Mortgage News

Mortgage rate hikes on the way

Sun, 22 Apr 2012 12:14:00 GMT

Bank of England rates remain unchanged, but several major mortgage lenders are preparing to raise their variable rates.

The BoE base rate, which is intended to be a major influence on the costs of borrowing for homeowners, has now been fixed at 0.5% for more than three years. However, while competition is meant to keep prices down, several banks plan to raise rates from the beginning of May.

The changes are to the standard variable rate, which means they'll immediately affect existing customers who aren't on a fixed, discount or tracker mortgage. The rates will apply to most fixed or discount rate customers when their current deal comes to an end, unless they are able to remortgage.

The changes include:

Halifax: 3.5% rising to 3.99%
Co-operative: 4.24% rising to 4.74%
Clydesdale & Yorkshire: 4.59% rising to 4.95%

Meanwhile RBS-Natwest is putting up the rate on its One Account mortgage from 3.75% to 4%. This is an offset mortgage, meaning it's linked to a bank account and the balance or overdraft is taken into account when determining interest costs on the mortgage. This deal carries its own rate, meaning the bank's other customers won't

Major banks sign up to 5% deposit scheme

Sun, 18 Mar 2012 20:44:00 GMT

Three major banks have agreed to take part in a government backed scheme to help first-time buyers who are struggling to raise a deposit.

Barclays, NatWest and Nationwide have all agreed to take part in the NewBuy scheme. This means first-time buyers will be offered 95% mortgages on newly-built property. The housing developer pays a cash sum worth 3.5% of the purchase price to the lender, while the government offers a guarantee worth up to 5.5% of the purchase price.

This guarantee only results in a payout to the lender if the homeowner defaults on the mortgage, the lender is forced to repossess and sell the property, and the market value of the home has fallen in the meantime. The combined measures mean house prices would have to drop more than 14% before a repossession for the lender to lose out through a default, not taking into account any interest it has already received.

There are some concerns over the plans however. It appears the banks will only be offering the loans on homes from a few major constructors, possible hurting other firms. It's also possible there'll be scope for constructors to increase sales prices now they can reach a

Home ownership continues to slump

Sun, 26 Feb 2012 20:13:00 GMT

The proportion of British homes that are owned rather than rented has dropped to 66 percent: the lowest figure since 1988.

The figures come despite a 14 percent rise in first-time buyer mortgages in December compared with the year before. Analysts believe that is likely the result of buyers rushing to beat the impending return of stamp duty for purchases of under £250,000.

The lack of homeowners appears to be caused by an increasing number of young people delaying their first home purchase, with the average age of a first-time buyer now 37. That problem is caused by the same increase in prices that has helped many existing buyers, and worsened by the substantial decline in low-deposit mortgages after the 2008 financial crisis. Only 10 percent of homeowners are aged under 35.

It appears the trend is purely financial rather than cultural. Around three-quarters of people who currently rent say they still want to buy when it is affordable.

The government has responded to the trend by relaxing rules on new housing developments and underwriting 95% mortgages for first-time buyers of new-build

Mortgage fees rise dramatically

Sun, 29 Jan 2012 21:52:00 GMT

Mortgage arrangement fees have risen by more than two-thirds according to a new survey.

Moneyfacts reports that the average arrangement fees paid by a customer to set up a mortgage (money that doesn't go towards repayments or interest) is now £1,498, up from £889 this time last year. One theory is that lenders are using fees as a way to increase revenue while they are unable to increase interest rates with the Bank of England base rate remaining unchanged throughout 2011.

The survey did find that shopping around still makes a big difference: the most expensive arrangement fees were around £4,000.

Financial analysts are warning customers to take the fees into account when deciding on the best deal, particularly if they are short of cash and looking for a mortgage with a small deposit. However, it's also been noted that for those with the money to pay for it, a larger arrangement fee could be worth paying if it gets access to a better rate.

It's also important to check terms and conditions carefully as while some arrangement fees are truly all-inclusive, some lenders impose separate charges to cover legal or valuation

Mortgage market facing major overhaul

Sat, 7 Jan 2012 20:31:00 GMT

The Financial Services Authority is proposing significant changes to the way banks must verify mortgage applications.

Under the new rules, banks must take much more account of individual circumstances rather than simply working on multiples of income. For example, they'll need to consider regular outgoings such as loan and card repayments. They'll also have to take into account how many children an applicant has.

