That was then, but now is a very different story.  The difference between the best standard variable rate and [...]]]> Before the recession hit, standard variable rates were fairly standard across the market.  The UK was a competitive mortgage market and you could figure that most standard vairable rates were around 2-2.5% above the bank base rate. 

That was then, but now is a very different story.  The difference between the best standard variable rate and the worst is nearly 4% according to moneyfacts.  The best standard variable rate was found to be Cheltenham & Gloucester and Nationwide at 2.5% whereas Chesham Building Society had the worst standard vairable rate at 6.45%.

What money facts found in terms of true mortgage cost between these two standard variable rates was startling.  On a mortgage of £150000 the Chesham mortgage would cost the borrower £5925 MORE than the equivalent mortgage with the Nationwide. There has always been a case to suggest that when you are on the standard variable rate you probably have no redemption penalties and as such you should be shopping for a better rate but clearly anyone who is on the Chesham standard variable rate can easily do better.  Many borrowers are currently staying on standard variable rates because their rate is so good as in the case of Nationwide and Cheltenham & Gloucester, or because they are waiting to see what happens to the market and what to do next.

Sadly some customers are being forced to pay higher standard variable rates because they do not have enough equity in their homes to find a better rate.  The fact is that the standard variable rate has never been so disjointed from the market.  As Bank of Egland base rates were droppped some lenders passed on these cuts whereas others didn't.  When interest rates do eventually start creeping up it will be interesting to see how those lenders with the higher SVRs react.

Some other current standard variable rates. 

^{Source: Moneyfacts, January 2010}

Let’s face it, the home-buying process is not easy even in the best of markets so it must be a terrible shock for [...]]]> Is Getting Your First Mortgage Stressful?

Homeowners often say that buying their first property was one of the most stressful things they have ever done.  I wonder if subsequent purchases were just as stressful?

Let’s face it, the home-buying process is not easy even in the best of markets so it must be a terrible shock for first-time buyers.   A first-time buyer currently has the initial worry of just getting a mortgage at the moment.  Most first-time buyers need a 25% deposit in order to secure their first mortgage so think about the stress in finding that kind of money.  Then there is the current market conditions, is the property valued correctly, is it really worth that much and what will it be worth in a few years time?  There’s the issue of finding a good solicitor and understanding the legal process they will have to go through and going back to the mortgage issue, whether to get advice from a broker or go direct to a lender and do their own research?  To top it all off, once the first-time buyer has got this far and found a property, made an acceptable offer and proceeded with all of the legal and financial work, they then have the worry of the chain falling apart.

It’s no wonder the home-buying process is so stressful but it must feel ten times worse for first-time buyers.  Is there a way to stop or relieve this stress?  Well, not really.  The only options that might ease the pressure could be shared ownership schemes (but finding a mortgage might be more difficult) or asking for parental help with deposits etc.  The brokerage community genuinely feel that they can and do help in offering advice to first-time buyers and holding their hands through the process so it’s worthwhile just having an initial consultation with a broker just to see if it could make things easier during the home-buying process.

A mortgage broker’s role is to help and guide you through the mortgage application process.  This involves explaining the various rates and options available to you, comparing all of the various lenders [...]]]> A Mortgage broker acts as a middle man between you, the borrower, and the lender and can be an invaluable source of knowledge and expertise.

A mortgage broker’s role is to help and guide you through the mortgage application process.  This involves explaining the various rates and options available to you, comparing all of the various lenders and making recommendations, helping you to complete the application, packaging the application for the lender which results in a faster mortgage offer and liaising with the lender and your solicitor to ensure a smooth transaction.  More than 50% of all mortgages in the UK are submitted by brokers acting on behalf of their clients. 

Mortgage brokers can be whole of market whereby they are able to offer advice on products from all lenders in the UK or tied advisers where they offer products from a selection of lenders.  The broker should always tell you their status when you meet them.

Mortgage Broker Advantages

• Access to the whole of the market in most cases

• Qualified advice.  Mortgage brokers are regulated by the FSA and have to not only pass exams to be able to give advise but also demonstrate a continued professional development to the FSA to ensure that their knowledge base is always up to date.

• A mortgage broker can save you a lot of time.  Because mortgage brokers know which lenders have the best products, fastest underwriting, best customer service etc they are able to get you your mortgage offer quicker than you going direct to the lender in most cases.  Mortgage brokers also help in completing application forms which most people find very time consuming.

• A mortgage broker can save you money.  As a broker is able to access the whole of the market (in most cases) they are able to find the best rates but more importantly they have the tools to be able to find the best product that matches your needs. 

• Mortgage brokers are able to access the whole of the market but brokers are also members of exclusive mortgage clubs which offer rates not found on the high street.  These clubs can represent an excellent source of business to lenders so lenders are keen to offer competitive rates for that business.

Mortgage brokers can and do help but they are middlemen and some people like to cut out the middle man in an effort to save time.  As brokers we have seen plenty of cases where clients have been to see their bank or building society direct only to be told that they did not qualify for that product or they did not meet criteria.  Would it surprise you to find that we were able to go back to the lender and place that rate?  Brokers know how the mortgage market works and they know how to package an application and what the lender is looking for.

