Mortgage News

Tesco Mortgage Deals

noreply@blogger.com (Tejvan Pettinger) — Fri, 03 Oct 2008 06:57:00 +0000

Tesco's have announced an entry into the mortgage sector. Previously they have avoided entering the market because they felt it was too competitive and profit margins too low. However, with the increased concentration of the mortgage sector. (the Government is effectively the second biggest mortgage lender now) and merger of Lloyds TSB / HBOS.

At the moment, Tesco's offer just a mortgage comparison service (link). But, now they feel that selling mortgages to be a good business plan. The new mortgage provider will help prevent the market get too monopolistic.

Tesco's current financial sector - Tesco Personal Finance specialises in loans, and credit cards. Tesco is one of the UK's most profitable companies.

Credit Crunch News

noreply@blogger.com (Tejvan Pettinger) — Wed, 24 Sep 2008 10:26:00 +0000

The credit crunch continues to cause problems for finance markets and the wider economy.
Losses from mortgage defaults caused big insurance firm AIG to require a bailout. Lehman Brothers went bankrupt, after the Fed decided they weren't important enough to bail out.

The Credit Crunch continues to cause problems for the beleaguered housing market. House price transactions have fallen to their lowest level since 1959 (link). See: Effect of credit crunch on housing market

The deteriorating housing market at least increases the hope for an interest rate cut

Because of continuing problems with the mortgage market and the economic slowdown, house prices are likely to continue to fall in 2009. However, house prices could rebound in the late 2009 - When Will house prices recover

The Fed is proposing a $700bn bailout for bad debt in America. It is being intensely scrutinised with many questioning the nature and scope of the deal. - Questions about Bailout

Banks at Risk from Collapse

noreply@blogger.com (Tejvan Pettinger) — Wed, 17 Sep 2008 21:18:00 +0000

Another frentic day on the stockmarket saw more banks lined up as potential victims of the credit crunch.

After the collapse of Lehmanh Brothers and rescue of HBOS by Lloyds TSB, share prices in investment banks plummeted on fears that the credit crunch could soon be hitting them.

Amongst the big losers were Goldman Sachs and Morgan Stanley.

They lost 25% and 37% respectively. The FTSE closed at its lowest level for 3 years. at 4,900.

The US government, who bailed out Freddie Mac and Fannie Mae, pumped over $80billion of money into insurance firm AIG. They didn't rescue Lehman Brothers, but, are looking closely at the financial state of Morgan Stanley. They will not want to let Morgan Stanley go under, but, are aware of the acute crisis occuring in the financial sector. With confidence on a knife edge, they will be reluctant to see another bank go under.

UK Bank Profits Rise

noreply@blogger.com (Tejvan Pettinger) — Mon, 11 Aug 2008 13:20:00 +0000

Banks Make Profit Despite Credit Crunch.

Despite having to write off bad debts in an unprecedented large scale, British banks have proved adept at maintaining what they do best - making profit. British banks made £3.8billion profits in last 12 months.

The Banks have used the credit crunch as an opportunity to increase bank charges on credit cards, mortgages. The result is that underlying profitability has continued to rise.

For example, HSBC, posted a 28% drop in global profits in its latest results, yet its UK personal-banking division was up 85% to £605m. For example, Over the past 12 months HSBC has increased the cost of its two-year fix for borrowers with 25% equity in their home by half a percentage point, from 6.34% in July 2007 to 6.84% . This amounts to an extra £62 a month on a £200,000 loan, or £1,505 over the two-year period.

The Royal Bank of Scotland also increased its operating profits by 9% and said it found the UK mortgage industry increasingly attractive and was trying to increase its market share here.

Times article
Top 10 British Banks
Top British Banks and Building Societies

www.moneysupermarket.com | Price Comparison Site

noreply@blogger.com (Tejvan Pettinger) — Tue, 05 Aug 2008 18:07:00 +0000

www.moneysupermaket.com is one of the market's leading price comparison sites. By having access to many different suppliers they make it easier for customers to compare prices and find the cheapest deal. Money supermarket specialise in financial services such as mortgage deals, insurance quotes and loans. However, they also run price comparison services for other services such as mobile phones, travel, broadband and shopping. www.moneysupermarket.com has been valued at over £1billion and has an estimated 35% of the market share.