Another major change is that lenders must take into account predictions of interest rate changes over the next five years. They'll then need to assess whether applicants will still be able to afford repayments if rates rise as high as expected.

Interest-only mortgages will still be allowed under the new rules, but borrowers will need to show a specific plan for repaying the balance at the end of the loan such as a savings or investment scheme. Simply saying you plan to cash in on rising house prices or await an inheritance will no longer be acceptable.

Self-certification loans, in which applicants simply list their income without providing evidence, will be banned

EU rules could hit buy-to-let market

Fri, 16 Dec 2011 20:13:00 GMT

Campaigners are protesting against planned European legislation that could restrict the ability of buy-to-let purchases to get mortgages.

The proposed rules come from a European Union consultation titled "Responsible Lending and Borrowing." If adopted as a directive, governments including the UK would be required to adopt the principles into domestic law, though there could be some scope for interpretation over the details.

One of the proposals is that the buy-to-let mortgage market be regulated in the same way as that for those who buy a home. That could mean lenders were no longer allowed to take potential rent revenue into account when making a decision, but rather would have to base the loan on the borrower's income from employment or self-employment.

Critics say that the regulations are aimed at protecting consumers and thus shouldn't apply to buy-to-let cases, where the home buyer is making more of a commercial business transaction. They want the regulation amended to give property investors an exemption from the

Brits carry on paying off their mortgage

Fri, 2 Dec 2011 19:58:00 GMT

British mortgage-holders are paying back their loans at a record rate. It could mean more cash is available to banks for new loans.

Newly-published Bank of England figures show borrowers repaid a total of £9.1 billion between April and June. That's equivalent to 3.5% of total post-tax income.

The figure continues a pattern of high repayments since the recession of 2008. In the past three years homeowners have consistently paid back more as a whole than they've taken out in new mortgages, with the total outstanding borrowing declining by £92.2 billion.

While it may seem odd that mortgage repayments are rising during a tough economic time, it appears many homeowners are putting all spare cash towards overpayments in an attempt to reduce monthly interest charges. The trend may also be because people are taking greater care to make scheduled payments rather than risk falling behind. It's also likely borrowers are taking advantage of historically low interest rates and putting more of their money towards repaying the principal.

How lenders will react is yet to be seen, but there's a strong possibility they'll be able to use the extra cash to fund new loans, as well as offering more favorable rates to tempt those

Government scheme puts 95% mortgages back in play

Fri, 25 Nov 2011 20:52:00 GMT

The government has announced a new scheme designed to make it easier for first-time buyers to buy property without a large deposit. Experts are split about the overall effects on the market.

The scheme will involve the first government guarantee of its type. It applies only to newly built property in England, and covers 95% mortgages (ie those where the buyer pays 5% of the purchase price up front.) Such mortgages have virtually disappeared in recent years as lenders have become more cautious in the wake of the credit crunch.

The new scheme, which takes effect from March, does not change the borrower's liability for the repayments. However, the government will deposit cash to the value of 5.5% of the purchase price with the bank, while the house builder will deposit a further 3.5%. This is returned once the relevant amount has been repaid by the borrower; in the meantime it serves as protection against the house having to be repossessed and selling for less than the original price.

The deal is open to first-time buyers and current homeowners alike, but those intending to buy property to let, or as a second-home, are

Virgin takeover earns mixed reaction

Fri, 18 Nov 2011 16:09:00 GMT

Financial analysts have been debating the effects on the lending markets of Virgin taking over Northern Rock.

Virgin Money will pay £747 million up front, with a possible £280 million in extra payments. It's considerably less than the money paid by the taxpayer to bail out the building society several years ago.

Supporters of the deal argue that adding a new commercial operation will help stimulate competition for mortgages and savings, particularly given Virgin's reputation for challenging traditional players in an industry. However, critics note that Virgin will only be around a tenth of the size of the major banks, meaning it may have little market power.

Given Virgin's tactics of promoting simple plans and packages in its other businesses, there seems a strong likelihood it will offer offset mortgages for customers who also hold current or savings accounts with the bank. That's a system by which any positive balance in the bank account is deducted from the mortgage balance when working out monthly interest charges. That's good news being that mortgage rates currently far exceed interest rates paid on current or savings

Deposits becoming more unaffordable

Fri, 11 Nov 2011 15:40:00 GMT

The increasing amounts of deposit needed to buy a home appears to have led to drastic measures. A new survey finds 10 percent of prospective first-time buyers plan to use a bank loan or credit card towards the downpayment.