The increase in market rates [...]]]> It appears that Fixed rates could well have bottomed out and may now start going up again.  Market rates which control fixed rate pricing have increased last week from 2.96% to 3.15%.  This means that it is likely that fixed rates will start going up again over the next week or two.

The increase in market rates is due to a rise in inflation and the government’s failed gilt auction which has left market confidence shaken in these uncertain times.

There are over a million homeowners currently on the standard variable many of whom are waiting for interest rates to drop to their lowest.  For fixed rates that could be now.  The Bank of England has signaled that it is reluctant to lower rates further than 0.5%.  All of these factors point to a bottoming out in rates.

A lot of financial experts are hinting that fixing for 5 years could be a very good idea to ride out the storm.

If you are on the standard variable rate and are thinking about moving to a fixed rate mortgage now would be a good time to start looking.  Speak to your adviser or alternatively (if your adviser hasn’t spotted this change in the markets and contacted you accordingly) if you would like a quote from us call us on 0870 080 2343 or complete the mortgage enquiry form.  We are FEE FREE mortgage brokers offering whole of market advice.

Fixed rates have been coming down over the last year and it is now possible to get a 5 year fixed rate at 3.99%.  Some experts [...]]]> Many people who are thinking about remortgaging or buying now have to decide between fixed rates or tracker rates.  Variable rates don’t seem to be offered by most lenders anymore.

Fixed rates have been coming down over the last year and it is now possible to get a 5 year fixed rate at 3.99%.  Some experts in the industry suggest that fixed rates have bottomed out now and that they could possibly start going back up again soon.

Tracker rates have gone up drastically over the last two years.  It used to be the case that you could have a Bank of England base rate tracker discount.  That is to say, you followed the Bank of England minus a percentage!  Sadly those days are now gone and best tracker rates you can now obtain are Bank of England plus 2.29% giving a current pay rate of 2.79%.

So the question remains.  Which rate would you choose, tracer or fixed?  The answer to this question simply comes down to your own personal risk profile.  A fixed rate will give you the security of an established budget regardless of what happens to the Bank of England base rate over the next few years.  A tracker  means that as soon as the Bank of England rate starts to go up again, so too do your mortgage payments.  The problem is that no one knows when the Bank of England will go up and by how much.

It is easy to see why the FSA might suggest this.  Repossessions are on the increase despite a fall in mortgage rates [...]]]> There have been articles in the press recently that the FSA could be making an announcement about future lending guides.  These articles say that the FSA may limit mortgage lending to 3 x salary. 

It is easy to see why the FSA might suggest this.  Repossessions are on the increase despite a fall in mortgage rates and the general cost of living is going up.  It is also proven that lenders were lending recklessly which has led to some of the problems of the credit crunch. Is setting the lending limit at 3 x salary a good idea then?

On a positive note it would ensure that if you can get the mortgage, you can definitely afford it as well as cope with increased mortgage payments when interest rates go up.  This would mean that the lender’s exposure to bad debt in the future would be minimal.  It would also encourage lenders lending to each other again and not being so worried about not getting their money back.

It could also have some very negative points too.  Right now first time buyers are finding it hard enough to get on the property ladder so setting a lending limit would make it even harder.  Without first-time buyers it is difficult to form chains which keep the housing market moving.  Also, what would happen to existing customers coming off fixed rates onto variable rates?  It could be that the product they were offered by the existing lenders may not be competitive yet they couldn’t remortgage due to them not meeting the lending affordabilty guide.  This would disadvantage the borrower and give the lender the ability to treat variable rate customers exactly how they wanted.

Personally I cannot see how a 3 x lending limit would help the housing market.  In fact, I think it would push the market further into negative equity.  House prices could tumble where people were desperate to get out of mortgages they now could not afford in the FSA’s eyes.

Affordability is different for everyone and simply applying a limit according to salary is not the answer to a very big problem.  A lot of the people who can’t afford their mortgages now cannot do so because they have lost their jobs.  Even if somone gets a mortgage and fits the 3 x salary model they too would struggle to make payments if they were made redundant.

I would be interested to see what other people feel about this story so please leave comments.  Obviously the FSA have not actually made this comment yet and they may never make it but it is getting people worried so maybe it is worth discussing.

There are two options to consider here.  The first is overpayments.  These circumstances [...]]]> Many UK Homeowners will have found their mortgage payments have halved in the last few months due to Bank of England base rate reductions.  This is obviously good news for mortgage holder (but bad news for savers) so what should they do now?

There are two options to consider here.  The first is overpayments.  These circumstances are not normal so don’t get used to the current mortgage payment.  The payments you were making a year ago were normal so if you can, you should try to overpay now up to the equivalent of your mortgage payment last year. The second option is more about helping the economy.  We’re in recession at the moment and the best way to get out of a recession is to spend money which keeps the general economy going.  You could use you excess monies to fund home improvements.  Now is not a great time to sell so it might be a better time to improve not only for your home’s future investment value but also for your immediate quality of life.

In a recession everyone is worried and has good reason to be, but try and thing long term as well as short term.  You need to keep on paying your bills now  and savings are a good idea.  The one aspect about the current set of circumstances which is worrying is that people might get used to the current interest rates and think that  they are normal.  They are not normal and one day soon interest rates will go up again and so too will your mortgage payments.  Try and budget for  this now rather than later.