Mortgages Uncovered

It may seem a little ridiculous for a bank to quote their rivals’ mortgage rates to their own customers even if they are lower than their own, however, HSBC are doing exactly this. The first step has been taken with HSBC customers at the bank’s Market Hill branch within Cambridge as they are the first to be given the option of HSBC’s own mortgages or those of their competitors.

The first step of the trial is to be extended to a further 19 branches over the course of the next few weeks and should the trial prove successful it is to go national in November 2009.

It is clear why HSBC have decided to do this. Whilst it is Britain’s sixth biggest lender, over two thirds of borrowers will choose to get their mortgage via independent mortgage advisers due to them getting the best deals across the market.

HSBC have linked up with mortgage brokers John Charcol to bring a service that charge each customer £150 for the privilege - a clever move. Should a customer decide to go with an HSBC mortgage, then the bank stand to make its normal profits from the sale. Should a customer arrange their mortgage with a “Mortgage Matcher” consultant, who will be a John Charcol employee then the bank will earn a referral fee plus their customer’s advisory fee.

Some people have a different view of the move that HSBC have decided to make and London mortgage adviser Peter O’Donovan said: “…hopefully HSBC’s customers will see that seeking advice from advisers to compare the whole market is common sense, as the lowest rate is not always best advice.”

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.”

The SNP has branded the Nationwide’s decision to prevent Dunfermline customers accessing new lower rate mortgages offered by the Nationwide a “disgrace”.

Where the Nationwide is to offer it’s customers rates of 2.5% at the end of their current mortgage term, Dunfermline customers will be restricted to a rate of 5.49% - at a time when the base-rate is currently 0.5%.

This arrangement was part of the Nationwide’s deal when it bought the Dunfermline.

Central Fife MSP Tricia Marwick, whose constituency includes many Dunfermline workers and mortgage holders said:

“This is an outrageous move by the Nationwide.

“Mortgage holders with the Dunfermline will be very angry. When mortgage deals come to an end they should have access to the best deal in what is now one society.

“Their building society has been sold off behind closed doors and now they are expected to pay a premium for the privilege. This raises more questions over the terms on which the Treasury sold Dunfermline.

“Retaining the Dunfermline brand is important, but that should not mean Dunfermline savers and borrowers suffer.

“Scots will bear the cost of any job losses at Dunfermline HQ – they should not have to pay these additional costs as well.”

SNP Westminster Treasury spokesperson Stewart Hosie MP added:

“The Dunfermline deal has been sold by the government as the best deal for customers and workers, but that is already unravelling.

“While I welcome the fact that Nationwide customers will benefit from this new rate, why should Dunfermline customers be treated differently.

“It is clear Nationwide have taken on the mortgages only to rip customers off.

“Nationwide have taken over the best parts of the Dunfermline business, and is even being guaranteed taxpayers money to pay for the takeover – the least we should expect is an even handed approach.”

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.

There has been an outcry from the MSP and SNP’s who have called Nationwide’s decision for preventing the Dunfermline customers from accessing the new lower rate of mortgage products on offer as a “disgrace”.

The Nationwide is set to offer its own customers mortgage rates of 2.5% after the end of their current mortgages; however, Dunfermline customers are restricted to the mortgage rate of 5.49% when the BofE base rate is only 0.5%.

During the takeover, Nationwide arranged this as part of their deal with the Dunfermline Building Society.

Fife MSP Tricia Marwick covers the area of Dunfermline in one of her constituencies and recently commented:

“This is an outrageous move by the Nationwide. Mortgage holders with the Dunfermline will be very angry. When mortgage deals come to an end they should have access to the best deal in what is now one society. Their building society has been sold off behind closed doors and now they are expected to pay a premium for the privilege. This raises more questions over the terms on which the Treasury sold Dunfermline. Retaining the Dunfermline brand is important, but that should not mean Dunfermline savers and borrowers suffer. Scots will bear the cost of any job losses at Dunfermline HQ – they should not have to pay these additional costs as well.”

In March house prices rose again, say the Nationwide.

The Nationwide building society claimed that house prices further increased by 0.9% in comparison to the previous month.

The annual rate of property price falls fell from February’s 17.6% to 15.7% in March, which brought the average cost of a UK home to £150,946.

Nationwide described the change as a “surprise bounce” and warned against concluding the market had turned.

Chief economist at Nationwide, Fionnuala Earley said;”While the rise in prices in March is welcome, it is far too soon to see this as evidence that the trough of the market has been reached. Cuts in interest rates and the Bank of England’s move to expand the amount of money in the system would take time to work through into the housing market before there was a sustained recovery in house prices.”

The survey from Nationwide found that UK house prices had dropped by 4.2% during the first 3 months of this year in comparison to the final quarter of 2008.

Ms Earley commented that “… the significant slowdown in falling prices year-on-year was distorted by the sharp decline in the market last year.”

The figures from the building society further show that the prices of flats have been particularly volatile in comparison with other types of properties.

There has been an outcry from the MSP and SNP’s who have called Nationwide’s decision for preventing the Dunfermline customers from accessing the new lower rate of mortgage products on offer as a “disgrace”.

The Nationwide is set to offer its own customers mortgage rates of 2.5% after the end of their current mortgages; however, Dunfermline customers are restricted to the mortgage rate of 5.49% when the BofE base rate is only 0.5%.

During the takeover, Nationwide arranged this as part of their deal with the Dunfermline Building Society.

Fife MSP Tricia Marwick covers the area of Dunfermline in one of her constituencies and recently commented:

“This is an outrageous move by the Nationwide. Mortgage holders with the Dunfermline will be very angry. When mortgage deals come to an end they should have access to the best deal in what is now one society. Their building society has been sold off behind closed doors and now they are expected to pay a premium for the privilege. This raises more questions over the terms on which the Treasury sold Dunfermline. Retaining the Dunfermline brand is important, but that should not mean Dunfermline savers and borrowers suffer. Scots will bear the cost of any job losses at Dunfermline HQ – they should not have to pay these additional costs as well.”

The spokesperson, Stewart Hosie MP for SNP Westminster Treasury said:

“The Dunfermline deal has been sold by the government as the best deal for customers and workers, but that is already unraveling. While I welcome the fact that Nationwide customers will benefit from this new rate, why should Dunfermline customers be treated differently. It is clear Nationwide have taken on the mortgages only to rip customers off. Nationwide have taken over the best parts of the Dunfermline business, and is even being guaranteed taxpayers money to pay for the takeover – the least we should expect is an even handed approach.”