The vast majority are still planning to save up the cash themselves. Just under one in five expect to borrow money from parents, while five percent plan to sell personal possessions.

The figures come at a time the average deposit on a home (for all buyers, not just first-timers) reaches £65,924 -- more than ten times the level required in 1990. The level of deposit is rising at roughly twice the rate of overall house prices, caused mainly by an end to 90% or 95% mortgages being typical, a result of increased bank caution after the 2007-8 credit crisis. Now an 80% or 85% mortgage is much more usual.

Property companies are recommending that buyers think twice about using unsecured, high-interest debt to get deposits. Instead they recommend buyers look at special incentives offered by both construction firms and government such as shared ownership deals that require less money up

Early repayment is a triple treat

Sat, 5 Nov 2011 19:22:00 GMT

Putting savings towards mortgage overpayments could be a far more effective way of using spare cash according to one calculation. Harvey Jones of Lovemoney says he reckons it could be the equivalent of getting more than a 7% return: welcome news in times when low base rates mean most savers are lucky to get 1%.

The "return" comes in the form of reduced monthly payments. Jones gives the example of a £100,000 mortgage at 4%, and somebody using £10,000 of savings to make an early repayment. The immediate effect is a drop in future monthly payments equivalent to £744 a year, or 7.4% of the initial "investment".

In reality, it's difficult to make such direct comparisons and if anything the benefits of early repayment are more dramatic. For example, the quicker you the balance on your mortgage, the less you rack up in interest -- across the course of a 20 or 25 year mortgage that can make a huge difference.

There are also tax advantages. At the moment, you pay tax on the interest you get from most forms of saving other than an Individual Savings Account, which is limited to just over £5,000 a year. (You can put more into

Home improvement loans on the rise

Fri, 14 Oct 2011 15:11:00 GMT

Financial writers are split over the wisdom of taking out credit to fund home improvements rather than move house.

The topic has come to the fore with many homeowners wanting to move to a larger property but being unable to do so. That's led to the Nationwide finding that 10% of the remortgages it arranges are used to finance work such as loft conversions, a figure that is 20% among existing customers.

Rosie Murray-West of the Telegraph suggests some homeowners trying out this strategy could even find it cost-effective to borrow money on cards or loans to fund home improvements, then remortgaging the house when the work is complete. Her theory is that the improved home value will be reflected in a more affordable deal while freeing up cash to pay back the cards or loans. But she does concede this is something of a gamble.

However, Lucy Tobin of the Evening Standards warns that although extensions or loft conversions can appear to make financial sense, the costs often exceed expectations and many homeowners end up in expensive disputes with

Mortgage rates set to stay frozen

Mon, 19 Sep 2011 11:18:00 GMT

Finance experts have forecast that interest rates will remain unchanged throughout next year. That could change the way consumers approach personal finance.

With the Bank of England keeping its base rate at 0.5% yet again, the same rate it's been at since March 2009, signs elsewhere suggest that it will remain the same. The US Federal Reserve is predicting no increases in its rate for at least 18 months, and European rates are forecast to fall.

It now appears that even the most extreme forecasts are for UK rates to rise no sooner that late next year, and most are expecting it to be mid 2013 before even slow rises begin.

For those looking for a new mortgage, the choice is between a tracker rate that looks set to be low for a while, or taking on a fixed rate: although you'll be paying "over the odds" right now, it's possible to get a low rate locked in for a long time, which can give stability.

Meanwhile those who took out fixed rate deals before rates began plummeting a few years back may be looking for an exit route. Every case is different and depends on penalty fees, but those who

Mortgage lenders in credit check shocker

Fri, 2 Sep 2011 15:43:00 GMT

Two banks have admitted carrying out secret credit checks on existing mortgage customers. And there's speculation the practice could spread to other banks.

Northern Rock and Bradford & Bingley have not only been commissioning the checks, but have even phoned some customers to warn them to cut down on "luxury" spending so that they don't risk missing mortgage payments.

It's believed the two banks, who are still publicly owned after previous bailouts, are calling around 2,000 customers a week and expect to phone a total of 30,000. The program is being run by UK Asset Resolution, which is managing the mortgages covered by the bailouts.

The theory behind the credit checks is that finding customers who have fallen behind with loans or credit card payments are most likely to go on to default on mortgages.

