Interest Rates

If you have limited equity in your home you can get hold of a mortgage but it is going to cost you more for the privilege – unless a good mortgage broker can help you put together an affordable deal.

It’s a fact that borrowers with small deposits are paying substantially more for mortgages according to Defaqto. It says the credit crunch and recession has made lenders much more risk-adverse, which means they are demanding more money for riskier loans, like high LTV deals.

David Black, banking specialist at Defaqto says: “Three years ago there was little difference in the interest rates charged whether you had a 10% deposit or a 25% deposit. Since the credit crunch the situation has changed significantly and those seeking a higher LTV mortgage have to pay significantly more.”

Defaqto says an average borrower with a 90% LTV interest-only loan pays £9,180 for a two year fixed rate whereas a borrower with a 75% LTV loan for the same amount will only pay £6,330 – a difference of £2,850 with an interest rate difference of 1.90%.

It might be that through a mortgage broker, who has close relationship with mortgage lenders of all shapes and sizes, can find you a high LTV mortgage that doesn’t break the bank. It’s true that less equity means higher rates, but a good broker may be able to prove that wrong.

SOURCE: Defaqto, 18/04/10

To Keep up with news and comments on the current adverse credit market please visit the Adverse Mortgage Blog.

People are becoming so desperate to find ways of handling their adverse debts that they are willing to commit fraud – if your debts are driving you to think of crime, you have to get help before you get yourself into too much trouble.

New research from LV= suggests that the number of people sustaining broken ankles from slipping on a pavement, whiplash from a car accident and post-traumatic stress has sky rocketed since the onset of the recession. While it may be that plenty of those claiming for injuries are real, it beggars belief that the increase and the recession are just coincidence.

LV= says the indebted now more likely to turn to insurance fraud in order to sort out their financial woes and most solicitors questioned by the mutual say that companies specialising in personal injury claims advertising a ‘no win, no fee’ offer are tempting people to make fake, or exaggerated, claims.

If you are struggling, don’t risk more fines or even a jail sentence. Talk to a professional about how to handle your debt in a sensible and legal fashion. It might mean trying to get hold of legitimate credit, it might mean just rearranging your finances or it might mean something more drastic. But whatever you do, and whatever the solution may be, get real legal financial help because insurance fraud never pays.

SOURCE: LV=, 14/04/10

To Keep up with news and comments on the current adverse credit market please visit the Adverse Mortgage Blog.

Finally! After years of adverse debt problems, many more people have finally seen the light and will now do all they can to reduce their debts rather than amass even more.

In fact, repaying debts this year is one of the main financial priorities for people in the UK, according to John Gilbert Financial Research. It has found that more than two thirds of adults in the UK plan not to borrow money and instead focus on saving money, getting to grips with debt or investing their money wisely.

Interestingly, over a quarter of those asked by the group wanted to focus on repaying their debts. They realise that amassing more and more short-term unsecured debt will not solve their problems, only exacerbate them.

A fitness instructor will tell you that fat is easy to to put on but very hard to take off – debt is exactly the same. You may have spent years filling in forms for free and easy debt and it is only now that you have decided to get on the finance treadmill, so to speak, and begin trying to shift some of that debt.

But help is at hand – good financial advisers are the financial fitness instructors. They know the best ways to reduce debt  and make you a fitter, leaner borrower. Like working out in the gym, it isn’t easy and it might be painful at times, but at the end of it you will feel a million times better.

SOURCE: JGFR, 09/04/10

To Keep up with news and comments on the current adverse credit market please visit the Adverse Mortgage Blog.

Adverse mortgage borrowers have struggled in vain to get hold of mortgage credit thanks to as much as £17,000 having been wiped off of their home’s value.

Recent research from MetLife found that the average household’s value to decline by £17,480, due to falls in the markets and house prices. This has meant those who initially had high loan to value mortgages now either own none of their home or are even in negative equity.

And mortgage lenders are now demanding much higher amounts of equity for people to secure a mortgage – the days of 100% mortgages are over and now many loans need 15%, 20% or even 25% equity. For many, that is a bridge too far.

But the good news is house prices rose by more than 10% in 2009 according to Nationwide, so some adverse borrowers might now be in a significantly better position. It might even mean they have gained back enough equity to get hold of a mortgage in this new age of prudent lending and tough credit criteria.

Dominic Grinstead, managing director of MetLife says: “The end of the recession in the UK is a genuine sign of hope for the future and it is undoubtedly good news that 2009 saw a rise in average household wealth. However, households are still counting the cost of stock market volatility and at £17,480 the cost is not trivial.”