If you are looking to save money on finance products, it is also worth considering these practical tips for saving money:

Mortgage Application Fees

noreply@blogger.com (Tejvan Pettinger) — Wed, 23 Jul 2008 12:05:00 +0000

Fees on fixed rate Mortgages have shot up in recent months. The cost of many fixed rate mortgage deals have increased by nearly 55%. Application fees on variable mortgages have increased, but, at a slower rate. Research by mform.co.uk suggest that best-buy discounted rate mortgages only increased 11%.

The shorter the mortgage, the bigger application fees will be as a % of the total mortgage. If you have a small mortgage, which you hope to pay off quickly, avoid paying high application fees.

It also shows that when choosing a mortgage application fees can be as important as the basic interest rate for determining competitiveness.

Mortgage firms have been happy to increase application fees to ration mortgage lending. The market is becoming increasingly uncompetitive with potential lenders being in an unenviable position of facing high costs and difficulty in getting loans.

Check out a variety of mortgage lenders because often the biggest mortgage lenders are not the most competitive.

Fixed Rate Mortgages.

Fixed rate mortgages are also not great value because with impending economic downturn, interest rates are unlikely to rise.

Dealing With Empty Houses In the UK

noreply@blogger.com (Tejvan Pettinger) — Thu, 17 Jul 2008 12:16:00 +0000

The Problem of Empty Homes in the UK

It is estimate that there are nearly 1 million empty homes in the UK. Often landlords leave homes empty because they don't want to spend any money on redoing their house. However, an empty house is likely to lead to a depreciation in your asset and gives no rentable income. If you have an empty house it is better to make use of it rather than leaving it idle for a long time. These are some options for empty houses.

Approach council for refurbishment grant
Approach housing association who may buy the house quickly or even offer support for refurbishment
Let the house via the local council. They manage the letting side, you are responsible for external and structural repairs. the cost is usually 1/12th of the total rent.

Credit Card 0% Interest

noreply@blogger.com (Tejvan Pettinger) — Wed, 16 Jul 2008 15:59:00 +0000

Credit cards which offer 0% interest on balance transfers can be an excellent way of saving money on debt payments. They require careful management because if you miss a payment, you will end up paying Standard rates of upto 18% and also incur a penalty.

If you are careful, you can keep transferring a balance of a few thousand pounds at 0% interest. This enables better cash flow and avoids more expensive forms of borrowing.

Cost of Balance transfers

The only thing to be aware of is that these days most 0% balance transfers incur a balance transfer fee, usually around 2-3%. Therefore, it is best to try and get a credit card balance transfer for a longer period (some go upto 12-15 months). This means that in effect you are paying an interest rate of 2% a year, which is still very good and less than inflation.

Top 10 Finance Companies

noreply@blogger.com (Tejvan Pettinger) — Wed, 16 Jul 2008 15:53:00 +0000

Some of the top 10 companies grouped into different aspects of finance such as mortgages, building societies, banks and investment trusts

Housing Market Bust Threatens Recession

noreply@blogger.com (Tejvan Pettinger) — Thu, 03 Jul 2008 14:34:00 +0000

Continued falls in house prices threaten to cause a wider recession. Falling house prices combined with the credit crunch and rising oil prices have proved a toxic mix for high street retailers. Evidence suggests that hard pressed consumers are reluctant to spend. This lower disposable income is particularly affecting higher value shops such as Marks and Spencers.

Is UK at risk from recession

Can we blame media for housing boom and Bust? Former BBC journalist Evan Davis suggests yes.

Regional House Prices - Northern Ireland has seen the biggest drop in house prices following spectacular gains. Scotland is one of the few areas to avoid a drop in house prices, but, Scottish prices still remain below the UK average.

Average House prices in UK since 1980.