The revelation has drawn attention to the fact that many mortgage contracts contain clauses allowing the lender to carry out a credit check at any time. Without such a clause, the bank would need explicit permission before each

Euro crisis could drive up mortgage rates

Mon, 15 Aug 2011 19:39:00 GMT

A mortgage broker has warned that potential government defaults in the UK could have a knock-on effect in the UK.

There's growing speculation that both Italy and Spain could be forced into defaulting on loans, or at least renegotiating payment schedules in the same way as looks inevitable in Greece.

Melanie Bien of Private Finance told the Daily Express there was a serious risk this could mean UK banks suffered cashflow damage or even outright losses. In turn this could mean they had less money available to lend on mortgages, making them more selective about accepting customers and demanding higher rates for those considered riskier prospects.

There is some good news for borrowers, though: the US Federal Reserve Bank has indicated it could be 2013 at the earliest before it puts up the base rates that heavily influence variable mortgage rates. That's likely to increase the chances the Bank of England will follow

Mortgages rebound but market still shaky

Sun, 31 Jul 2011 19:19:00 GMT

New mortgage approvals are on the rise, though it seems existing customers still fear a rate rise.

The number of approvals for mortgages to buy houses rose by four percent from May to June, reaching the highest level since last spring, although analysts noted the figure is still low by historical standards. Indeed, the total amount lent to customers fell slightly because the new loans didn't keep up with the total made in repayments. There are also some questions about whether the housing market is fundamentally improving or if people are simply taking advantage of price falls.

There was actually a slightly bigger proportional rise of five percent for remortgages, suggesting borrowers want to get new deals in place before any base rate rise. Although a change looks to be some months away, it's no secret that the next change will mean those on variable rate deals will face bigger monthly

Negative equity fears back in play

Sun, 8 May 2011 22:42:00 GMT

Lloyds Banking Group has revealed that 150,000 of its mortgage customer are currently in negative equity. It's a potential problem for both customers and the bank itself.

According to the group, 5% of its customers are in negative equity, meaning the outstanding balance on their mortgage is more than the current market value of their home. However, these customers make up 13.5% of the total value of the bank's mortgages. That suggests the problem is particularly bad among those in more expensive homes where a house price slump is more dramatic. The negative equity also appears to be a hangover of the peak of the 100% mortgage loans (those with no deposit) which are more susceptible to problems if prices fall.

Normally negative equity isn't a major problem for homeowners unless they need to move house. However, with spending cutbacks underway, there's a risk that unemployment will rise, leading to more borrowers falling behind with mortgages, but banks being unable to get back their full loan amount if they repossess and sell the

Every little helps in mortgage market

Fri, 29 Apr 2011 20:41:00 GMT

Supermarket giant Tesco has confirmed it will be adding mortgages to its range of financial services some time this summer.

The move follows the revelation that its tier one capital ratio has reached 15.9%. That's effectively a comparison of the money an organization has on hand to the value of its riskier assets such as loans that might not be repaid. The ratio is significant as it should easily be high enough that investors in the company are happy for it to take on the additional risk involved in high-value mortgage loans.

Tesco has also announced that a 26% drop in its bad debt provisions, which is the money that it sets aside (in accounting terms) to cover defaults by customers. That shows it is much more confident about repayment levels.

The supermarket first announced plans to offer mortgages last year. It's yet to announce any details of the rates it will offer and what advice it will provide to prospective borrowers, particularly those with unusual

Mortgage rate rise may be drawing closer

Fri, 22 Apr 2011 11:52:00 GMT

Although the Bank of England voted earlier this month to keep the base rate at 0.5% for the 26th consecutive month, minutes of that meeting released this month suggest a rise is drawing ever closer.

The papers show that members of the Monetary Policy Committee were split 6-3 on the issue, meaning it would only take two members to change their minds for those backing an increase to have a majority.

And while the minutes suggested those backing a continued 0.5% rate appear firm in their position, independent observers still expect a gradual rise starting this year, with predictions that 2012 will see a return to the rates of 2%-3% that were in force in the immediate aftermath of the 2008 financial crisis.

That's led to debate about whether it's a smart idea for existing mortgage holders to switch to a fixed rate deal. The most common view seems to be that high switching fees and a reluctance of banks to offer new deals to people who are still in the early years of a mortgage means this often won't be worthwhile. Instead experts are advising customers not to treat the low rates as a way to enjoy extra spending

Mortgage defaults in shock rise

Fri, 1 Apr 2011 19:25:00 GMT

The proportion of people defaulting on home loans has unexpectedly risen. And one analyst warns the credit crunch may lead to permanent changes in the way lenders offer deals.

