Latest Which? Survey Reveals Mortgage Concern

In recent weeks there have been many reports of lenders increasing their mortgage rates and there has been plenty of additional discussion about the impact that this may have. Results of a survey from Which? have just been released that highlight consumers concerns over the hike in their monthly charges.

Amidst reports that over a million customers would be facing a collective rise of £300m in mortgage payments, the organisation found that of those surveyed, 70% of mortgage holders are concerned about monthly increases while 14% declared that they were already struggling to meet higher payments.

Which? claim that those worst affected can be put into the bracket known as ‘mortgage prisoners’ – those who are not able to move to another lender for whatever reason.

Of those people surveyed, 41% said that if their mortgage were increased by £50 a month then they would have to cut back on regular household essentials such as food with 11% stating that they simply wouldn’t have enough for the vital areas of the family budget.

The percentages continue to increase in line with potential higher payments and for anyone facing a £100 a month rise, 11% said that they would simply be unable to pay their mortgage.

Which? went on to find some worrying statistics with regards to those already facing up to mortgage debt. The organisation found that an encouraging amount of people in this situation had already contacted their lender but very few were being met with any real help.

“Our advice to anyone struggling with their mortgage repayments is speak to your lender straight away.  It is encouraging that a third of people we spoke to had approached their lender, but, worryingly, in one in five cases, they said their lenders offered no help at all,” said Peter Vicary-Smith, Chief Executive of Which?

“This is just not good enough and we want to see banks do more to help their customers who are struggling. These SVR rises are the consequence of the lack of competition in the market and the failure of the Government to take action to promote competition.

“This is why the new financial regulator, the FCA, needs to be a watchdog not a lapdog. It must stand up for consumers and stand up to the banks.”

This ‘Watchdog not Lapdog’ campaign that Mr Vicary-Smith referred to wants lenders and the FCA to protect their customers against unjustified rate rises and ensure that they are offered options of fixing payments at a reasonable level. Which? also wants lenders not to take advantage of those who are unable to switch mortgages.

How to Avoid Mortgage Arrears

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.

Top 10 Mortgage Tips for First Time Buyers

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.

To get a free telephone consultation with an impartial mortgage advisor please complete the form below.

Mortgage Decisions in 20 Minutes, But Beware

Well, that’s a decision in principle in 20 minutes at least, but it still shaves a lot of time off the normal application process.  HSBC has rolled out its new ’20 minute’ system in a bid to meet growing consumer demand.

People no longer want to visit their bank or building society to fill out mountains of paperwork or face scrutiny in a stuffy office.  They want quick results from remote services they can access from anywhere.  More and more lenders are beginning to recognise this trend and offering user-friendly and more responsive application systems.

However, convenience can sometimes be a bad thing.  Let’s say you apply online for one mortgage product and get turned down, there is nothing to stop you going to another lender’s website and starting another quick fire application and continuing the process until you find a lender that gives you a decision in principle.  If you do decide to do this you could be setting yourself up for huge problems.  Every time you make a fresh application it leaves a ‘footprint’ on your credit file.  Each lender will run a credit history search on you and a record is left of that search and made available for all potential lenders to see.  Now, if they see you have made a lot of applications in quick succession they are going to smell a rat.  Lots of searches on your credit file can often result in you being turned down flat for a mortgage by every future lender you approach.

Whilst it’s never been easier to apply for a mortgage online, unless you are certain of the product you want to apply for and the likelihood of being approved, you should always get some advice from a qualified whole of market mortgage advisor.  They will have access to the latest mortgage products available and have the expertise to choose the right product to suit your needs.  Even if you have a poor credit history or low deposit, there is usually a product that fits the bill although interest rates will be higher with these products.

In the 20 minutes it could take you to apply for a mortgage and get turned down, you could have spent the same time chatting to a mortgage advisor and getting some sensible advice and a great deal.  That’s not to say you will get turned down of course.  Many lenders have different lending criteria and even those with an excellent credit rating can get turned down.  Mortgage advisors know the market, the criteria you need to meet, and how to overcome potential problems.

To get a free telephone consultation with an impartial mortgage advisor please complete the form below.

Are you wondering: what will the interest be on my mortgage this year?

The upside of the credit crunch fuelled recession has been, for many British families, lower mortgage repayments on loans. Despite the media’s love for doom and gloom these lucky souls have been going about their business not believing their luck. The mortgages in question are those calculated at the lenders’ standard variable rate (which may or may not be tied to the bank of England Base rate) or tracker mortgages (About 1,500 C&G customers on tracker mortgage at 1.01% below Bank base rate have been paying no interest at all on their home loans since March 2009! according to Citywire).

Historically low interest rates have meant that some homeowners have actually found an extra few hundred pounds in their bank account each month as a result of the Bank of England’s efforts to buoy the housing market and avoid an even greater disaster of a recession.

Those who have a mortage with a lender who ties their variable rate to the BoE base rate have been the happiest, or those with tracker mortgages.

However some banks (such as Standard Life) have an arbitrary standard variable rate that they set themselves. (Remember that kid that wouldn’t let you play with his ball unless you agreed to his version of the rules?)

Some of these lenders whose SVR is not tied to the bank’s rate are starting to hit many UK homeowners with a rate rises in an efforet to recoup losses made elsewhere reports citywire this week.

Our own Professional Landlord recently sold a house due to his mortgage company (Standard Life) keeping their SVR for low LTV customers at 6.67% despite the base rate sitting at 0.5%. A remortgage deal for an existing customer? Why no sir, those are reserved for our special new customers only sir.

In fact Buy-To-Let investors tend to fare worst in these circumstances and are seen as fair game by lenders as their interests are also commercial. Or so the argument goes.

A quick and dirty list of Lenders’ SVRs shows some disparity:

Marsden building society 5.95%
Mansfield building society5.59%
Ipswich, Scottish and Cambridge building societies and Accord Mortgages, most of which are well over 5%.
Skipton SVR 4.95%
Norwich & Peterborough 4.85%.
Natwest 4.00%
Santander SVR 4.24%
Nationwide Building Society SVR 3.99%
HSBC SVR 3.94%
First Direct SVR 3.69%
Halifax standard variable rate (SVR) 3.5%
Barclays SVR 2.49% (via the Woolwich)

Sources: Citywire & Mortgage Rates

Most analysts agree that the BoE base rate will rise from 0.5% this year, but moderately and towards the end of the year – into 2011 looks a bit far out from here to say but again moderate increases are expected.

So what can we learn from this? If you’re remortgaging or getting a mortgage then tracker deals inherently are a gamble of sorts and you could get lucky like those C&G customers above, or you could get unlucky and we could enter a period of high inflation – or something in between. If you are taking a new fixed rate deal then look carefully at how the lenders’ SVR is calculated – is it the arbitrary judgement of the boardroom or is it contractually tied to the BoE base rate?