Mortgages Uncovered

Some UK banks are literally leaving some people unable to pay their mortgages by withdrawing money from their customers’ current accounts to cover their loan and credit card debts which seems a little easier to do now that more bank’s have merged a charity has claimed.

Banks are legally allowed to transfer money out of a person’s bank account without their permission to cover bad credit card debts and Citizens Advice is calling for this to be scrapped.

CAB says it has now seen a 25% increase in the amount of such cases during the past 2 years.
The British Bankers’ Association says that it is down to the customer to sort their problems out with the banks if they are in financial difficulty.

In the majority of cases though, companies are only able to force someone to pay a debt through the courts.

However, as set out in many banks terms and conditions the ‘Right of Set Off’ does give banks the legal right to transfer cash to pay a loan or credit card arrears without needing the permission of the account holder.

CAB says there are many cases recently of people having benefit payments taken out of their bank accounts which have left them unable to pay their “priority debts” like mortgages and council tax.

The British Bankers’ Association commented on this “inappropriate” activity as regrettable but supported banks by saying that they take their responsibilities under the banking code very seriously.

You probably won’t be all that comforted to learn that the Emerald Isle (that’s Ireland, not a place somewhere over a rainbow) has been hit as dramatically as everywhere else in terms of credit and mortgages. In April last, growth in residential mortgage lending rates was seen to have fallen to the lowest level in 16 years, according to Irelands Central Bank.

Although April has always been a poor month for mortgages lending due to its coinciding with the Easter Holidays, Easter fell earlier in March this year and so the figures should be taken as being particularly grim.

Residential mortgage lending saw to the lowest annual rate of growth seen since May 1992.

In terms of hard cash the figures seem astounding with €143.4 billion in outstanding residential mortgages. Outstanding debts on credit cards saw a year on year increase of 7.2% in April, although at least this was down from the 8.6% in March.

However, the Bank of Ireland is assuring the population that the housing market is going to start ‘balancing out’. In its quarterly Irish Property Review, the bank claimed that the average price of a house had fallen back in line with levels as they were in 2006 – around €281,600. The report also claims that Ireland will see a rise to 37% in terms of house affordability in 2008 as the average income rises by 4.9%.

But don’t break out the party hats and streamers just yet. The same report indicated that average rents had seen a 22% increase in the three years running up to March 2008.

It may be an old British belief that jumping onto the property ladder is THE Thing To Do, but doubtlessly to the creeping horror of the sorts one might see at a UKIP conference, it seems that more and more British citizens have started to emulate their cousins from the European mainland by embracing rental properties rather than mortgages.

Why are less people wanting to buy properties outright? The number of UK citizens living different sorts of rented accommodation rose from 10% in 2002 to 12% in 2007, and although this might not look like such an earth-shattering shift, it’s pretty impressive when you think just how many people that extra 2% represents.

As house prices have continued to rise and rise and as mortgages have become to harder get for many people, the property experts at Paragon have released figures showing that long term renting has become a much more common and acceptable practice within the UK – and not just for individuals and young professionals. Families are getting in on the act too.

The knock on effect of this has been a marked rise in the houses being purchased in order to be let out, which in turn has pushed property prices even higher. I’m not sure how the UK will be able to break out of this spiral without another huge economic disruption similar to the credit crunch. The higher house prices climb, more people are forced to rent, meaning that property owners and landlords have more money to spend acquiring new houses to rent, pushing prices up even further, and so on and on.

This really is a tricky situation and I will be interested to see what our government does to balance things out, if they CAN do anything

Brits may like to believe that a man’s home is his castle, but if you happen to be renting your castle you’re not going to be the only one holding the keys to the portcullis…

Those who jumped on the buy-to-let bandwagon a little late face the very real possibility of financial ruin.  Many saw the potential earnings and figured buy-to-let seemed an easy way to pave their way to retirement.  Some even remortgaged their own home in order to buy a second house to let.

Unless the landlord is equity-rich, which for many means having bought their buy-to-let house(s) almost a decade ago, there are several factors which are all happening at once and mean many tens of thousands of landlords could find themselves in a sticky situation with negative equity, rent not covering the mortgage or even repossession. Read the rest of this entry »

As house prices have risen dramatically over the last few years, so many people decided to jump on the bandwagon and buy an extra house to rent out… or even two or three extra houses.  For those who got in early enough, they made a mint, but is it still a good time to do it?

According to the Council of Mortgage Lenders Read the rest of this entry »