Though it hasn't published precise figures, the Bank of England -- which surveys lenders every three months -- says that not only was the total amount lose through defaults on the up between January and March, but that it looks set to continue rising through the spring. That's particularly worrying considering interest rates haven't yet increased, a move many consider inevitable and that will put borrowers under more pressure.

That made another Bank of England announcement itself more surprising: there's also been an increase in the number of loans that require less than a 25% deposit. The Bank said that though this seems counter-intuitive with defaults rising, it believes lenders simply don't feel they can make a big enough profit on less risky loans.

Meanwhile David Miles, a member of the Bank of England committee that sets base interest rates, says he believes the market may have changed permanently. He argues that the old model of offering cheap introductory rates to new customers, subsidized by existing borrowers, no longer works, simply because the

Shape of home loans is changing

Fri, 25 Mar 2011 21:30:00 GMT

The market for home loans remains extremely busy, but it's not first mortgages that are showing the effects.

The number of new mortgages issued each month is now below 30,000, much less than "traditional" levels. But there's a significant trend of more and more remortgaging: in February the number of remortgages came within 2,000 of the number of new mortgages. That looks to be down to a combination of strong competition between lenders to offer good deals, and the ongoing belief that with inflation high, the Bank of England will have to raise interest rates sooner rather than later -- making it a good time to opt for a fixed rate deal.

Meanwhile there's reportedly been a change in the way older homeowners make use of equity release and home reversion products in which the owner gets paid money now, with the house being taken over by the finance company when the owner dies.

Historically such deals were mainly used by people wanting to access cash and enjoy their retirement. Now two thirds of people using one company that spoke to the Daily Mail say that they need the money either to pay off debts or to clear a mortgage because they

Mortgage rates slowly rising

Fri, 11 Mar 2011 16:04:00 GMT

Mortgages are getting more expensive but loan costs are falling, latest figures show.

According to the Bank of England, the rates on three different sample mortgages all rose in February. The average five-year fixed-rate mortgage deal hit 5.17%, the highest since last July. A two-year fixed deal is up to 3.72 percent (highest since September) and a two-year tracker deal is up to 3.51 percent.

Although it might seem odd that prices should change when the Bank of England base rate continues to remain at 0.5%, the base rate is playing a factor. With high inflation fuelling speculation that a rate rise is a case of "when", not "if", people looking to refinance are shopping around now rather than waiting. That demand is pushing up rates.

Meanwhile rates for unsecured personal loans and credit cards are steadily dropping. That appears to be the result of a combination of competition in the market, and consumers being wary about taking on extra debt during an uncertain economic

Northern Rock brings back 90% mortgage deal

Fri, 4 Mar 2011 20:22:00 GMT

Northern Rock has joined several rivals in offering 90% mortgages to first-time buyers. The move has attracted attention given the 2007 crisis that almost brought the bank down.

The bank, now owned by the government, says only a small proportion of borrowers will be offered the deals, which mean buyers only need a deposit worth 10% of the total purchase price. Until now, Northern Rock borrowers had been required to have a deposit of at least 15%. The bank hope the change will make homes more affordable for first-time buyers.

The higher loan-to-value ratio brings increased risk to the bank: not so much in terms of how likely it is that borrowers will default, but rather the consequences if they do. A 90% rather than 85% mortgage reduces the cushion for house prices to fall to the point that if a borrower defaults, the bank won't be able to recoup the full outstanding loan by selling the house.

However, Northern Rock insists the new deals will be made in a responsible manner. That's in contrast to its policy last decade of offering some loans worth 125% of the purchase price, leaving it dangerously exposed to credit

Halifax mortgage confusion leads to �500,000,000 refund

Fri, 25 Feb 2011 20:35:00 GMT

Halifax is to pay around half a billion pounds in compensation after a blunder left some customers unaware of a price change.

The issue affected around 600,000 customers who took out a standard variable rate mortgage between 20 September 2004 and 16 September 2007. The problem came about when Halifax decided to change its pricing cap from two percentage points above the Bank of England base rate to three percentage points above the base rate.

Unfortunately the wording of the mortgage documents at the time left many customers confused and wrongly believing that they would automatically be informed of such a chance to the cap. To make things worse, when Halifax did inform some customers of a rate change, it didn't make clear that this was because the cap had been increased.