Help With Mortgage Arreas

noreply@blogger.com (Tejvan Pettinger) — Thu, 26 Jun 2008 13:24:00 +0000

Recent predictions by the Council of Mortgage lenders suggest that the coming months will see a marked increase in the number of home repossessions. If you are struggling to meet mortgage payments and fear slipping into arreas, there are a number of strategies that you can take.

Government Help. The government doesn't give much financial help for dealing with mortgage payments. The main thing is that the government offers advice through bodies such as the Citizens Advice Bureau and National Debt Helpline. See: Government help for Mortgages

Reducing Mortgage Payments. There are various things we can do to increase affordability of mortgage payments. For example: Struggling to pay mortgage?

How to avoid defaulting on mortgage payments

Current Mortgage Issues / Problems

noreply@blogger.com (Tejvan Pettinger) — Wed, 25 Jun 2008 08:28:00 +0000

Flats for Sale - But Who is Able to Buy Them? - How the credit crunch has affected the market for flats. - Flat for sale anybody?

The dilemma of the Bank of England - which is worse inflation or a recession. In the current climate it is difficult to reduce both inflationary pressure and prevent a slowdown. Rising oil prices have really made their job difficult. - What should Bank of England do to interest rates?

In the longer term, the UK may still face a housing shortage which doesn't bode well for long term housing prospects. - Why the UK still has a housing shortage

Trying to understand inflation - Why is their scepticism of the official figure? - Measuring inflation

Understanding Interest Rates - guide to interest rates at economics help

Interest Rates for Dummies

noreply@blogger.com (Tejvan Pettinger) — Mon, 16 Jun 2008 14:36:00 +0000

Interest rates can be confusing. There is a huge range of interest rates - anything from 0% a year to 2,000% on some extortionate pay day loans.

Interest rates basically reflect the cost of borrowing money. The most important interest rate is the base rate (or repo Rate) set by the Bank of England.

The Bank of England change interest rates to try and influence the inflation rate in the economy. The bank of England need to try and meet the government's target of 2% inflation. However, they will also be sensitive to other objectives such as economic growth and unemployment.

How Interest rates affect individuals and the economy

Higher interest rates increase the cost of borrowing
Higher interest rates increase mortgage interest payments causing consumers to have less disposable income
Higher interest rates cause an appreciation in the exchange rate. An appreciating exchange rate causes lower aggregate demand and lower inflation

Bank Rates and Bank of England Rates

Despite the Bank of England keeping interest rates the same. The nationwide building society recently announced that its own mortgage rates would be increasing. This shows that commercial bank rates are often independent of the Central Bank rates.

The nationwide justify their rate increases on fixed rate mortgages due to the increased cost of interbank lending. They point to the rise in the Libor 3 month interbank rate and say it is now more expensive for them to borrow money.

More on: Understanding interest rates
Predictions for mortgage interest rates in the UK
Interest rates at Bank of England

Negative Equity in the UK

noreply@blogger.com (Tejvan Pettinger) — Wed, 14 May 2008 12:16:00 +0000

Definition of Negative equity: Negative Equity occurs when the value of a house is worth less than the mortgage debt.

Negative equity is a real problem for people who need to sell their house and then still end up owing money to the bank.

Many UK Banks remain heavily exposed to negative equity because in the past few years, 100% and 95% mortgages were very common. The annual rate of house price inflation is now negative and if house prices fall by 30%, it is estimated 20% of mortgages could be at risk of negative equity.

Negative Equity and Impact on the Economy

Negative equity can have a powerful influence over the economy. If people see prices falling and their mortgage debt bigger than their wealth it is liable to reduce consumer confidence and see a decline in spending.

Negative equity also makes it impossible to engage in equity withdrawal or remortgage to clear other debts.

What Can Be Done About Negative Equity?

Not much. Often the only option is to downsize. Sell the house and buy one cheaper. However, if you don't have to move a decline in house prices doesn't have that much effect on homeowners. - Their monthly mortgage payments are unaffected by falling house prices.

