read. One point that many industry experts keep raising is the reluctance by sellers to bring down their asking prices but statistics released this week suggest that this situation may have changed.
Property website Zoopla has found that the number of houses that have sold for less than their original asking price is now at its highest level for nine months. However, the figures in financial terms may be very significant.
Of those properties sold, Zoopla reveal that 37% have had their asking price cut at least once while the average reduction is 7.6%, which in turn equates to an average drop of £19,000.
Traditionally, the summer is a quiet period for the market as a whole but those one-off events have also had an effect. It’s therefore thought that sellers have accepted the need to drop their prices in order to combat the further slowdown caused by the Olympics and the Queen’s Diamond Jubilee.
“Activity levels tend to fall over the summer months as holidays delay the buying process,” said Zoopla’s Nigel Lewis.
“With the recent bad weather and the extended jubilee bank holiday, the rise in proportion of price reductions is a signal that sellers have been doing everything they can to try and tempt those buyers still in the market.
“Once the distractions of summer holidays and the Olympics are gone buyers will once again be able to focus attention on their property search, and this should bolster confidence among sellers.”
Meanwhile, regional variations differ greatly but in regards to the overall market, it’s being claimed that the summer’s events are having little effect in some parts of the country. London based Estate Agent Marsh and Parsons claim that their own sales for the period of the Olympics – 27th July to 12th of August were up by 23 per cent compared to the same period in 2011.
“While many potential buyers were glued to their TVs and seats at venues rather than out viewing homes, London’s housing market didn’t grind to a halt by any means,” said Marsh and Parsons’ Peter Rollings.
“The traffic chaos and logistical problems feared in the run up to the Games thankfully failed to materialise, and a corps of committed buyers moving with urgency actually took advantage of quieter streets to secure homes.”
These figures are among the most interesting to have been released so far this year but were the boost in sales at this particular Estate Agents really down to quieter streets or are reduced asking prices about to have a marked effect on the property market as a whole?
Mortgage Price War takes an unexpected turn
Fixed rate mortgages had dominated market news in recent weeks as HSBC, Nationwide and Santander had slashed their rates and offered products under 3% for the very first time. In an unexpected twist however, one of those key products has now been withdrawn.
HSBC’s five year fixed deal was released just four weeks ago but the bank has announced that it is being removed from the market. The 2.99% fixed offer was the first of the sub 3% products to emerge and was therefore responsible for starting the price war, but as of the 16th August, it is no longer available.
While the mortgage was the lowest fixed rate to hit the high street, it did require borrowers to find a minimum 40% deposit in order to secure the deal. Santander, Nat West and Nationwide were swift to follow with differing rates and terms and while the deposit requirements had still to be lowered sufficiently to help the majority of first time buyers, the moves were welcomed.
HSBC have insisted that this was always likely to be a limited time offer and that the product has been withdrawn simply because all of the funds allocated to it have been lent out to home buyers.
“It was designed to bring in business – we knew it would be popular,” a spokesperson said.
Reaction to the news has been mixed but some mortgage brokers have highlighted the fact that while the price war may have grabbed the headlines, it was irrelevant for first time buyers along with many others.
“While a mortgage rate war has broken out in recent weeks, with five-year fixes in particular falling to record lows, these are available only to those with sizeable deposits of at least 40pc,” said Mark Harris of SPF Private Clients.
“First-time buyers with modest deposits continue to pay a premium on the rate, even though they can least afford it. For example, the best five-year fix for a buyer with a 5pc deposit is at 5.99pc from Leeds Building Society.”
David Hollingworth of London and Country Mortgages added,
“Despite improving rates the mortgage market remains constrained and so meeting credit scoring requirements can still pose problems.”
Meanwhile, there are no suggestions that other lenders are going to follow HSBC’s lead and withdraw their lowest fixed rate products from the market. HSBC themselves still offer fixed rates starting from 3.29% so while this is another story that’s taken more than its fair share of column inches, it seems to have little effect on the majority of potential borrowers.
