Green Mortgages in UK

Encouraged by Chancellor Gordon Brown's "Green Initiative" more banks are promising to offer “Green Mortgages”. These mortgages provide incentives for home owners to take out extra finance in order to reduce the environmental impact of housing. For example the benefits of insulating roof and cavity wall insulation are quite high in terms of reducing energy. However the benefits can take along time to pay back. Therefore adding the cost onto a mortgage is an ideal way of making it affordable.

Green mortgages may also be given only to those houses that are environmentally beneficial. Some financial institutions may make a small donation to green charities as part of the mortgage deal.

Green mortgages are likely to increase in the future as more people become conscious of environmental issues.

Ecology Building Society.

The Ecology building society has been in operation for 25 years offering mortgages to those who want to promote environmental issues. It will only lend to buy houses, which have some environmental benefit. Borrowers can get 1% off the SVR for using to reduce energy emissions.

The Cooperative bank says it has been offering green mortgages for the past 7 years, providing incentives for home-owners to get environmentally friendly improvements

Non Status Mortgages UK

Non Status and Sub Prime Mortgages

Non status or Sub Prime Mortgages are often known as bad debt or bad credit mortgages. They have been in the news recently because of America’s problems with its sub prime mortgage market.

Sub Prime lending means lending to people with bad credit histories. (e.g. those with missing credit card payments, unauthorised overdrafts e.t.c.) It can also apply to people on very low incomes without bank accounts.

Loan sharks are an extreme example of non status / sub prime lending. This type of lending is geared towards those with no bank accounts and is often unofficial. Interest rates have known to be extortionate; up to 50%

Sub prime mortgages are similarly mortgages for people with bad credit histories. It involves getting an unconventional mortgage like a self certification mortgage (income doesn’t have to be proved). Unconventional mortgages also include:

• Interest only mortgages
• 40 – 50 year mortgages.

Because sub prime and non-status mortgages are geared towards people with bad credit histories they are more risky for the lending institution. Therefore as a financial compensation for the bank they will usually charge a higher interest rate than on a mortgage with good credit history.

UK Sub Prime Mortgages

In the past year there has been a big growth in the non status - sub prime market. In particular it is worth checking out deals from HSBC, Royal Bank of Scotland and the Alliance & Leicester. These banks have been targetting the sub-prime market.

Problems with Sub Prime Mortgages in US

There has been a record amount of bankruptcies in America involving lenders involved in sub prime mortgage lending. For example HSBC revealed at the start of March that it had to write of over $10.5bn in bad debt. This is largely because of defaults of sub prime mortgages.

Part of the problem in America was that in recent years house prices rose much faster than the rate of inflation. With rising house prices and historically low interest rates, lenders were encouraged to lend more generous payments and give more risky mortgage deals. However now that house prices are falling and interest rates potentially rising it makes the likelihood of further debt default likely.

This is also a potential problem in the UK. House prices have been consistently rising due to constraints in supply but the average house price to earnings ratio has increased making them overvalued. Therefore it is possible house prices could fall in the future. This would definitely make the lending institutions think more carefully about lending to “risky borrowers”

Sub Prime mortgages are generally more susceptible to a period of rising interest rates. This is because the mortgage interest payments for those with a sub prime mortgage are generally a higher % of their disposable income than those with a standard mortgage

See: Different types of Mortgages

Unconventional Mortgages

Co-Buying Mortgages in UK

Want to live together and get on the property ladder? - then Co-Buying may be an option.

Co-Buying is when individuals legally group together and buy a property between 2, 3, 4 or more people known as 'Co-Buyers'. Simple as that! Well it is simple as long as you are happy living with the other co-owners. So it may be worth renting together to see if you can live together first. Even if you are best friends the other’s habits can be unbearable day in day out. On the other hand buying a house can be stressful! So it helps if you can share the workload with your other co-buyers.


Financial benefits are the main reasons to Co-Buy: it can increase your financial muscle by buying together for example by increasing the deposit. Big lenders like Yorkshire Building Society, HSBC and Northern Rock take account of at least the two highest incomes. The costs and repayments are split between 2 or more Co-Buyers. Many people have always lived in a busy house and simply don't want to live alone, if they can't afford to buy on their own co-buying gives them another option.

