Mortgages Uncovered

 Few will be surprised at the BBC’s report that the number of available types of mortgages have crashed in this last 12 month period from around 11,000 to a mere 3,200, making these the most profound changes for a generation.

But what’s causing all this? Do we really needed to ask?

The so-called ‘credit crunch’ has prompted UK building societies and banks to withdraw thousands of mortgage products and up their interest rate charges on loans of all kinds. Where does that leave the rest of us…? Schtum.

According to a leading mortgage research company, Moneyfacts, the average cost of mortgages in the UK have risen by £200 in the last 2 years.

Before the crunch squeezed so hard, homeowners could have come off of a two-year fixed deal in could typically have got themselves another fixed deal at about 4.34%, compared to the 6.65% they have to pay now. Banks are becoming more and more nervous about lending money to so many customers and 100% mortgage deals have completely vanished from the market.

These problems originate largely from the sub-prime lending crisis in the USA, which is still sending shockwaves through global banking systems. This crisis has meant that banks are less willing to lend each other money, the corollary of which is that banks are also less likely top pass risk onto us average Joes in the form of mortgages or loans.

Insecurity breeds insecurity, and despite what we might have been told throughout the eighties and much of the nineties, there is no such thing as ‘easy’ money.

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…

According to figures from moneysupermarket.com, demand for payday loans has increased by 55% since last year.

Tim Moss, Head of Loans at moneysupermarket.com, said: “The rise in payday loans is astronomical and symbolises just how difficult people are finding it to cope day to day.  Payday loans can be useful as a short-term credit vehicle. They are a bit like taxis – convenient for short journeys, but if you are going a long way, there are much cheaper ways to travel.  They should only be taken out when it’s absolutely necessary and you are sure you can pay it back quickly. Anyone looking for longer term credit or unable to pay off the debt immediately, should steer clear of them.  It would be wiser to borrow the cash from family or friends or arrange an authorised overdraft with your bank.”

Payday loans are short term loans, with payment schedules of around 30 days and typical interest rates of 25% – per month!  Although that might sound a lot – indeed it is – if you were borrowing just £80 and paying back £100, that is cheaper than going into an unauthorised overdraft.

You need to weigh up your personal circumstances to decide what is right for you – but be sure you are going for the cheapest option.

Property Investment Portfolio has bought several sites to transform into industrial units and create a new business park.  The industrial units will be built on the old site of Paramount Windows.

This will give new opportunities to those who want commercial mortgages.

Director Arv Soar commented: “These will be the closest industrial units to the town centre and Mansfield remains one of the cheaper areas of the East Midlands for both residential and commercial property.”

The Scotsman newspaper reported that office space is in short supply in Glasgow, which will greatly interest those who have commercial mortgages.

According to commercial property consultant firm, DTZ, there is only 75k sq ft of office space (Grade A) available in the city.

There are currently developments underway which will provide an additional 98,000 sq ft of office space, and serviced offices, but that will not be completed until later this year.

In comparison, Aberdeen’s office space market is busy.

Yesterday we reported that the Bank of Englands Monetary Policy Committee (MPC) had decided to maintain the current base rate of 5 per cent.  Experts could barely believe it.

A spokesman for insurance company Legal & General said:

“It”s just a matter of time before the next quarter point cut.”

A spokesman for Barclays said:

“We expect the Bank of England to reduce interest rates gradually over the coming quarters”

They believe the interest base rate will be cut to as low as 4.25 per cent by the end of this year.

Now if that happens, then I’ll look at one of these new 25 year fixed rate mortgage deals!

The Bank of England held the base rate this month, despite speculation that another cut was on its way.

News was stated that the Bank of Englands Monetary Policy Committee had decided to hold the interest rate at its current rate of 5 per cent.

Murmurs from the experts predict it won’t be able to sustain this.  We shall wait and see…

According to figures released this week, 44.79 percent of first-time buyer mortgages now come from dual income applications, showing that more people than ever are clubbing together to get their first step on the property ladder.

It also seems to be a buyers market at the moment and first time buyers have been haggling prices.  The average house value for a first time buyer is down 5.75 percent compared to March – down to £170,559.

Senior Editor at Moneyextra.com, Robin Amlot, said:

“While it may be getting tougher to get a mortgage now, it would appear that those first-time buyers who are in a position to buy are driving much harder bargains with sellers.  Housing is very definitely a buyers’ market now rather than the sellers’ market that existing homeowners had become used to.”

The average loan-to-value ration on first time buyers mortgage has also dropped to 82.89 percent as well.  I don’t think that’s purely as a result of first time buyers having more money, although obviously there will be a little more if they’re clubbing together, but probably because banks have stopped offering 100 percent mortgages, there are fewer 95 percent mortgages and they’re haggling the price down.

Landlords are seeing an increase in rental demand now that mortgages are more difficult to get as a result of the credit crunch.

Indeed, there may even be a shortage of properties available as criteria for buy-to-let mortgages has also tightened.

Director of Robert Watts estate agent, James Watts, said he had seen rental prices increase by about five percent in his local area of Bradford.

A spokesperson for the Royal Institution of Chartered Surveyors said the recent forecasts that buy-to-let landlords would leave the market to benefit from lower capital gains tax were unlikely to happen because of the increase in rental demand.

Jonathan Charters-Reid, RICS regional spokesman, said: “With first-time buyers struggling, the current state of the property market lends itself to first-time renters.”

Housebuilder George Wimpey is offering to help its customers combat the increasing costs of getting a mortgage and is trialling this in the South Midlands. For those who want to reserve a home in the region, they should have a free consultation with the Wimpey mortgage broker

The idea is that the home buyer will be protected against interest rate increases for up to three years. This move could save them thousands of pounds.

Jason Colmer, Sales and Marketing Director for George Wimpey South Midlands, said: “We are offering our customers confidence and security at a time when many homebuyers are worried about the cost of mortgages. We understand how important it is for homeowners to have a manageable monthly budget and we make sure, with the help of our independent financial advisors, that this is the case. We also offer to pay the set up costs of mortgages, because those with lower interest rates generally are more expensive to buy. This stops customers having to add this cost to their mortgage and therefore paying interest on it.”

You must get the consultation before you reserve your home, so contact the Sales Executive at the development you’re interested in. If you have a home to sell, then there is also the option to use the Wimpey easymover scheme, which means the housebuilder will help you sell your property.

My advice would be to check the price of the new home first. If you have your heart set on it, then this is a great offer, but be sure you aren’t paying over the odds for that property type in that area first.