News

Bank of England reduces bank base rate (BBR) to 5.5%

(name all major lenders) mixed responses from the lenders as to when this will impact on mortgage borrowers with Standard Variable Rate (SVR) , discounted and capped rate mortgages.

Most borrowers with Tracker Rate mortgages will see reductions in mortgage their mortgage payments in January 2008. Borrowers with Fixed Rate mortgages will be generally unaffected by the move.

Borrowers with Sub Prime borrowing or Adverse credit mortgages will generally be unlikely to see benefits of the BBR cut as many of the mortgage schemes are linked to LIBOR . The correlation between the Bank of England Base Rate and the LIBOR rate (the rate at which banks lend to each other) is widening, which could impact on the mortgage products available in the markets, particularly those future products becoming available. The impact of which is that many people may well be paying more for borrowing in the future.

Sub Prime borrowing or Adverse credit mortgages face the potential double whammy of the credit crunch and rising LIBOR rates, as they may well find that they will experience a huge hike in the mortgage payments , as their ‘schemes’ end, coupled with an inability to remortgage to alternative products, if the credit crunch continues.

If you have been or think you may be affected, don’t panic or burry your head in the sand’ seek advice immediately, lenders have a duty of care to the customers, if you need help or advice you can email us at crossmangiles@tiscali.co.uk our initial consultation is FREE.

The real affect of this is yet to be felt by millions of borrowers currently enjoying low rate fixed rate mortgages, which will be coming to an end in the near future. goto top

Fresh hope for first-timers after revamp of loan aid

The government has re-launched a low-cost shared-ownership product that could save struggling first-time buyers hundreds of pounds a month.

With the new Open Market Home Buy scheme, the government is attempting to address problems with its previous programme of the same name, which had a poor take-up. It was launched without warning or fanfare last week, buried in the small print of the housing green paper, and caught both brokers and mortgage lenders on the hop.

The government’s ailing shared ownership scheme has changed for the better, writes Lisa Bachelor Sunday July 29, 2007 -The Observer

The government has re-launched a low-cost shared-ownership product that could save struggling first-time buyers hundreds of pounds a month.

With the new Open Market Home Buy scheme, the government is attempting to address problems with its previous programme of the same name, which had a poor take-up. It was launched without warning or fanfare last week, buried in the small print of the housing green paper, and caught both brokers and mortgage lenders on the hop.

Under the new version of the scheme the government will provide an interest-free loan worth up to 17.5 per cent of the value of a property a first-time buyer would like to buy, with the purchaser taking out a mortgage on the rest. The government will lend up to £50,000 on each property, which means eligible first-time buyers will be able to look at properties worth up to £286,000. The maximum household income, joint or single, of eligible applicants is £60,000.

Crucially, the mortgage can now be any type of loan with any lender and will not be limited to a select few expensive products, as with the old version of Open Market Home Buy.

‘This opens up the doors to a lot more people and lenders can be more generous with their lending criteria,’ says Richard Stone, director of SPF Sherwins, a mortgage broker specialising in mortgages for affordable housing schemes.

How much borrowers can take out on the mortgage part of the product is up to individual lenders. However, since April, anyone who applies to a shared-ownership scheme has been assessed on affordability, which takes into account an applicant’s entire financial circumstances, including any debts, rather than just being based on salary multiples.

Under the original version of the scheme, lenders and the government offered a more generous 25 per cent interest-free loan between them to first-time buyers, with the mortgage being taken out on the remainder. However, buyers could only choose from four mortgage providers: the Yorkshire building society, the Halifax, Nationwide and Advantage, the lending arm of Morgan Stanley. Because of the lending risk, the loans on offer were more expensive than conventional mortgages and they locked borrowers in for five years. ‘A lot of people have been complaining about this five-year lock-in,’ says Stone.

Under the new version of the scheme, while buyers will have to borrow on a higher percentage of the property value (82.5 per cent rather than 75 per cent), the flexibility to take out any loan on the rest will make it more attractive to more buyers. For example, under the old scheme the Yorkshire building society Home Buy product (the only fixed rate among the deals) is fixed at 7.09 per cent for five years with a fee of £395 and five- year early repayment charges. Monthly repayments on a £130,000 mortgage on a repayment basis over 25 years would be £926.29.

