Mortgages Uncovered

We may be far behind many of our European partners, but the ecologically friendly housing is finally starting to take off in the UK – and not before time either!

Councils across the UK are going to great lengths to stress the benefits of ‘green’ houses and living, with many offering all sorts of grants and other financial incentives to companies and individuals who want to build houses with a minimal carbon footprint. Indeed, providing you can show a benefit to the local economy (perhaps by using local tradesmen or whatever) it seems unlikely that you’d have many problems gaining planning permission for such a venture.

It’s far too soon to call this a green revolution, as the prices of property and land-for-building continues to fall it may be worth investing in a plot to build that eco-home, if you have the money already put away of course. Getting a loan for a standard mortgage if difficult enough right now without complicating things further!

If you actually build that energy efficient house many of your monthly expenses will drop, because ‘green’ also equals ‘more economical’, and the chance of getting any sort of grant or tax break from the council in the current climate is pure gold…!

As both property prices and the cost of living keep on creeping up in the UK with little light yet to appear at the end of the tunnel, more and more Brits are opting to look overseas for a better life – and we’re not just talking about the usual ex-patriot haunts in Spain and other parts of Europe, but much farther afield too, like non-EU Eastern Europe, South America and even the Far East.

With the boom in property prices in the UK, and with London allegedly becoming the most expensive place in the world to live with the super-rich (like the new Russian billionaires) jostling to live there, it is a small wonder that so many Britons are heading abroad to find their dream homes and lifestyles. In parts of Eastern Europe and South America property is still dirt cheap by British standards and a luxury home can be bought or created for a fraction of the cost of a similar property in the UK.

Whereas the pound-sterling is still struggling to keep apace with the Euro it remains very strong against eastern and South American currencies, making these regions all the more attractive to British emigration. In recent years many countries that in the past would have seemed too insecure to British people in terms of economics, state infrastructure, amenities and even personal rights, have seen substantial improvements, where the standard of living from a British émigré could be the same, and even better, than in the UK for less money.

It seems to me that those with a substantial nest-egg would do well to invest in these properties overseas, especially in those regions that are experiencing massive growth, because when the pendulum swings back in the UK and prices in the property market begin to fall (or even plummet), these foreign properties can be sold for a profit in time for re-investment in cheap British properties in key areas.

Unless of course investors become addicted to the lifestyle in their new foreign home – in which case, more strength to them. Can’t beat a bit of sun and sand.

According to the independent financial website Moneyfacts.co.uk, most new mortgage products that appear on the high street have little more than an eleven day lifespan and are designed just to generate a quick burst of consumer interest.

In May last year the average length of time that a mortgage product was available was thirty working days. Bearing in mind that the products on offer are mortgages, which are considerable financial binds upon customers and certainly not things to be entered into lightly, even thirty days seems a bit short, let alone the paltry average of eleven days offered this year. In fact in April, there were some mortgage deals that appeared in various lender companies that lasted for as little as six days!

This dramatic shift has come at a time when loans and mortgages have become increasingly hard to come by, with available loans falling from 15,000 to 3,814 over a twelve month period. Because of this limited availability, any new home loans that come on the market tend to have an overwhelming response – far more in fact than staff are able to handle.

According to research carries out by Engage Mutual, British householders are paying up to a third of their disposable income on essentials like utilities and food, and so cannot afford to buy property for themselves.

Apparently almost half of the British population would be unable to pay for things like mortgages or further education without some sort of inheritance. But with 54% of retired people struggling with their own finances and with just under 8,000 pensioners declared bankrupt in 2007, it seems unlikely that the British public will get the windfall they need and hope for, which raises doubts about over how realistic the financial expectations of half the country.

Spokesperson for Engage Mutual, Karl Elliot, has said: “Our previous research has shown that Britons are already struggling to pay for everyday costs like bills and the household shopping, so we wanted to know how they could afford larger items like paying off their mortgages. It is worrying that so many people have to depend on inheritance to be able to pay for these things.”

Mr. Elliot went on to say that while an inheritance can be a great financial help it isn’t something that can be controlled and therefore relied upon. The key, according to Mr. Elliot, is for families to take control of their own futures by saving a little bit of money as often as they can: “Even £10 each month could make some difference in the long run.”

On Monday the Halifax, Britain’s largest money-lender, will be launching a new series of products and will also be cutting its rates and fees.

Tracker rates will apparently be cut by up to 30 points.

Halifax will contact brokers later today with more details.

It isn’t just the UK that has been hit hard by the ructions across the Atlantic because of America’s sub-prime mortgage crisis. Banks in Turkey have lost up to $50 billion since January as a direct result of foreign investors retreating from the region.

Granted that there are also home-grown economic tensions within Turkey that have also had an effect on this outcome, but it is frightening at just how much the outflow of foreign investors can result in such a sudden and steep decline in profitability for Turkish banks. These aren’t just any old investors of course, but ones who bought into banking stocks over the last decade and who are now selling those stocks like they are going out of fashion – which, in a sense, they are. The fluctuation in the world markets because of the US Sub-prime crisis has led to this en-masse selling, which is in turn creating a dramatic decline in banking stocks – a situation not helped by the banks’ consecutively high dividend issues which also drive away foreign investment.

