Mortgages Uncovered

Woolwich, the mortgage arm of Barclays have just raised their tracker mortgages ahead of the next B of E interest rate cut.

The UK’s 6th largest lender has increased its tracker and fixed rates mortgages. A 2 year tracker for borrowers with a 40% deposit increased 2.74% above the base rate to 2.99% above base, with a fee of £995.

There are other lenders who are now expected to follow suit with re-pricing their trackers.
Chase de Vere Mortgage broker Aaron Strutt, said:

“The few lenders still offering base-rate trackers have previously been quick off the mark to withdraw their deals in anticipation of a cut. The high margin on the majority of them makes them uncompetitive – especially as fixes are so low. Many borrowers sitting on their lenders standard variable rate (SVR) are better off staying on it. However, borrowers should not expect any cut to be passed on in full.”

Woolwich have also made quite an unusual move by introducing a cap to its new mortgage deals which will limit the effect of future base rate increases. If the base rate rises above 3% this will not be passed on to borrowers.

A spokeswoman from Woolwich said:

“Our lifetime tracker mortgages are hugely popular, especially while the base rate is so low. However, we do not know where rates might be in the next year or beyond and that may cause some nervousness about committing to a tracker. “We’ve, therefore, introduced a cap on both the lifetime and offset tracker mortgages so customers can be certain that any changes to base rate above 3 per cent will not affect their mortgage rate.”

Mr Strutt added:

“I haven’t seen a capped rate from a mainstream lender for four years. Borrowers know that the base rate will have to increase at some point in future, which could mean a sharp rise in repayments, so it is welcome that Woolwich is trying to protect new tracker customers from a shock later on.”

The primes minster signaled the of 100% mortgages when he spoke to directly to building societies and high street banks in encouraging more “responsibility” within the housing market.

The Observer ran an article where Gordon Brown suggested to first time buyers that they will have to save more money before they get on to the housing ladder because he needed to reduce the chances of another market crash.

Mortgage lenders are possibly also facing a curb on the high multiple mortgages which are offering to lend money at six times the applicant’s annual salary.

“We want to see the reinvention of the traditional savings and mortgage bank in Britain – making loans on prudent and careful terms, not just to people with large deposits but to first-time buyers and those on middle and modest incomes who wish to buy their home but who have not been able to save a huge deposit,” Brown writes. “But we have got to get the balance right between serving homeowners better and encouraging responsibility in the market.”

Gordon Brown also argued that “more responsibility” in banking would ensure that trust is restored and will unlock more lending and business.

The newly formed Lloyds banking group has pledged to offer more business loans and mortgages on the condition that the £480 million in their annual interest charges is waivered by the government which the bank says it is due from the recent government bailout funding.

Chancellor, Alistair Darling has prepared for the possibility of missing out on the annual interest which is generated from the 4 billion pounds of conversion from government preference shares on the understanding that the bosses of the new group.

Lloyds is now due to provide its full annual results this week that are set to include the £10 billion of losses at HBOS.

It the meantime, it emerged that some of the senior City bankers have been demanding pay rises of over 0% in order to compensate for their bonus culture being reigned in.

Wages in the financial sector were amongst those figures that had doubled within the last few years as banks have tried to balance their own books preparing for the massive loss of big bonuses.

Some market analysts have said the basic rates had already increasing hugely by between 5 and 10%, once bonuses had been reduced significantly these were to rise to cover the deficit.

Both the Bradford & Bingley and Northern Rock have been advised to cease charging for their mortgage arrears. The nationalized banks Northern Rock and Bradford & Bingley are now under pressure to stop charging their customers when they miss a payment.

Northern Rock, now completely nationalized are starting to charge its customers who are 3 months in arrears anywhere up to £55 a month and £25 a month for two missed payments and is said to rake in over £1million a month from arrears charges.

Bradford & Bingley who were nationalized last year will charge £25 per month the second a borrower falls month behind in payments.

Debt charities of the mortgage levies are arguing that the banks are putting unnecessary additional pressure on property owners who are already struggling to make payments.

