Archive for the 'Mortgages' Category

Gordon Brown has announced the Homeowners Mortgage Support Scheme. This new scheme will enable households that experience redundancy or other significant loss of income to defer a proportion of their interest payments for up to two years. Banks will have to participate in the scheme in order for the Government to guarantee the deferred interests payments. The 8 largest lenders covering 70% of the mortgage market – HBOS, Nationwide, Abbey, Lloyds TSB, Northern Rock, Barclays, RBS, HSBC – have agreed to support the new scheme. The details of the scheme have not yet been finalised but it is thought that the scheme will be open to anybody with a mortgage of less than £400,000 and no more than £16,000 in savings. Applicants would have to provide evidence of genuine economic hardship and have had trouble meeting repayments for 3 months. There are more than 10 million homeowners with mortgages of less than £400,000. It has been suggested that repossessions could hit 75,000 next year, rising from an estimated 45,000 this year. The Chancellor, Alistair Darling, said: “This is real help for homeowners at risk of repossession through no fault of their own. The scheme will give people who face a temporary fall in their income the confidence that they need to rearrange their finances so they can come through a difficult period without losing their home.” Teresa Perchard at the Citizens Advice Bureau said: “To ensure that borrowers are not saddled with unreasonable and excessive payments after the 2 years are up it will be vital that both parties explore all the options available during this period. More also needs to be done to help those on the margins of the mortgage market whose lenders have not signed up to this scheme.“

Information from the British Banker’s association shows that mortgage lending for house purchases in January was just slightly lower in number than January last year, but nearly 16% higher in value. The average rose from £126,800 to £146,700, while volume dropped from 45,039 to 44,804.

David Dooks, Statistics Director at the BBA, said “January saw a continued stable demand for mortgages. Actual borrowing on mortgages remains strong compared with this time last year, so the impact of higher interest rates has yet to feature.”

So at the moment it appears as if the three recent rises in the base rate have had little effect on general demand for property.

Property markets, as with other markets, rise and fall in value, but is a change in people’s living habits creating a permanent increase in property prices? Is the ratio of house prices to salaries rising for good? Let us know what you think.

The Bank of England has today decided to increase rates by a quarter of a percent. This brings the rate to 4.75%. The increase has been made in order to keep inflation from rising further. Inflation rose to 2.5% in June – above the government’s target of 2%.

A rise had been expected, but many analysts had been forecasting it to occur later in the year.

The Bank of England’s Monetary Policy Committee (MPC) has today voted to keep the base rate at 4.5%. The move (or lack of it) was widely expected by analysts.

However, it is generally expected that rates may rise before the end of 2006. Rising inflation has led people to believe the MPC will decide to increase the base rate in the coming months in order to keep inflation in check.

This has been reflected in rises in fixed rate mortgage deals already, with many rising by up to 0.5% in the last few months.

The Financial Services Authority (FSA) have been investigating exit fees on mortgages, or Mortgage Exit Administration Fees (“MEAFs”), since September 2005. It has been looking at whether the recent increase in the level of the fees charged by some lenders are fair to consumers.

The fee is labeled as covering costs such as changing name on the registration of the property at the Land Registry, but many think that lenders are increasing them disproportionately so they can recoup money ‘lost’ by offering extremely cheap mortgage deals to new customers.

Many mortgage contracts will state that the lender may increase the exit fee during the life of the mortgage, however, this means that the variation must comply with the Unfair Terms in Consumer Contracts Regulations 1999. The FSA has stated that “a variation clause is less likely to be regarded as unfair if the variation can only be made with a ‘valid reason’ which is specified in the contract.”.

With many lenders increasing their exit fees drastically in recent years, many may find it difficult to justify the increases as being ‘fair’. For example, Cheltenham & Gloucested charged just £50 5 years ago, but now charge £225 – an increase of 350%.

This issue is exacerbated by the fact that since 2003 the Land Registry has kept deeds in an electronic form, actually reducing costs for lenders.

The FSA has given lenders that are under investigation a month to produce a response, providing evidence of why increases to MEAFs were made. They will report on the issue in the autumn.