Further exacerbating the plight of Turkey’s banks, Ahmet İyimaya, the head of the Justice Commission, has presented a draft bill to the Turkish Parliament for proposed caps to credit card interest rates, which has caused another plummet to bank stocks within the last week.

A consortium of banking interests has presented its concerns to the Turkish Parliament, but little progress has yet been made to sort out the problems they face.

The Office of Fair Trading has taken the long overdue step to investigate the Sale and Lease Back sector, which, under existing laws, has no regulation and does not require those businesses involved register at Companies House. It is not yet clear whether there is enough legislation in place to protect the public.

Suffice to say there is a real scandal brewing in the sector that sees companies buying homes at a knock-down price from people who are in need money, only to become a landlord that leases the properties back to the original owners for an agreed period before putting the homes on the market if they so desire.

Although it is perhaps unfair to point a finger at all companies and businesses in this sector, there are a growing number of reported incidents where homeowners who find themselves in need of capital because of short-term financial difficulties they have been facing, have been encouraged to take out Sale and Lease Back agreements when they don’t fully understand what they are getting themselves into.

Obviously this financial arrangement isn’t the same as a re-mortgage, but some customers don’t seem to have seen the difference, nor that they stand to lose their homes when the lease-back period runs draws to a close.

Indeed consumer groups have alleged that such is the pasity of legislation that lease-back landlords are allowed to annul their lease with their tenant and thereby get the property even more cheaply and quickly thean they can already.

We will of course have to wait to see what conclusions are drawn by the Office of Fair Trading and whether the sector will finally subject to greater regulation. However, even if matters are resolved in the eyes of the Office of Fair Trading, there may yet be a media backlash if some of the more sensational stories of families losing homes hit the headlines.

Why is it that brokers can’t seem to find as good deals on mortgages as we can find for ourselves online?

Many brokers are being locked out by banks and loan companies because of the uncertainty in the mortgage market right now. This means that even with the best will in the world they can’t always find deals as appealing (on the face of it) as some you might be able to find for yourself online. In a recent report by Moneyfacts, it was shown that, based on £150,000 mortgage, the best 13 deals for a two-year, fixed-rate home loan weren’t available to brokers at all and had to be purchased straight from the lenders themselves.

Generally speaking, this has been caused by an uncontrollable increase in applications to lenders due to the credit crunch and the hike costs from home loans from mortgage and home-loan companies. Odd though it may seem at first glance, too much business actually threatens the profit margins of lenders and so they have blocked off brokers, who, as lenders have to pay them a substantial commission, have been deemed an unnecessary expense in these difficult times.

This means that if customers want to find the best deals on mortgages they will have to do a lot of the looking around and administration for themselves. It is still worth approaching at least two brokers to find you the best deals, remembering that even if they charge for their time they do not get paid until completion of the deal – so if you don’t settle on a deal they offer you don’t pay them. Essentially you are just getting advice from them.

While the brokers are looking around for deals prospective home-buyers should really throw themselves into researching for a good deal on the internet, from both independent sites and also from the lenders own websites. Eventually you should have a list of options from your own research and from the brokers you approached and from there it is just a matter of weighing up which deal is best for you, taking into account your income and how much free time you have to do any essential administration.

If you choose to go it alone without a broker you will be freed from whatever commissions and additional expenses that come with them. Then again, you will have to deal with the valuers, solicitors and mortgage lenders for up to two months, on top of the usual stresses and responsibilities in your life (your job, children etc)

A Broker will tend to cost more, but will deal with all the paperwork and administrative nightmares that can arise from house-buying and entering into mortgages. One of the The biggest concerns of not engaging a broker is that even if you find a good deal it still might not be the best mortgage for your personal circumstances. Maybe a slightly more expensive but very flexible mortgage would serve you better than a cheaper fixed term contract? Remember that brokers aren’t just there to find deals that you can find for yourself with a bit of legwork – brokers can also offer expert advice about your situation.

The Council of Mortgage Lenders (CML) has released a grim report concerning the prospects of the British housing market, confirming and even exacerbating the fears of many analysts and would-be buyers.

CML are very well respected in the industry and so despite their somewhat gloomy report their predictions and analyses are considered accurate. The group believe that there will be a 7% fall in property prices with as many as 35% fewer transactions on last year.

The one ray of sunshine in CML’s report was that they did not forecast a rise in repossessions of houses in 2008, stating that people coming off of fixed rate mortgage deals have been dealing quite well with changes in modes of payment.

It seems that CML’s report predicts a possible rock bottom in the housing market in 2008 followed by low level consolidation at the start of 2009, providing there are no more drastic movements in the market and wider economy.

All that said, these predictions may change once again if the UK’s sub-prime mortgage market continues to suffer as it has been causing more homeowners to struggle to meet their mortgage repayments on time.

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.