After complaints to the Financial Services Authority that the mistakes may have deterred customers from looking for a better deal elsewhere, the FSA reached a voluntary agreement with Halifax. The company will now pay £250 to those who were told about the rate change, but not given a clear explanation. In cases where people weren't told about the change at all, it will refund the additional money spent on mortgage

Government calls in the lenders over mortgage slump

Fri, 28 Jan 2011 21:03:00 GMT

Britain's major mortgage lenders have been told to attend a government summit to discuss the continued lack of loans to first-time buyers.

Figures covering January show that members of the British Banker's Association, which covers most lending, approved 400,000 mortgages last year: that's the second lowest total since 1999, behind only the panic-strewn year of 2008.

That helped contribute to a decline in the total amount of outstanding loan amounts (ie mortgage loans minus repayments) in December to the lowest figure since June 1999.

According to housing minister Grant Shapps, the low levels of lending mean the average age of a first-time buyer (excluding those who get money from their family) is now 37. And he doesn't think the decline in loans is due to a lack of demand, quoting estimates that 1.4 million people want to buy a home but either can't afford it or can't get a mortgage.

Shapps says he will urge the banks to come up with more creative ways to help new buyers afford a home, but says it will take a " unified effort and creative solutions from across the board" rather than government orders being

Mortgage outlook still bleak

Fri, 7 Jan 2011 15:02:00 GMT

Mortgage lending has hit another 10-year low, with worries in the industry that demand may fall even further.

Newly released figures show that just 29,991 loans were approved in November, the lowest figure since March 2009, and almost a third down on the previous year. There's also been a 13.5% year-to-year drop in the total value of home loans.

Meanwhile net lending (the amount borrowers still owe on the mortgages) has fallen 56% since last year. That's a knock-on effect of fewer new mortgage holders in recent years, who by definition have paid off a lower share of their loans. It's also down to continuing low interest rates, with some of those on variable rate deals using spare cash to pay off the balance of the loan.

Analysts are predicting the pattern will continue for some time, with new buyers being unwilling to take on mortgage debt while the economy remains uncertain.

In theory the pattern could be good news for those who are able to afford to buy, with mortgage lenders more desperate to win customers with favorable deals. In practice, it could be that competition actually narrows with some smaller lenders cutting back on their range of loans or even

Mortgage market shows mixed picture

Fri, 26 Nov 2010 19:00:00 GMT

A drastic fall in mortgage lending is hiding a two-tier split in the housing market.

The total value of all home loans in the UK fell to £7.6 billion last month, the lowest figure since February 2001. That's largely caused by an ongoing lack of new applicants, with the number of newly issued mortgages also dropping in October, to the lowest levels since March last year.

The total outstanding debt (that is, the overall mortgage value minus the money people have already paid off) rose a little to £1.7 billion. That's not necessarily a good sign for the market as it may simply be that people had less cash spare to pay off their mortgages during the month.

The irony is that the drop in lending isn't simply a case of houses as a whole being too expensive. There's actually an increase in the number of new loans for the most expensive property. That's partly because wealthier people are better placed to meet the tough demands of lenders for high deposits, and partly because the most expensive homes are doing a better job of holding their price, meaning homeowners are better placed to move

Mortgage demand still under pressure

Mon, 22 Nov 2010 15:11:00 GMT

Mortgage lending has again fallen, reaching an 18-month low. It's prompted concerns that even those potential homebuyers who could get mortgages are putting borrowing on hold over economic fears.

Only 31,000 new mortgages were approved last month, the lowest since March last year. And while the total amount of outstanding loans grew, it did so at the lowest rate in a decade.

Although interest rates are low, many borrowers remain unable to afford deposits in the now-common 25% range. And forthcoming "stress tests" imposed by the Financial Services Authority could have a significant effect. The Council of Mortgage Lenders says that had the rules been in existence at the time, around half of all mortgage loans made in the past five years would have been banned, many of them taken out by first-time buyers.

And while there aren't hard statistics to back the theory up, some financial analysts believe that many would-be borrowers who still qualify under the increasingly tight lending rules are putting off home-buying because of concerns about job losses through government spending

Lawyers save one mortgage by creating another

Fri, 12 Nov 2010 19:08:00 GMT

American lawyers have found a creative way of making money from clients who are facing home repossessions: they are getting the homeowners to take out a second mortgage with the payments going to the lawyers.

The scheme is the work of lawyers specialising in foreclosure defense: challenging a bank's attempts to repossess a home, often by highlighting legal failings in the repossession procedure.