Both lenders told The Times newspaper that current charges were under review. B & B said it was likely to further “improve” the structure of its penalties in order to support the interests of its customers better.

“These charges from lenders owned by the taxpayer have the effect of pouring salt into the wound, compounding the problem for families unable to make their mortgage payments.” Chris Tapp of debt charity CreditAction told The Times. “The logic seems warped.”

There are larger numbers of first-time home buyers who are now looking to stay in the rental arena at least for the foreseeable future whilst the government carries on with its crackdown on the high loan-to-value LTV mortgage products.

A number of industry professionals have said that products like Northern Rock’s 125% mortgage were a major cause for the economic troubles in the UK and many lenders that were keen to protect themselves from accruing bad credit through giving loans to only those people who have significant amounts of equity.

Gordon Brown further reiterated the calls for “greater responsibility” within the housing sector which had meant that potential first time buyers would have to continue to take out storage solutions and remain in rented accommodation for the time being.

The CML, Council of Mortgage Lenders have put pressure on for more restraint in the market, claiming that it is no time to have a “backlash” against the affordable mortgages and further claiming that 100% LTV products would be beneficial to the state of the market.

Those people who are still unable to obtain a mortgage can make use of safe storage and stay in rental property until the deposit is large enough to purchase a property.

Confidence in the UK housing market has not picked up as house prices fell by another 1.8% during February say a survey by Nationwide building society.

The high street mortgage lender claims that the average UK home has fallen by 17.6% over the past year to an average of £147,746.

Interest rate cuts mean that mortgage repayments are much cheaper for some but as far as house sales are concerned it has not made an impact.

Chief economist at Nationwide Fionnuala Earley claimed that falling prices and lower interest rates should mean that sales will start to pick up once confidence returns to the market.

“Further cuts in [interest] rates will be welcome in the housing market, but the economic conditions that require them will mean that there is unlikely to be a swift turnaround in the housing market in 2009,”

Those with properties in London could really benefit to the significant monthly cut in costs to their mortgage bills as an average people have seen cuts of around £350 since the end of 2007.

“It is too early to say that the market has reached its trough, given the economic recession. However, falling house prices and interest rates have made the situation for borrowers today much easier than it might have been,” said Ms Earley.

A recent comment coming from a foreign property advice company said that anyone who needed to borrow 100% against their property is probably not in the right place financially to be buying a property at this stage.

The Managing director, John Reilly at www.BuyAbroad.com was recently responding to the increased reports that some British are still able to get 100% loans if they are purchasing a property in France.
He pointed out that

“You have got to question people relocating to a new country but needing a 100 per cent mortgage to do it.”

Mr Reilly also stated that it was highly unlikely that the majority of people would want to purchase a new property unless they could really afford it.

“It is generally perceived in the property market that if you need a 100 per cent mortgage then you shouldn’t be buying a property,”

he commented.

The company to have spurred all the excitement is French Mortgage Direct who is selling 100% mortgages to people overseas who wish to purchase French properties.

The investment publication Jet-to-Let commented that France had already been voted as the second most popular country in the world for foreign property investors. Cyprus is the most popular.

RBS this week revealed that the losses were in excess of over £24 billion during 2008, however, it has also confirmed their participation in the Government’s Asset Protection Scheme would be set to result in another £9 billion of funding for their mortgage products this year.
RBS also announced a significant internal restructure after it confirmed its’ sizeable losses, which has partially contributed to the £16.2 billion of underperforming assets.

Stephen Hester, RBS Group chief executive commented:

“We are, of course, in a privileged position to be able to restructure the Group with support from the UK Government. With that privilege come responsibilities that we mean to fulfill. We have many difficult decisions ahead of us and continued and major uncertainties in our markets. How we do business will be as important as the business we do as we navigate our way through these challenges. Everyone at RBS is now focused on the drive toward recovery. Participation in this Scheme would assist us in reducing risk for shareholders whilst providing greater support for UK customers via increased lending. It would provide increased certainty to the market by limiting potential losses on a significant proportion of our balance sheet.”

