This figure is up from £36.6 billion in 2005.
Many economists suggested that this rising mortgage equity withdrawal rate would increase consumer spending on the high street. However from figures on retail sales this does not seam to be the case. It appears that more people are using the extra funds to pay off other debts such as credit cards, bank over drafts and other unsecured debts.
Homeowner often release equity in their properties to fund home improvements, but it should be noted that should property prices fall they may be in a negative equity situation.
At this point house prices remain robust, but there appears to be a slow down in house sales. This is particularly prevalent in the first time buyers market with would be purchasers finding it increasingly difficult to get on the property market.
]]>This rate raise was widely predicted by many economists and while respected by many, business leaders were less impressed with this rate raise.
Many traders are also predicting that by the end of the year interest rates will hit 6%. So what does this mean for homeowners? If you have a £150,000 mortgage the increase would be around £23 extra per month.
]]>There are more and more people opting for interest only mortgages in an attempt to keep monthly payments as low as possible. As an example if you had a £100,000 mortgage over 25 years at 5.75% you would pay around £629 per month compared with £479 per month on an interest only mortgage.
The problem with interest only mortgages is that you do not pay anything off the capital sum borrowed, so even after paying this type of mortgage for 25 years you would still owe the same amount, on the above example you would still owe £100,000.
Interest only mortgage can be used short term when finances are stretched but you should always plan to switch to a repayment mortgage as soon as possible or have some other investment vehicle in place to pay off the mortgage.
]]>The FSA have been investigating this sector for six months, and have admitted that it was surprised at the number of errors uncovered, made by both mortgage brokers and lenders.
The sub prime mortgage market is a very profitable area for both mortgage lenders and brokers, with mortgage intermediaries being paid higher commissions to sell sub prime products of between 1 to 1.5% and also often charging substantial fees on top of this.
34 intermediaries and 11 lenders were reviewed by the FSA, with 5 facing discipline, which could range from a ban on conducting business to a fine. Similar bad practices in the USA, have contributed to the worst housing slump since the 1930s, with defaults by sub prime mortgage holders at record levels.
The Association of Mortgage Intermediaries has said it will be setting up a working party in conjunction with the Council of Mortgage lenders to review the problem.
]]>This has come as a surprise to many with the interest rate rises making it more expensive to remortgage.
This increase is in part by people coming to the end of introductory deals, and borrowers looking to raise capital to pay off other more expensive debts such as credit cards and other unsecured loans.
While it is true you can reduce your monthly repayments, it does mean however in the long run you will be paying more interest.
There has also been a large increase in the average value of mortgages taken out with the figure up £18,884 bringing the average mortgage value to £166,732.
This reflects the increase in property prices and the higher prices first time buyers have to pay to get on the property ladder.
There have also been concerns expressed by the mortgage regulator that lenders need to monitor their lending criteria to ensure first time buyers in particular are not over stretching themselves to get on the property ladder.
]]>There is no application fee with the product or higher lending charge.
This mortgage product is offered with Tracker and fixed rate options, and you can add an offset facility which means as the borrowers financial status improves they can make payments to the offset account to reduce their mortgage.
Borrowers should think very carefully before taking out such a large mortgage as they will be in instant negative equity, and should satisfy themselves that it is an affordable option.
]]>The situation is being compounded by the fact that first time buyers now face the highest interest rates for 15 years and with figures from the Council of Mortgage lenders showing that first time buyers are paying 18.7% of their.
The latest figures from the Council of Mortgage Lenders show first-time buyers in April were paying 18.7% of their income on mortgage interest, and with further interest rate rises in the pipeline the situation may get worse.
]]>With an offset mortgage you combine your savings with your mortgage account; the lender then calculates the net borrowing on your mortgage minus your savings and charges interest on the reduced sum.
For example if you had a £150,000 mortgage with savings of £20,000 you would only pay interest on £130,000. With this type of mortgage you also get the option to make overpayments or underpayment, which keeps payment options flexible.
According to the Yorkshire Bank, it suggests these type of mortgages could be advantageous to around three in ten borrowers in the UK, which equates to around 4 million people.
Offset mortgages are not suitable for everyone and I would recommend you seek advice from a qualified independent mortgage broker or IFA who will be able to advise you.
]]>If you need the stability of a fixed rate mortgage there is still time to act, and there are many good fixed rate deals on the market. You can still get sub 5% fixed rate mortgage deals and with the current Bank of England interest rate at 5.5% these will provide considerable savings, especially when compared to lenders standard variable rates of around 7.5%.
A saving of over 2.5% can save the average mortgage borrower hundreds of pounds per month. If you have a fixed rate mortgage deal which is about to come to an end it pay to seek independent mortgage advice you may be surprised how much you can save.
]]>This is believed to be in part caused by people rushing to avoid the introduction of the home seller information packs. These pack were originally scheduled to come into force on 1st June, but have now been postponed and will be phased in starting on 1st of August with only four bedroom houses or over requiring them until the end of the year.
The rise in the number of properties on the market has also helped to keep a lid on house price inflation, with the increases in prices nationally up by just 0.8%. This is good news for buyers as there is a larger than normal selection of properties for sale, but may not be as good for sellers as they may need to take a cut in price to shift their property.