Tips for Co Buying Mortgages

1. Draw up a legal contract.
2. Spell out how the property will be divided when you sell
3. Insure each contributor to the mortgage for ill health or critical illness
4. Exit strategies need to be agreed for all eventualities and set valuation methods for break –up if one busy out another owner is the price the average of 3 estate agents valuations
5. Own the business as Tenants in Common so each person owns their share outright.
6. Check co-buyers can pay as you are each ‘jointly and severally’ responsible.
7. Consider having your own solicitor


See also: Joint Mortgages advantages and disadvantages

UK Niche Mortgages

With ever increasing levels of competition in the UK mortgage market mortgage dealers are increasingly looking into niche, unconventional mortgages to find a more profitable market. These niche markets are increasingly taking advantage of the difficulty UK first time buyers have in getting a mortgage. New mortgage schemes such as

Joint Mortgages
Interest Only Mortgages
Perpetual mortgages
50 year mortgages.
Current ACcount mortgages

All these mortgages are different to the standard mortgage model and often have features to suit both buyers and lenders.

Other mortgage markets such as buy to let also are usually more profitable because they have a higher interest rate than conventional mortgages

First Time Mortgages - Staircasing and Joint Mortgages

WIth the increasing affordability gap between the cost of buying a house and average incomes many first time buyers are taking desperate measures to try an get on the property ladder. Popular options include:

Borrowing from parents,
Self certification mortages
Interest Only Mortgages

One of the best schemes is to try and get some kind of "staircase" arrangement this allows you to buy a % of the house say 60%, the remaining 40% is bought by a housing association you then can increase your ownership of the house over a period of time. This is why it is known as staircasing.

Staircase Mortgages for first time buyersf

Mortgage Lenders offering Mortgages Over 40 Years

40 Year Mortgages
Alliance & Leicester
Birmingham Midshires Building Society
Bradford and Bingley Building Society
Britannia Building society
Chelsea Building society
First Direct.
Halifax
Nationwide BS
Natwest Building Society

45 Year Mortgages
Exclusive connections, Mortgage express

47 year Mortgages
Intelligent Finance

52 Year Mortgages
Direct Line,
Royal Bank of Scotland
The One Account

See also: Benefits of Getting a 50 Year Mortgage

Buy To Let Mortgages: Is Now a good time ?

Buy to let mortgages have become increasingly popular in recent years due to 2 main factors.

1. Rising UK house prices. House prices have increased by over 100% in the past 12 years, leading to excellent capital gains for homeowners. In addition some areas of the country have benefitted even more.

2. Strong renting Market. Returns from renting have remained good, due to high demand for relatively low number of renting opportunties

3. Low Interest rates. Interest rates are much lower than in the past.

Many feel that the above factors may start to change. Firstly many economists believe that house prices may fall significantly in the near future, because they are overvalued. Therefore buy to let investors would be well advised to avoid buying at the moment. See house prices may fall 2007.

1. However there is no certainty house prices will fall. There are certain economic forces to explain the rising house prices. There is no evidence this has changed significantly. House prices may not fall

2. With a continued shortage of housing, the renting sector is likely to remain strong. However in some areas the income from renting is now failing to meet the requirements of being 130% of the value of the mortgage payments.

3. Interest rates have increased several times in the past 2 years, but economists suggest the future direction of interest rates could be downward by the end of the year. Inflation is still close to its target of CPI 2%. Also it is worth noting real interest rates are still very low by historical standards.


In the short term there may be some risk. But in the long term buy to let mortgages are probably a good investment affording the investor both a steady income stream and scope for equity gains.

See: Buy to Let Mortgages In UK

Offset Mortgages which can be worth of 11% savings rate

A recent article by Intelligent Finance suggest offset mortgages can be worth having a current account savings rate of 11%. The way offset mortgages is to combine your mortgage with your current account. THus any savings in your current account can be used to reduce your monthly mortgage payments. This is very worthwhile for those with big current account savings accounts. Furthermore it stops you paying tax on your saving interest.

Advantages of Offset Mortgages

Offset mortgages at Intelligent Finance

The Never Ending Mortgages...

I came across a new type of mortgage today. "The never ending" or "Perpetual" mortgages. Basically you can just pay interest payments on your mortgage. There is no need to worry about paying off your mortgage because you can leave both your house and your mortgage to your kids!

View: Never Ending Mortgages

This way you don't have to pay any inheritence tax and you can get away with the lowest monthly repayments at least in the short term. Of course a specialist will make the obvious point of how you will end up paying much more interest in the long term, but it has a certain attraction if you were to hold a belief rampant inflation in the UK will reduce the real value of future mortgage payments.

Off topic it remind me of some Tibetan Buddhist's who believe in reincarnation so strongly that they will lend money to be paid back in a future incarnation. The only downside of this is that you can get people coming up to you to say, o by the way do you remember in 1750 when I lent you £50? well now with inflation I guess you owe me about £5000.