A British drugs deal along with his girlfriend managed to get mortgages from 3 separate lenders worth £300,000 by lying about their employment.

Mandy Blair, 26, informed the Abbey that she had been an acting company secretary for 8 years at a Diving Centre in Tyneside, earning £35,000 a year she had held down a £35,000 even though it meant that at the tender age of 18 years old she claimed she was holding a lucrative and very responsible position within the company. Abbey still accepted her claim.

The girl was given a mortgage of £120K which was towards the cost of her £125,000 detached bungalow and conservatory in Gateshead.

Her boyfriend Barry Hogan a known drugs dealer lied on various applications blatantly to Northern Rock bank and Cheltenham & Gloucester so he could make lavish purchases for two houses for his two sisters and their 10 children.

After Hogan, 31, was later arrested for dealing cocaine dealing the whole mortgage scam was revealed.

Steven Orange, prosecuting was clear that the lenders who agreed all the mortgage applications had not considered the information clearly or checked anything.

Hogan had reportedly told Cheltenham & Gloucester that he was earning £35,000 as an office manager to secure £76,000 towards £80,000 needed to buy one of the houses in Darlington.

Hogan told Northern Rock that he worked as a painter for a local company so he could obtain £73,625 towards the £77,500 he needed for his third property in Darlington.

Mr Orange told the court,

“despite his claims to have regular employment, Hogan’s job record was patchy, to say the least.”

The court was told all three properties had been repossessed, but because of the downturn in the housing market, the lenders are likely to lose out.

Judge John Evans told Blair and Hogan:

“The building societies have lost out and are going to lose out. Many people apply for mortgages by legitimate means and this sort of activity has a detrimental impact on these trying to obtain mortgages by legitimate means.”

Hogan was sentenced to 21 months in jail to run concurrently to the sentence he is currently serving. Blair was sentenced to 51 weeks in jail, suspended for two years, and ordered to carry out 250 hours unpaid work.

Over the last 6 months the amount of tenants that were evicted by landlords who had defaulted on their mortgages has rise.

Some tenants have only been given a few days notice to leave their homes, says the charity Shelter, who want to ministers to “act quickly to give tenants far, far longer”.

Government legislation which is coming into force for April will likely entitle tenants to up to 7 weeks’ notice.

“What we’re seeing already is a steep rise in the number of tenants, entirely blameless individuals, who are becoming homeless because their landlords can’t pay their mortgage and their homes have been repossessed,” said Shelter chief executive Adam Sampson. “What the government must do is to act quickly to give tenants in those circumstances far, far longer to find themselves somewhere else to live, in a housing market where housing is in desperate short supply.”

Mark Sullivan, a 34-year-old jeweller, began renting in Woking, Surrey, in February last year, he said

“almost immediately threatening letters for the owner – who was un-contactable in the United States – began appearing. When we contacted a debt-collecting agency who were writing to the owner – because we needed to know what was going on – a letter stated that no monies had been paid on the mortgage for four months before we had moved in. Eventually I was given about two weeks to leave the property just after Christmas. At the time, we still had to wait for our deposit to be returned and find a new deposit for our new property and I had to borrow off my mother. The most annoying part of it is that the letting agency was so scrupulous with us. We were credit-checked and had to provide proof of income for ourselves. They don’t do the same thing for the owner, whereas we are made to feel almost criminal.”

Steve Donnelly took a 3 bedroom townhouse with his partner a year ago in Oakenshaw, Bradford.

“It turned out that the landlord had purchased two properties on the street but never paid a penny on the loan, and then went back to Africa while myself and our neighbours paid the rent for six months,” he said.

Ian Potter at the Association of Letting Agents said;

“We also had numerous people calling over other debts this man had, and even had a tow-truck turn up trying to repossess our car. Repossession agents started knocking on the door. The owner obviously had financial problems and as soon as it started happening we started looking to buy a house. One letter from the mortgage company addressed to us said we might have to move out within two or three days.”