The problem such lawyers face is that clients by definition don't have spare cash for paying the legal fees, which can include a basic retainer fee plus a proportion of any savings if the lawyer is able to get the outstanding mortgage reduced or even wiped out.

To get round this, some lawyers are now asking clients to take out a second mortgage on the home, with the lawyer as the "lender". Under the arrangement, which only takes effect if the repossession attempts by the original lender are defeated, the lawyers do not advance any money to the homeowner but instead provide the legal services, with the home held as security against failure to repay.

One of the most prominent lawyers carrying out the scheme says that under no circumstances would he exercise his right to repossess a client's home

Barclays celebrates home loans milestone with mortgage rate cuts

Wed, 13 Oct 2010 11:31:00 GMT

Barclays has cut its mortgage rates to celebrate reaching a total of £100 billion in home loans. But despite that company's boom, one industry magazine claims lenders need to reconsider the deposits they demand from new customers.

The Barclays mortgages are provided by its subsidiary Woolwich. It claims to be the fastest growing lender in the UK, increasing the total value of its lending by 42% over three years, more than 10 times the industry average.

It's now cutting its tracker rates: mortgages on 70% loan-to-value ratio are coming down from base rate + 2.49% to base rate + 2.08%, while those on 75% loan-to-value ratio fall from base rate + 2.69% to base rate + 2.39%.

But the editor of What Mortgage says loans which require high deposits -- such as the cut-price deals from Barclays -- won't be enough to get first-time buyers into the market. Ben Wilkie said that even a 90% loan means that an average first-time buyer needs around £20,000 in cash, which is "a huge amount of money for a lot of

UK mortgage market facing further turmoil

Sat, 9 Oct 2010 11:55:00 GMT

There’s a mixed outlook for homeowners and home buyers this week. Those with mortgages are paying them off at the quickest rate for more than a year while those trying to get mortgages are facing serious struggles.

British homeowners paid a total of £6.2 billion towards their mortgages between April and June, newly released figures show. That’s the highest three-month total since January-March 2009. The added expenditure appears to be the result of consumer confidence taking a knock thanks to the poor economy and the expected results of government spending cutbacks. Consumers are taking money they’d normally have spent in the shops and put it towards paying off major debts instead.

Meanwhile the Bank of England has warned that getting mortgages is continuing to get harder. It says banks have become more strict about the credit history they require from new mortgage customers over the past six months, and that they may raise the bar even further over the next quarter. It also predicts that, as a result, the number of new loans will fall in the coming months, again for the first time since early last year. Officials say those who do get offered loans will likely have to pay

Cooling-off period on the cards for mortgages

Mon, 27 Sep 2010 20:08:00 GMT

Rumored European legislation could give mortgage customers a ten day cooling-off period after agreeing a loan. It's designed to give homebuyers more opportunity to shop around for the best deal, but the UK mortgage industry says the rules are unnecessary.

The European proposals won't be published for consultation until early next year, but the Council for Mortgage Lenders says officials are considering a compulsory "reflection period" after a mortgage is agreed in principle, during which customers can change their mind. The idea is to encourage people to look for a better deal during this time rather than rush into a mortgage.

According to the CML, this is largely irrelevant in the UK because most people use a mortgage broker, who will already shop around for the best deal.

The CML also criticised other European proposals to standardize mortgage rules across the continent, including introducing a standard information sheet about each deal, which would replace the current Financial Services Authority documents. The CML argues that such standardization isn't needed as few customers will be comparing mortgage offers from companies in more than one

Mortgage giants dominate lending market

Wed, 22 Sep 2010 12:02:00 GMT

Just six lenders now make up more than 90% of the UK mortgage market. It makes it even more important for would-be home owners to shop around for deals.

New figures from the Council of Mortgage Lenders show a major contraction in market competition. The top six lenders (Lloyds, Santander, RBS, Barclays and HSBC) now have a combined market share of 92.2%, compared with 79.4% two years ago.

That's down to a combination of banking groups carrying out takeovers, and traditional building societies failing to grow their business, partly through a lack of funding. The CML also described the mortgage activities of non-banks as "comatose" and warned that the market breakdown will not change soon.

To further show the narrowing of the market, the top three lenders now make up more than three-fifths of all lending.

As a result of the contraction, there's likely to be less pressure on big lenders to be competitive. That means borrowers need, more than ever, to compare a wide range of deals to be certain of getting good

New mortgage deal keeps interest rate options open

Tue, 7 Sep 2010 19:06:00 GMT

A mortgage company has unveiled a tracker mortgage that comes with an option to switch to a fixed-rate without penalty.