]]>In another report by The Local Government Association figures show that Council tax in England is set to rise by an average of 4% this year.
The current rate of inflation is 1.9% which means that the average rise in council tax is more than double this rate.
The average household in the UK pays around £1078 per year in council tax.
While council tax rises hit all homeowners they have a particular severe effect on pensioners who have not seen large rises in their pensions to compensate.
Further bad news for pensioners was that the Government announced that it would not be providing the £200 rebate this year.
]]>As part of the plan to build more houses the social housing budget is to increase by 50%.
Mr. Brown also announced that the housing minister will attend government cabinet meetings.
Yvette Cooper, the minister for housing and planning, has pledged that the government's solutions will not decimate the green belt and plans to build new "eco towns" which are designed to address the needs of both public-sector workers and take environmental considerations into account.
The need for affordable housing can not be over stated and with a new report released by the National Housing and Planning Advice unit (NHPAU) they forecast that by 2026 the cheapest homes in England will cost around ten times the average earnings of the lowest paid 25% of the population.
tags: mortgage, remortgage, first time buyers
]]>At first glance there seams to be a bewildering choice of different mortgage types and deal, with loads of different banks and building societies and other finance companies all offering different mortgage deals.
So before you looking at all the different mortgage offers you should acquaint yourself with the different mortgage types on offer and have a basic understanding of how they operate. Main mortgage options
The first choice you will need to make is how you choose to repay your mortgage, there are two basic options. A repayment mortgage or an interest only mortgage which should be linked to a suitable investment.
This is where the monthly payment you make to the lender pays the interest on the mortgage as well as paying some off the amount of capital you have borrowed. This type of mortgage gives you the security of knowing that at the end of the mortgage term you will have paid off the entire amount.
This is where you pay your mortgage lender the interest on the loan only, but do not pay anything of the sum borrowed. So at the end of the mortgage term you would still owe the original amount you borrowed. Therefore with this type of mortgage you should have an additional investment plan that will cover this payment. There are many options available such as Individual savings account (ISA) or endowment, which should pay off your mortgage at the end of the term.
Once you have decided on the type of mortgage you require you next need to look at the interest rate options that are available.
This is the standard rate of interest that your chosen lender charges and can vary both up and down depending on market conditions and the Bank of England base rate.
The fixed rate mortgage as the name suggests offers a fixed rate of interest for a set period of time, which means that you know for the period of the fixed rate exactly how much you will be paying every month. This is good if you are on a tight budget as you will have the security that your mortgage payments will remain the same during this period. Fixed rate mortgages differ in length from one years to 10 years or more. One disadvantage of the fixed rate mortgage is that if interest rates were to fall during your fixed rate period you would still continue to pay at your fixed rate for the period of your fixed rate.
With a discount rate mortgage you get a discount off the lenders standard variable rate for an agreed period of time. If interest rates go up or down your payments will follow suit.
The capped rate mortgage offers the customer a guarantee that the mortgage rate will not go above a certain level (capped rate) for the agreed period of time. However if interest rates fall your payment should also fall.
This is not an interest rate option per say but is often combined with one of the options above. With this type of mortgage you will receive a cash back payment when you take out the mortgage. These types of deals are particularly popular with first time buyers who may be short of cash for such things as furniture. You should always be aware however that you do not get something for nothing, and there will oftern be cheaper deals out their without a cash back option.
This type of mortgage is design for people who may want to vary the amount they pay back on their mortgage to varying degrees over time depending on their circumstances. This type of mortgage is often popular with the self employed whose income can very considerably over time. You can take payment holidays and make overpayments. This type of mortgage is not usually recommended for first time buyers or people on tight budgets.
This always depends on individual circumstances but one of the best methods is to consult with an independent financial advisor you will be able to look at the whole mortgage market to help you find the best deal to suit you.
]]>As the name suggests with an Interest only mortgage you only pay the interest on the loan, and pay nothing off the capital amount. With a normal repayment mortgage your mortgage payment is split into two parts. First you pay the interest on the mortgage and secondly you pay off some of the capital amount on the mortgage. At the end of a repayment mortgage you owe nothing and the property is yours.
On the other hand with an Interest only mortgage you never pay anything of the capital amount so for example if you borrowed £100,000 over 20 years and stayed with this type of mortgage at the end of the term you would still owe £100,000.
So why do people opt for interest only mortgages you may ask.
Probably the main reason is their affordability, if you choose an interest only mortgage your monthly payments will be considerably less, which can be attractive to first time buyers or those who are stretching their finances to buy a larger property which they can only afford on an interest only mortgage.
Short term this type of mortgage can provide a way for many to get on the housing ladder and a few years down the line when their income has gone up they can switch to a normal repayment mortgage. However it should be noted that the longer you leave it the larger your monthly payments will be.
]]>Further figures released today also show that annual money supply growth increased in May to 13.8% from a figure of 13.3%. This raise in money supply will put pressure on the Bank of England to raise rates next month.
From minutes from the Bank of England’s Monetary Policy Committee it showed that the vote to hold rates this month was 5 to 4 in favor. This close vote gives a further indication that there may be a further rate rise sooner rather than later, which has been forecast by many financial pundits.
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