Under the new arrangement, applicants could approach, for example, the Abbey, which has a two-year fixed-rate mortgage at 6.19 per cent with a fee of £489. Monthly repayments on the same mortgage would then be £852.76 – a saving of £73.53. Buyers could also re-mortgage after two years without penalty, subject to approval from their Home Buy agent.

The previous Open Market Home Buy scheme was launched in October last year and will continue to run alongside the new version, although experts say it is now unlikely that many homebuyers will choose it.

The government had originally set itself the ambitious target of getting 20,000 people into home ownership in the first five years of the scheme but, as we reported in March, it has failed to attract more than a few hundred first-time buyers. The government admitted last week that, nine months after its launch, only 800 buyers had bought a house through it. ‘It [the old version] is not sufficiently flexible for everyone who needs help purchasing on the open market,’ it said.

The new product will not be available to everyone looking to buy their first home. As with the previous scheme, eligibility will be restricted to key workers, social housing tenants and ‘other priority groups’, as decided by the HomeBuy agents, the housing associations responsible for vetting people for the scheme. But Stone says that eligibility is more flexible than this: ‘The definitions are pretty relaxed now and apply to any first-time buyer who cannot afford to buy otherwise.’

The loan does not have to be repaid until the property is sold, at which point the amount repaid will be calculated as 17.5 per cent of the property’s market value at the time of the sale.

Graeme Moran, managing director of Metropolitan Home Ownership, a Home Buy agent in London, says his firm will be targeting the new scheme more intensively at higher-income households, who are earning £45,000 a year or more. ‘These are the households who have the most realistic chance of benefiting from the scheme given present average purchase prices by our customers of between £185,000 and £195,000 in our area of operation,’ he says.

Unfortunately, those who have bought under the old version of Open Market Home Buy cannot switch to the new product. Those who have not yet exchanged under the old scheme will be able to apply for the new 17.5 per cent product, but may lose any booking fee they paid. goto top

Property woe for public workers!

Public sector workers such as teachers, nurses, police and fire fighters cannot afford to buy homes in seven out of 10 UK towns, the Halifax bank has said.

Halifax arrived at its conclusions by dividing average regional property prices by average annual wages.

It said property was most unaffordable in London and South-East England but property costs were also racing away from wages in other parts of the UK.

The government said it had worked hard to help key workers buy homes.

Housing Minister Yvette Cooper said: “No government has done more to help key workers; since 1997 almost 25,000 key workers have got their first step on the property ladder through government shared equity and shared ownership schemes.”

Please contact us at Online Mortgage Offers as we have schemes very similar to the “Key Workers Scheme” but with what we believe are added benefits. goto top

House Prices still rising:

UK house prices are still rising at a strong pace despite recent interest rate rises, according to the country’s biggest mortgage lender, the Halifax.

The bank reported that prices rose by 1% in March, taking the annual rate of house price inflation to about 11%.

According to the Halifax, the average house price is now £194,362.

A strong economy and a shortage of houses for sale were behind the rise, the bank said, although it added that price growth might ease later this year.

The Halifax noted “emerging signs” that pressure on householders’ finances – partly as a result of three interest rate rises since last summer – was beginning to have a dampening effect on the market.

“We expect the recent rises in interest rates, negative real earnings growth and above inflation council tax bills to lead to slower house price growth over the coming months,” said Tim Crawford, Halifax group economist.

Last week, the Nationwide noted a similar cooling in the housing market. goto top

Regional breakdown

House prices increased in all parts of the UK during the first three months of 2007.

The biggest rises in the quarter were in Scotland, where prices climbed by 5.4%, and Wales, where values rose 4.9%.

At the other end of the scale, prices in East Midlands and Yorkshire moved upwards by only 0.2% and 0.6% respectively during the three-month period.

The Halifax figures also showed that the average price of a house in Northern Ireland has broken through the £200,000 barrier for the first time.

This means that Northern Ireland is now one of the most expensive parts of the UK to buy property.

This is quite a turnaround – two years ago Northern Ireland was the second cheapest part of the UK to buy a home.

A strong local economy, immigration and demand created by second homebuyers have led to an unprecedented boom in house prices.

House prices in Northern Ireland have risen by 76% since the start of 2005, far outstripping growth in the rest of the UK. goto top