HSBC Mortgage Offer Brings in New Customers

noreply@blogger.com (Tejvan Pettinger) — Wed, 14 May 2008 12:10:00 +0000

With most of the mortgage news focusing on mortgage products being withdrawn, HSBC were able to announce that they have seen a fourfold increase in the number of mortgages taken out.

Previously HSBC, had a low share of the market with only 3% of the market. This has enabled them to take advantage of the credit crisis and offer a 'mortgage price matching offer' This means that they will offer the same rates as any other market deal.
HSBC, say that many of the new customers have good credit ratings and are borrowing a low % of their total house value.

IN other news, the Council of mortgage lenders reported that the average cost of a UK mortgage increased last month, despite Bank of England Base rates remaining the same.

Prospects of future rate cuts were hurt on the news that inflation increased to 3%

Building Society Mortgages

noreply@blogger.com (Tejvan Pettinger) — Mon, 05 May 2008 10:10:00 +0000

Research by the Council of Mortgage lending shows that lending by Britain's building societies has slumped in the past few months. Total mortgage lending in March was down by £1 billion on the same level last year. It also shows that building socities have been hit harder by the credit crunch that the big banks.
Building societies typically fund their mortgage lending mostly from savings. (about 70%) in the current climate they have had difficulty raising additional funds for mortgages. Instead building societies have been focusing on attracting saving deposits.

Ironically, the mortgage market has changed so much that building societies no longer want to appear at the top of the 'best buys for mortgages' because they then struggle to deal with the demand coming in.

Top 10 Building Societies

Best Value Nationwide Mortgages

noreply@blogger.com (Tejvan Pettinger) — Mon, 28 Apr 2008 15:06:00 +0000

The Nationwide recently moved to increase the deposit ratio on all but 2 of its mortgage products. New customers are now required to have a deposit of 10%. For an average house price of £200,000 this means new first time buyers must find an extra £10,000.

However, the Nationwide did cut its standard variable rate, in line with the Bank of England. It's standard variable rate, with no costs for signing up presents one of its most attractive mortgage deals. This is unusual for a mortgage market where the best deals are usually found in fixed rate or tracker mortgage deals.

The increase in the deposit ratio, is a sign that the Bank of England's recent injection of liquidity into the money markets may be insufficient to boost mortgage liquidity.

It also came on a day when house prices showed their first annual year on year fall, for many years

Should I Get a Fixed or Variable Mortgage?

noreply@blogger.com (Tejvan Pettinger) — Tue, 15 Apr 2008 09:43:00 +0000

A fixed mortgage prevents security against rising interest rates. At the moment, interest rate increases are mainly driven by a rise in interbank lending, rather than an increase in the base rate.

Predictions for Interest Rates in UK

With house prices falling and the economy slowing, the Bank of England will be looking to cut rates. If house prices continue to fall at a very quick rate, we could see the UK face the prospect of a recession. IF the UK enters a recession, interest rates could fall as low as 3.5%. However, a recession is unlikely at the moment. Also the interest rate predictions are complicated by the impact of cost push inflation. Driven primarily by rising oil prices, manufacturers are experiencing unprecedented rises in the cost of production. Therefore, the Bank has to be more cautious in cutting rates.

Prediction for beginning of 2009, interest rates 4.25%.

Therefore, with the prospect of lower interest rates, current fixed rates may not offer good value. However, with standard variable mortgages there is no guarantee that the banks will pass on base rate cuts anyway. With this in mind a tracker mortgage offers good value. A tracker mortgage is fixed to the Bank of England base rate and therefore as the Bank cuts base rates, homeowners will benefit from lower rates. The only problem with tracker mortgages is that many homeowners require a large deposit to be eligible for a tracker mortgages

Finding Best Mortgage Deals

noreply@blogger.com (Tejvan Pettinger) — Thu, 03 Apr 2008 09:01:00 +0000

Finding the best mortgage deals has become alot more difficult recently with many big mortgage lenders withdrawing mortgage products and increasing the cost of mortgages. within the past month the number of mortgages on offer has fallen by 40%, with big names like first Direct, Co-op Bank and others restricting the number of new mortgages.
The difficulty of getting a mortgage has encouraged many customers to borrow through alternative means such as credit cards and unsecured loans.
Finding the best mortgage deals has become a lot more difficult because the gap between the bank's commercial rates and the bank of England Base rate has risen. For example, at the moment the 3 month libor rate is 6%, whearas the Base rate is 5.25%. The gap between the base rate and the 3 month libor rate has increased due to the shortage of funds in credit markets. With the increased difficult of getting a mortgage it is harder to find a cheap mortgage. However, there are still some things worth trying.