If you think your fortunes have improved over the last year, talk to an adverse mortgage adviser about your mortgage potential. Any adverse mortgage borrowers would do well to speak to an expert now to make sure their home finances are in the best possible shape.

SOURCE: Nationwide, Jan 2010, MetLife, 24/03/10

To Keep up with news and comments on the current adverse credit market please visit the Adverse Mortgage Blog.

Just because you are offered credit doesn’t mean you should take it – it is a lot harder to rid yourself of adverse debt than it is to sign up for it.

Worryingly, many young people are maxmising the credit that is on offer to them – research by Callcredit has revealed that young people aged under 24 appear to be maximising available credit by taking out multiple current accounts with available overdraft facilities across multiple providers.

It says that almost one in ten of these young people admit to running three or more current accounts with overdraft facilities. Even more disturbing is that 9% of young Brits have over-inflated their income when applying for credit in a bid to secure a higher credit limit. Also, 6% of people even acknowledge that they have applied for credit knowing they might not be able to meet the repayments.

Graham Lund, managing director of Callcredit says: “While the end of the recession may be in sight, it seems that many consumers continue to struggle in managing their finances. What’s particularly concerning is the proportion of young people who appear to be targeting multiple providers for access to multiple overdraft facilities.”

The research also revealed one in four mortgage holders would default on their mortgage if their monthly income dropped by just £300. This shows that people are still too indebted and need to take some expert advice to see what they can do about taking on safer financial products and reducing their credit dependency.

Michael Middlemiss, head of credit risk at Sainsbury’s Bank says: “This research reveals some alarming trends around how consumers view credit and how their behaviour has changed over the recession. Monitoring affordibility and being able to identify quickly and effectively any change in circumstances which may affect a consumer’s ability to repay is not a “nice to have” but rather key to good business practice.”

SOURCE: CallCredit, 12/03/10

To Keep up with news and comments on the current adverse credit market please visit the Adverse Mortgage Blog.

Mortgage rates have been historically low for a year now thanks to lender forbearance and a low base rate – but should people with adverse loans be concerned that mortgage rates are on their way up?

It’s a tricky task to predict the exact point, or even a close estimate, of when rates may rise. However, with the current base rate at 0.50%, it is fair to assume the future for rates can only be up. 

HSBC is reminding borrowers that 20 years ago the Bank of England base rate was at 15.4%, proving that rates can rise significantly higher than 0.5%. It says that while no one is arguing that interest rates are likely to hit double figures anytime soon, some economists are estimating that Bank of England base rates could reach 6.5% over the next five years. 

Martijn van der Heijden, head of mortgages at HSBC says: “The message for borrowers is that if you couldn’t afford an increase of up to 3% on your mortgage, you should seriously look to fix your payments now. Mortgage holders unsure of how they might be effected by rising interest rates over the next few years should first take expert financial advice.”

A mortgage expert will not try to predict the future, but they will use their years of experience to help you come up with a solution that is likely to mean you pay out as little as possible over the coming years. No one can know what the future holds but you can prepare yourself with the help of someone who has seen it all before.

SOURCE: HSBC, 03/03/10

To Keep up with news and comments on the current adverse credit market please visit the Adverse Mortgage Blog.

Most young people need some help from their parents to have any hope of getting onto the property ladder – and both need help from a mortgage adviser if they are to be successful.

According to the Council of Mortgage Lenders, 80% of all under 30s now need financial help from a parent or relative to get on to the housing ladder. It says before the financial crisis it was just 45% of all young people.

As a result, those under the age of 34 are half as likely to be able to get a mortgage than those ten years ago.

The CML says: “What is most striking is that to get into the market, today’s first-time buyer is putting in a deposit of around £34,000, equivalent to more than their total gross annual household income. Only three years ago the deposit required to enter the market was a much more manageable – but still hefty – 37% of annual household income, at £12,700.”

For the first-time buyer, a mortgage adviser is always crucial. The first time someone signs up for a mortgage it can be a challenging, daunting task so having a professional there to make sure everything goes smoothly is a big help.

And for those parents who are helping the first-timers, financial advice is equally as crucial. It might mean remortgaging, it might mean unlocking equity in their home or it might mean the cashing in of assets like stocks, bonds or pensions. However they find the money, they need a professional by their side as much as their kids do.

SOURCE: CML, 02/03/10

To Keep up with news and comments on the current adverse credit market please visit the Adverse Mortgage Blog.

