Archive for October, 2009
Slow Improvements
Wednesday, October 28th, 2009
Nationwide have increased their maximum loan-to-value to 85% for trackers, indicating that they believe house prices have stopped dropping – a good sign for first time buyers to start looking!
It’s also worth noting that the 1% stamp duty “holiday” on houses up t £175k will end on 31st December 2009. It will revert to £125k from then on, unless Alistair Darling changes his mind. So if you were considering buying a house for below £175k, act before the year end – the completion date is what counts, so time is of the essence!
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Mortgage Regulation
Tuesday, October 20th, 2009
You may have seen the FSA are planning on tightening up on mortgage lending, specifically self-certified lending.
This does not require any proof of income and was originally designed for start-up self employed people, who had not traded long enough to produce accounts. However, it became a mainstream product and was widely abused, with employed people taking self-certified mortgages because they could exaggerate their income – so shop assistants suddenly earned £50k+ a year!
If you cannot now prove your income with P60′s or SA302′s you will struggle to get a mortgage. Indeed, it may become impossible.
The FSA are also encouraging lenders to check affordability far more stringently. This will result in income and expenditure being analysed to ensure you are not over-stretched with your mortgage, which may see a move away from income multiples and towards affordability as the main test of how much can be borrowed.
For prime borrowers – those with at least a 25% equity, good earnings relative to the mortgage and a clean credit history – these changes will make very little difference. Those who are stretched financially, have a poor credit history or a small amount of equity may find getting a mortgage becoming far more difficult.
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Mortgage Deals Improving!
Saturday, October 10th, 2009
Northern Rock are chasing the market and are aiming to provide 1 in 10 new mortgages. The only way to do this is to lower rates and this is exactly what they have done.
The result is that they have initiated a mini pricing war. Abbey and Woolwich have responded by lowering rates, so sub 3% trackers are now widely available.
There has also been a move upwards in loan to value banding’s, so the best rates are now available at 75% LTV – an improvement over the 60% that has typically been on offer.
The key question is whether to fix or track. Tracker rates are sub 3%, but how long will they last? A sub 5% fix over 4 years or more will offer excellent value.
So if you cannot afford a mortgage if the rate exceeds 5%, fix now on a longer term fix – Northern Rock have a 4 year fix at 4.89% at 70% LTV. If you can afford it, a tracker will be cheaper now and in the immediate future, but be prepared for far higher costs when rates inevitably increase again.
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