Search online to make sure you are able to check less well known mortgage lenders. Often it is the big mortgage lenders who are more expensive.
Look around at all the different mortgage products, consider getting a longer term mortgage to keep it affordable.
Saving for a deposit will definitely help in the current climate mortgages with 95% LTV or higher are likely to attract much higher rates.

What Factors Affect Interest Rates?

noreply@blogger.com (Tejvan Pettinger) — Wed, 19 Mar 2008 11:58:00 +0000

Interest rates are the main tool for influencing economic activity and therefore affecting the inflation rate. In the UK, interest rates are set by the Bank of England Monetary Policy Committee MPC. In the US, interest rates are set by the federal Reserve.
In the UK, the MPC have been set an inflation target of CPI 2% +/- 1. Therefore, the most important factor affecting interest rates are the prospects for inflation.

Generally, a rise in inflation will cause interest rates to rise. A fall in inflation will enable lower interest rates.

Inflation Predictions.

The MPC produce an inflation report. This tries to predict inflation in the coming months and is important for determining interest rate movements. These are the kind of factors that can cause inflationary pressures to increase and therefore cause an increase in interest rates

High economic growth. If growth is above the average sustainable growth rate, inflation is likely
Depreciation of Exchange Rate. When exchange rate fall, imports become more expensive and domestic demand increases, causing both demand pull and cost push inflation
Low Unemployment. When unemployment is very low it tends to cause rising wage inflation
Rising house prices. This creates a wealth effect and therefore encourages spending.
Price of Raw Materials. Rising prices of raw materials such as oil tend to cause cost push inflation.
High levels of consumer confidence and low savings ratio

As well as inflation, the Bank of England may take into account economic growth. For example, if the UK experiences inflation and lower growth it is in a difficult position. But, if the economy does go into recession, it is likely they will worry about inflation less and try to keep interest rates low.

Rate cuts in America, but UK worries about inflation - for a comparison of interest rate policy in UK and US
How easy is it to predict interest rates?
Interest Rate Predictions
Interest Rates explained

Mortgages and the Credit Crunch

noreply@blogger.com (Tejvan Pettinger) — Tue, 18 Mar 2008 12:39:00 +0000

The credit crunch refers to the difficulties of borrowing money in the financial sector.
There is a detailed explanation of the Credit crunch here

This is a simple step by step guide to how the credit crunch is likely to affect UK mortgages.

Rapid increase in mortgage defaults in US mean that many mortgage lenders have to write off bad debts.
These Bad debts were often rebundled and sold onto other finance insitutions and banks.
This means many investment banks and commercial banks have also had to write off bad debts, sometimes totalling billions of pounds. These bad debts have overwhelmed banks such as Bear Sterns and threatens Lehman brothers.
Because so much debt has had to be written off there has been a drop in banking confidence. Banks are hesitant to lend to each other because they fear they could lose it.
This means there has been a shortgage of lending and money on the money markets and in particular the interbank lending markets.
Therefore, it has become difficult to finance regular mortgages because banks struggle to raise the money on the money markets. The shortage of liquidity hit Northern Rock because they were very dependent on raising funds through the money markets.
Because borrowing is more difficult, the cost of borrowing rises. This means banks are

Withdrawing any mortgage products that feels risky e.g. 125% and 100% mortgages.
The cost of standard mortgages such as tracker and variable mortgages are rising

Will the credit Crunch Get Worse?

At the moment UK banks have increased lending costs by a relatively small amount. But, if the credit crunch continues to worsen, they could be forced to withdraw more mortgage products and increase borrowing costs even more.