The Consumer Credit Counselling Service, a UK debt charity, is warning people not to be complacent about their debts or risk serious problems in the future.

It says that people should not ignore signs that they have unmanageable debts and to seek help as soon as they realise they have a debt problem. Many people simply bury their heads in the sand and hope that the lottery or a magic genie will come along and solve all their problems. Unfortunately this is real life and debt problems can only be solved if people proactively try and make amends.

According to new research by Unbiased.co.uk, Brits have spent the first 50 days of 2010 just earning enough money to pay off the interest on their personal loan and credit card debts. CCCS points out that those who have now earned enough to repay the interest are not free from debt and may have a debt problem as they still have to repay the actual debt itself. Simply, it is not enough to manage the debt, you need to work towards reducing it or risk being in the red forever.

Laura Carver, CCCS helpline manager, says: “Being unable to repay your debts is the most obvious sign of a debt problem. However, there are other warning signs that your debts are putting a strain on your finances and that they are likely to become unmanageable, particularly if you have an unexpected large expense or change in circumstances.

“These signs include only making the minimum payment on your credit cards each month, not knowing the total debt you have, lying to your friends or family about your spending and debt and using credit to repay debt.”

Take control if you are struggling. Talk to your mortgage broker, your lenders, a debt charity or a debt manager to help you work out a way of getting on top of your money problems. It takes time and it is not easy but it is only those who do not ignore the signs who eventually become debt free.

SOURCE: CCCS, Unbiased.co.uk, 19/02/10

To Keep up with news and comments on the current adverse credit market please visit the Adverse Mortgage Blog.

Repossessions might be falling and we might be officially out of a recession but there could still be as many as one million people struggling to pay their mortgage each month.

Peter Sargent  president of R3, an insolvency practitioner, says, “The insolvencies and repossessions reported are the tip of a very worrying personal debt iceberg. What lies below the waterline is a much larger group who are sadly not facing up to their debt problems.”

R3’s research shows that around one million people are struggling without seeking help, and a further half a million have contacted their creditors informally for help after struggling with their debts. All in all, the number of people experiencing financial difficulty is estimated to be around seven times the number of people in formal insolvency.

A lot of people just assumed that as soon as the recession ended it would be the end of the economic misery and all of a sudden the good times would return. Some of those who are struggling to pay their adverse mortgage debts each month thought they would be able to simply ask their mortgage adviser for more credit and hey presto! the debt would disappear.

Unfortunately real life isn’t quite so simple. Yes, we are out of a recession, but those million people will not suddenly find their mortgages are manageable. They still need to talk to their mortgage adviser, their mortgage lender, debt managers or charities and find ways to make their debts more manageable through hard work, consolidation, saving and budgeting.

It isn’t easy but seeking out advice is all adverse mortgage borrowers can really do while the UK economy struggles out of the recession.

SOURCE: R3, 05/02/10

To Keep up with news and comments on the current adverse credit market please visit the Adverse Mortgage Blog.

More people who have adverse mortgages and adverse debts are finding ways to avoid having their homes repossessed, giving them the chance to work towards getting back into the black.

According to the Council of Mortgage Lenders, lenders took 10,200 properties into possession in the last three months of 2009 – 13% lower than the previous three months, and 2% down on the last three months of 2008.

Although adverse borrowers are more likely to stay in their homes thanks to lenders showing more forbearance, 188,300 mortgage borrowers still ended the year with arrears equivalent to at least 2.5% of their whole mortgage – that roughly correlates to three months of non-payment, which is a serious problem.

Michael Coogan, director general of the CML says: “The fact that mortgage arrears and possessions did not rise as much as we feared in 2009 is testament to the effect of low interest rates, and a great deal of concerted effort by lenders, government and the advice sector to help borrowers to address financial difficulties when they occur.

“We are not out of the woods yet – 2010 will still be a challenging year for many borrowers, and some households will inevitably find their finances being squeezed if and when interest rates do eventually rise. But borrowers should feel reassured that the vast majority of people who get into arrears manage to keep their homes.”

But Brian Murphy, head of lending at the Mortgage Advice Bureau warns that if rates were to rise materially then there could be an increase in arrears and repossessions in the future. He says: “It’s essential that anyone who is beginning to struggle with their repayments gets in contact with their lender straight away in order to find a solution. The worst thing to do is stick your head in the sand.”

SOURCE: CML, MAB, 11/02/10

To Keep up with news and comments on the current adverse credit market please visit the Adverse Mortgage Blog.