Mortgages Uncovered

According to the most recent reports there are only 2,282 mortgage products are on the market today. This means there have been falls in the number of home loans available.

This figure shows there is around ten times fewer loans around today compared to two summers ago. Although this must mean that there is lack of choice for the mortgage buyers it does mean that its now easier for brokers to recommend which Mortgages are suitable for individual consumers simply due to lack of variety which is frustrating as yet again the only people look set to loose out are the consumers-with a lack of choice it means there is higher potential that they will take up a mortgage which isn’t right for them.

Buying a home for the first time can be expensive at any time in ones life but now more so than ever. Many people are resorting to renting or even setting up home with friends as a way of being able to finance it. Most mortgage lenders require a deposit of at least five to ten per cent of the value of the property you wish to buy.

As the price of property increases, the deposit can become expensive. A lot of first time buyers are ex students whom also carry the burden of student debt so is getting a mortgage really the best thing to do or is it only going to get them into more debt which they will struggle to repay. It will leave almost their entire income to cover the mortgage repayments.

People that have a fixed rate mortgage cannot get out of their contract resulting in them not being about to take advantage of the low bank rates at the moment. Many people are now paying way over the odds due to being in a fixed rate mortgage a person paying five hundred pounds a month could probably save themselves a hundred to hundred and fifty pounds a month. So which type of mortgage is the best, as they all seem to have their problems in the current economic climate?

According to reports the Abbey National have the best fixed rate loan around at the moment at one time people would have jumped through fire to get paper work all sorted but now everyone is edging on the side of caution and they have reason to.

A few years ago it was said that getting an endowment mortgage was the way forward as it allowed buyer to receive cash in hand at the end of the fixed period. Now as many people know or are finding out, there are people with large short falls in the repayments of their mortgages.

Its now said that One in Three Endowments Will ‘Definitely’ Fail to Pay Off the Mortgage not only that but more than 60% of policyholders are likely to face a bill to top up their mortgage due to an underperforming endowment policy. These are sad facts as many people went into their contracts with the idea that it was going to benefit them not financially cripple them.

The administration of Obama is broadening it’s mortgage refinancing programme to allow more borrowers hit hard by falling home prices to take part. Loans are now worth up to 125% of the value of their homes and people are now eligible to refinance their homes under the Obama foreclosure prevention plan. Previously, the limit was 105%.

How many more people will be drawn to the program now, however, remains questionable, especially since mortgage rates are on the rise but the administrations have predicated that 4 million to 5 million mortgage borrowers would be helped with the broadening of the programme. So basically it would seem giving mortgages to the people who cannot afford to pay a mortgage has increased the problems of toxic debt that started the banking problems in the first place.

Politicians described the figures as “absolutely pitiful”, saying it didn’t begin to address the true extent of the problem facing Britain’s homeowners yet almost 1,000 homeowners are being evicted every week. Housing Minister John Healey said: “We have put in place help for home owners struggling with their mortgage at every step of the way.”

But the problem is now so great that the Government is supposedly establishing a new team to fast track the cases of those most at risk of repossession. The idea is that under the new scheme families that are eligible can either sell their home and become tenants of it or get an equity loan.

Within the Times newspapers recently, the paper has talked about an particular instance which saw a customer of Northern Rock turned down when he tried to take back his mortgage overpayment by withdrawing from what is called his ‘flexible’ mortgage.

There are many people who have these flexible mortgages with Northern Rock and have also been told that they may overpay but based on understanding that they may later withdraw their money back if they wished to do so by making a telephone call to the bank.

Apparently, a reader of the Sunday Times overpaid £1 million on their £3 million mortgage account and then tried to withdraw back £25,000 only to be surprised when met by a series of questions regarding his outgoings before he was referred to an underwriter.

Now it is official that Northern Rock customers may no longer have the option to withdraw overpayments.

An independent mortgage broker, Ian Gray told The Times Newspapers;

“This is yet another example of lenders tightening criteria for borrowers unexpectedly. Many people took out those flexible deals with the promise that it was a place to park cash and they could get it next day with a phone call. There are now serious questions about whether they can get their money.”

The proposals regarding the future of regulation for mortgages within Europe may lead to a clash of what will occur within a national and European level the CML claim.

Council of Mortgage Lenders in the UK recently warned that the separate debates which are ongoing with the Financial Services Authority in London and the European Commission who are both following similar timetables is going to create a possible risk of conflict.

CML further warns that the hostility due to the market failings in the United States is becoming a political reality within Europe. A spokesman said;

‘While clearly there are differences between the UK and US, some of that hostility could spill over to the UK. We saw elements of this in the build-up to the recent G20 summit and the different stances of France and Germany, and the US and UK. The Commission and other European institutions appear to acknowledge, however, that markets in the US and Europe are widely different. A key goal therefore, both for us and for the European Mortgage Federation, is to ensure that the Commission continues to acknowledge the diversity of national markets.

The CML further reiterated that;

“There is an opportunity in the coming months to help the Commission strike the right balance between measures that would work on a global or European level and those that would not, and to try to avoid a clash between regulation at a European and national level.”

The least of the risky mortgages within the United States are beginning to show a clear and sharp jump towards “serious delinquencies” says a recent report released last week which now raises fresh concerns for the health of the economy in the United States.

Credit quality has been shown in the report across all loan categories and spells a continued decline during the fourth quarter of last year which means that the riskiest of subprime mortgages are showing, as originally anticipated are at their highest levels of serious delinquencies which is defined as those that are loans that have arrears of 60 days or more.

The largest percentage jump had been in prime mortgages which is the lowest risk of loan category.
Controller of currency John Dugan commented “while there is an increase from a low level, the trend is a matter of concern and prime mortgages account for nearly two-thirds of all mortgages.”

The re-default rates were showing as consistently lower that has resulted from lower monthly payments. After further modifications had decreased the monthly payments by over 10% there were only around 23% of the loans that had became seriously delinquent 6 months after.

John Bowman, the acting director for OTS said; “The trend toward lowering payments to make home mortgages more affordable is moving in the right direction,” said John Bowman, OTS acting director.

Both Bank of Scotland and Halifax are now offering brand new mortgage deals for their existing customers who have zero equity in their homes!

Both lenders discreetly extended their LTV’s on some of their recent mortgage packages in order to keep their customers who are reaching the end of their tracker or cheap fixed.

Now borrows with no equity at all and even those that may own money on the value of their home do qualify for those loans that are aimed at people with deposits of a minimum of 5%.

In recent times mortgages which allow home owners to borrow 100%of the value of their properties have completely disappeared from the market whilst plummeting house prices have increased the further threat of a longer period of negative equity.

A Halifax spokeswoman said;

“it is important to offer a range of options for customers coming off existing deals, even if their equity had been wiped out. Borrowers who are not offered a new deal when their existing one expires have to revert to their lender’s standard variable rate (SVR). While these are low at present – Halifax charges 3.5 per cent, for example – there is a risk that if interest rates rise sharply, borrowers may be stuck with unaffordable mortgage payments.”