How Does Credit Crunch affect my Mortgage?

If you are on a fixed rate or Tracker mortgage, the terms have to be kept to until the end of your agreed term. However, when you remortgage you could find the cost of mortgages has increased.
If you are on the banks standard variable rate you are likely to see higher SVR rates, even if the Bank of England cut base rates

Best Variable Mortgage Deals

noreply@blogger.com (Tejvan Pettinger) — Thu, 13 Mar 2008 08:08:00 +0000

In my opinion, variable mortgages offer better value at the moment. The state of the economy makes it more likely that interest rates will fall over the coming year. The credit crunch and declining housing market have caused the government to reduce their growth forecasts; lower growth should cause lower inflation and therefore enable the MPC to cut rates.

Tracker mortgages may be a particularly good choice because with a standard variable mortgage there is no guarantee that banks will base the base rate on to consumers. However, with a tracker mortgage they have to. (tracker mortgages offer best deal)

Although the chancellor, Alistair Darling announced plans for fixed rate mortgages to be encouraged many British homeowners prefer taking out variable mortgages. This is because often initially they are cheaper; you have to pay a premium for the security of a fixed rate mortgage. With interest rates low, a fixed rate may not offer a good return in the short term. However, it is always difficult to predict interest rates into the medium term. For those homewners seeking guaranteed payments, fixed rates are the best choice in the long term.

Related

Top 10 Mortgage Companies to avoid

Darling Introduces Rating scheme for Mortgages

noreply@blogger.com (Tejvan Pettinger) — Mon, 10 Mar 2008 08:16:00 +0000

In a bid to make the UK housing market less volatile. Alastair Darling has introduced plans to encourage 25 year fixed rate mortgages. The plan also involves giving kite markets to mortgages depending on how risky they are. Fixed rate mortgages will attract a better rating and so it is hope easier for the mortgage lender to raise money on the capital markets.

However, groups such as the Council of Mortgage Lenders have criticised the plan saying that it could create a two tier mortgage market, with some first time buyers finding it very difficult to get a mortgage because they do not have sufficient income for the 'reliable mortgages'

Also it is not clear whether homebuyers will actually want to take out 25 year fixed rate mortgages. In the past there has been little demand for long term fixed rate mortgages. Typically the best fixed rates on long term mortgages are 6% compared to 5.25% on shorter rate mortgages

Housing Market Facts

noreply@blogger.com (Tejvan Pettinger) — Fri, 07 Mar 2008 08:10:00 +0000

Housing Market Terms explained
How Much Can I borrow for a mortgage? A look at the various factors which determine how much you can borrow for buying a house
Ratio of House Prices to IncomeThe ratio of house prices to income is important for determining the affordability of housing. The ratio of house prices to income is currently at an all time high
How Do Interest rates affect the Housing Market? Interest rates set by the Bank of England are a key tool for determining the state of the UK housing market.
What is subprime and what caused the subprime crisis?
Why are house prices so expensive in the UK? - A look at the factors behind expensive house prices
House price inflation 2006-2008
Guide to Getting Your first mortgage - tips for the first time buyer

Cheap Mortgages still available

noreply@blogger.com (Tejvan Pettinger) — Tue, 04 Mar 2008 11:31:00 +0000

Despite all the adverse newspaper headlines about the housing market and withdrawal of 100% mortgages, there are still plenty of good mortgage deals around.

In the past few years, there were some exceptionally cheap mortgages. This was because it was easy for lenders to resell mortgage debt in the form of CDO - collateralised Debt obligations. This meant mortgage lenders could parcel up and sell on mortgage debt to other financial institutions. Now with the credit crunch this is no longer so easy to do. Therefore, mortgage companies have greater difficulty financing mortgage lending but although, some of the most extreme types of mortgages 125% e.t.c have been pulled off the market, it would be easy to exaggerate any malaise in the housing market.

The market for mortgages still remains very competitive. We are unlikely to go back to the days of the bank and building society cartel. With the advent of the internet it will always be relatively easy to search online for the best mortgage deals.