What Do You Need to Get on the Property Ladder?
A recent survey carried out by RightMove on behalf of the Guardian has underlined just what First Time Buyers (FTB’s) currently need in order to take that vital first step onto the property ladder. Essentially, it’s claimed that those requirements amount to three key ingredients – a degree, a partner to share the costs and benevolent relatives who are prepared to help.
Over 5,000 FTB’s took part in the survey which found that one in four would be seeking assistance from their parents in order to fund a deposit. However, 53% of those surveyed claimed that they would be funding their purchase alone.
Overall, 38% of those surveyed were educated up to degree level and 30% held some form of postgraduate qualification. While the survey took in respondents of all ages, it was found that, of those between the ages of 25 – 34, 41% held a degree.
The findings were intended to underline just how difficult it is to get on the property ladder as house prices have risen beyond income increases in recent years. In addition, the perception is that lending criteria has made it increasingly difficult to obtain a mortgage but do these results really back those claims up?
You could reverse the headline to suggest that three in four respondents weren’t seeking financial assistance from their parents and for some, the fact that over half of FTB’s surveyed are buying a property alone is a significantly high figure.
Earlier this month, RightMove produced another survey of FTB’s which they claimed had provided some positive results as those buyers came to terms with the economic downturn. The findings revealed that of those looking to purchase a property within twelve months, three in ten were FTB’s and this was the highest level for almost three years.
Reacting to the news, Rightmove’s Miles Shipside said,
“The results come as a welcome surprise, hopefully this three year high in intending first-time buyers will come to fruition.”
“The property market needs this upward trend in first-time buyer activity to continue as first-time buyers perform an essential role at the bottom of the property market food chain. “
Mr Shipside also added a warning that the future for FTB’s was far from certain but, on the face of things, there are two sets of conflicting reports from the same source in the same month. Alternatively, perhaps this just emphasises that there are times when statistics can be viewed in two separate ways.
Who Takes the Blame for the Slow Mortgage Market
The property market as a whole was expected to slow down considerably this summer as the UK headed into a season of celebrations. With the Queen’s Jubilee followed quickly by the Olympics, it was predicted that sales and mortgage enquiries would be subdued, in keeping with the typical reaction to these types of events.
However, as the Jubilee fades and London 2012 approaches, another factor is being blamed for the lack of mortgage enquiries in recent weeks. The wet weather that has blighted much of this summer so far has been cited as the main reason for a significant drop in approved mortgages for home purchases in June.
Figures released this week by the British Bankers’ Association (BBA), claim that those approved home loans fell by 11% in June to 26,269 from the previous month. Meanwhile, the met office indicate that this was the wettest June recorded since 1910 so are those two sets of statistics related?
The BBA’s report blames the wet weather along with a host of other factors besides,
“June’s approvals numbers were affected by the Diamond Jubilee celebrations, Euro 2012, and the wet weather,” the BBA said.
“Paying off loans or overdrafts and building up deposits is the current consumer ambition,” David Dooks of the BBA added.
Mortgage activity as a whole has been slow since March and gross lending of £7.2 billion in June was also comfortably below the six month average. While no single factor can be held wholly responsible, those major events combined with appalling weather have all been factors and the prognosis for the near future is by no means encouraging.
“The ongoing eurozone crisis, which has stepped up a level in the past week, will continue to undermine consumer confidence and encourage buyers and sellers to sit on their hands until there is significant improvement,” said Mark Harris of SPF Private Clients.
“Any recovery in the housing market remains a long way off.”
As far as the ‘holiday effect’ is concerned, with the Jubilee over and the Olympics about to get underway, could we see an upturn in mortgage lending in the coming months? The wet weather has also abated and although the long range forecast is mixed, it seems unlikely that we will be returning to the torrential downpours seen throughout May and June.
Those events may soon be behind us but as Mark Harris from SPF Private Clients pointed out, there are considerably more factors affecting the mortgage market besides the weather.