The firm behind the deal, Principality, says it is aimed at buyers who are confused about contradictory forecasts over interest rate movements and are wary about taking risks given the financial climate. Marketing director James Wright said that while some financial experts predict low rates for the foreseeable future, other economists are pegging an 8% rate within two years.

The deal is for a three-year variable rate at Bank of England base rates plus 2.49% (meaning 2.99% at the moment). The deal automatically switches to Principality's variable rate (currently at 4.99%) after the three years. However, the borrower is able to switch to a fixed rate during that time without having to pay the standard early redemption charge of 3%.

There are some catches. The mortgage carries a £999 product fee and is only available for loans up to 75% of the property's

Mortgage struggles drive up rents

Sun, 5 Sep 2010 19:28:00 GMT

The number of mortgages approved in the UK has fallen for a second straight month and is close to dropping below 1,000 a day. The figure for July is down nearly a fifth from the same time last year.

Although mortgage rates are still low, the best deals generally require high deposits, up to 25% in some cases. That cash requirement, plus consumer concern over job losses has meant more people are choosing to stick to renting rather than buying.

The BBA noted that there are more houses available for sale (which has been linked to the removal of Home Information Pack requirements), and there's been a slowdown in price rises, but this hasn't been enough to tempt new mortgage holders.

In turn that's putting pressure on rents: over the past quarter the number of sources reporting rent rises was 27% higher than the number reporting fees. The increased demand for renting has coincided with a shortage of supply, caused mainly by banks imposing much tighter controls on buy-to-let mortgages. The number of new properties added to the rental market has now dropped for four straight

Mortgage lenders better off despite rate drops

Thu, 19 Aug 2010 15:16:00 GMT

Mortgage lenders are making their highest ever profit margins on individual loans according to new statistics.

Figures quoted by Moneyfacts say the difference between the average mortgage rate and the rates banks pay to borrow money themselves is now 3.29%, a margin that has doubled in the space of two years. That's enough to outweigh the trend for a small decrease in the rates customers pay.

One reason for this appears to be a slowdown in lending. Because banks and building societies are more hesitant to take on new customers at a time when job cuts look likely, the rates on offer remain higher than if lenders were engaged in fierce competition.

It appears borrowers believe rates could rise from current levels. Since the start of this year, the proportion of people taking out fixed rather than variable rate deals has risen from 45% to 60%. That's further fuelled by speculation that the Bank of England may soon raise base rates in an attempt to slow down

Regulator plans end to self-certification mortgages

Sun, 18 Jul 2010 15:48:00 GMT

Self-certification mortgages look set to be banned under a Financial Services Authority crackdown on the home lending market.

The FSA is planning to tighten the requirements that lenders check borrowers are able to afford repayments on mortgages. It comes as the regulator found there was such a disparity between loans and incomes that 46% of house holds are left with no money after mortgage repayments and living costs.

The new rules wouldn't mean that people without a fixed salary, such as the self-employed, would be barred from getting a mortgage. However, they would have to offer more conclusive evidence of their income rather than the lender simply taking them on their word. FSA research shows that people on self-certified mortgages have been three times as likely to default on payments as those who've been through income checks.

In another significant change, the FSA is considering a policy that checks on the ability to repay are based on a capital and interest basis. That means that even where the lender wants to take out an interest-only mortgage, they must still prove they could afford to repay the loan itself in their monthly payments, rather than simply hope a combination of

FSA cracks down on mortgage advice

Mon, 5 Jul 2010 19:59:00 GMT

The Financial Services Authority has announced that all mortgage advisers will be more accountable in future.

The new rules, which take effect from next March, mean that both independent mortgage advisers and bank staff which give mortgage advise will have be registered with the FSA. As well as proving they are "fit and proper", the advisers will have to show they meet a minimum level of competency and agree to follow an FSA code of ethics.

The authority has also brought in tighter controls on how lenders treat people who are in arrears. The changes mean firms can't apply an arrears charge once there's an agreement to pay off the arrears, and that the borrower's payments are put towards the arrears first, rather than any charges they've racked up.

There are also tougher rules on firms which offer to buy a home from a customer in difficulties and rent it back to them. These include a ban of emotive terms in advertising (such as "rescue" or "fast sale"), a 14-day cooling off period, a ban on cold calling, and a guarantee that any homeowner who takes up such a deal will be allowed to rent the property for at least five