Helping Innovate Property (HIP) – Blog, Housing Market News and Articles

Many people are reluctant to consider the option of re-mortgaging given the current financial crisis, but it is something that everyone should keep in mind as there can be considerable savings to be made. Here are some thoughts when considering re-mortgaging:

1: Plan ahead – for those on a fixed term deal, keep in mind when your current package comes to an end and begin looking for alternatives a few months in advance. Securing a mortgage can be a lengthy process and making tracks in advance can be advantageous in making sure you get the right deal and at the right time.

2: Shop around for the right deal – The rise of comparison websites allows easy access to view a large number of varying types of mortgages and their specific terms and conditions. Remember that what looks like a very small percentage difference can amount to a very large monetary difference over the term of the loan – make sure all the information is given to you in plain and simple, and easy to understand, terms.

3: Once you find the right deal, make sure you secure it as the recent turmoil in the financial industry has seen lenders resort to withdrawing deals at very short notice.

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A poor credit record and rating can be a millstone around ones neck for a long time and a serious stumbling block when looking for a mortgage.The current economic crisis has not been an assistance to those with a poor credit rating; lenders who were once willing to lend to those with an adverse credit rating are becoming more difficult to find.

Perseverance is the key. It is by no means impossible for someone with a poor rating to secure a mortgage – there are a few things one can do to help the process.

The first, and most important point to think about when looking for a mortgage is the deposit you are able to put down. Having a poor credit rating can be as a result of circumstances that are long in the past and you may have managed to save a sizeable nest egg with which to apply leverage to the lender.

It is vital to stress just how beneficial this is, as a large deposit may open doors that may remain locked to those with little to offer.

Lenders will be more willing to negotiate with a potential buyer on a sliding scale that measures how much, or little of the capital they are needed to advance – the less the better, especially in the current climate of tightened financial belts.

A further factor to take into account is the lender itself: there are many lenders on the market who specialise in adverse credit mortgages and loans; whilst these companies were once viewed as unscrupulous traders all mortgage lenders must be and are now fully licensed.

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The buy to let market in the UK has been the subject of much speculation of late, with the press continuing to announce the premature death of the process. This may be proven to be wide of the mark for future investors with cash in their pockets and a long term view.

Landlords who entered the market in recent times (2006-2007) are likely to be in negative equity and those whom were highly leveraged are going to face challenging times as the mortgage market tightens its belt.

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The worldwide economic downturn that has swept the financial markets has led to a serious decline in UK house sales and many construction companies have halted exisiting builds and made widespread redundancies.

This trend looks set to continue for the foreseeable future – most news agencies are forecasting a two year slump in sales and new builds – but what does it mean for the first time buyer?

To raise a cliché, there is good news, and there is bad news – which would you like first?

We will start with the bad news.

Finding a mortgage is going to be more difficult than for many a year as banks and lenders tighten their belts. The days of lending freely and willingly, especially loans of five and a half times ones salary are gone.

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For the past ten years UK property has been a certified blue chip investment in the UK. Anybody who put their money into property ten years ago has seen their investment gain in value beyond expectations – until now.

The financial crash that has swept the world in the past few months has exerted an influence on the housing market to an already notable effect as the doom and gloom of predictions in the daily press have risen. Forecasts of a fall in prices over the next two years up to 30% have been popular and has cast a dark cloud over the UK housing market

What is then the truth about the prospects of property investing in the UK – is the market in terminal decline or is there a future in speculation?

While prices are no doubt set to continue to fall, there has to come a point where things level out – bricks and mortar can never be worth nothing after all. Potential investors in the market continue to closely read and follow the property news and analysis in order to determine just when this is likely to happen.

Predicting the trends in the housing market is considered by many to be something of a dark art but that need not be the case. Keeping a close eye on the press and housing prices in the area intended for investment, should give the interested observer an indicator of the severity of the fall to come.

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It is a nightmare scenario in which the value of your property falls below that of the loans secured on it and it is likely to affect a great number of homeowners in the coming years thanks to the worldwide recession.

In fact, estimates put the number of homes falling into the negative equity zone at over two million by the year 2010, with over quarter of a million having joined the statistics in the last few months.

What should you do if you find yourself in the negative equity trap?

First and foremost, a couple of important points: your mortgage lender wants his money, not your house, hence repossession is very much the final option. The bailiffs will only be despatched to your door as a last resort. Also, house prices fluctuate – what is falling now may be rising in a few years – and negative equity will affect those who have to sell their homes while in the trap. If you can stay put for a while, do so, and you should find yourself climbing out of the zone in time.

Try and reduce the debt

At the first signs of negative equity – and for those who are unsure, this is the point where the market value of your property becomes less than the mortgage secured upon it (and any other loans that may use the property as collateral) – the thing to do is take stock. Investigate ways of cutting the debt – many mortgage lenders will have an option available to pay off a chunk of the mortgage, generally up to ten percent – by using available funds. Of course, you should not consider taking out further loans, but if you happen to have savings then it may be worth using these to reduce the mortgage amount repayable in the first instance.

If paying off some of the loan is not an option you should still contact your lender, and straight away.

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UK Property sales have slowed or as some describe ‘died’ and mortgage applications are at the lowest acceptance rates for years. The UK property market can seem to be in a tail spin at present and it is hard to look anywhere without apparent bad news emerging. Though, is it bad news for everyone?

For those people on fixed rate mortgages that are coming to an end with a high Loan-to-value (LTV) mortgage deal there are without doubt; unfortunately going to be difficult times ahead and the possibility of securing a mortgage with an attractive interest rate seems to be reducing.

However, to bring some positivity into the current market it does present attractive buying opportunities for some. Lets take our young couple who entered the property market 5 years ago and successfully obtained a relatively small mortgage in todays standards and have made their mortgage repayments since then on time.

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The doom and gloom that pervades in the UK economy at the moment is exerting a heavy impact on the housing market – in fact, there are many who cite the wilful granting of excessive mortgages as the core of the current financial crisis.

This is somewhat unfair as, although it is clear that banks have been lax of late in controlling lending, the root of the problem lays with general mismanagement, with the housing market a convenient scapegoat.

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The Bank of England recently reduced interest rates by 0.5% and many home owners looked forward to a reduction in their mortgage repayments, however has this been the case?

Some lenders have not immediately reduced their interest rates on existing mortgages as most were hoping for as the property market continues to struggle.

For banks’ customers with tracker mortgages guaranteed not to be greater than the defined gap between interest rates and mortgage rates; are likely to see the biggest interest rates cuts and will be seen on their repayments on their house loan in the coming weeks or months, dependant on their individual mortgage terms and conditions.

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As part of our ‘House Buying Guide‘ we look at realistic mortgage and borrowing options and how to formulate what amount of money can be borrowed and more importantly be repaid.

We have all read and heard the recent news stories of families that are in difficult mortgage related positions, some of which immediately entered into a negative equity position. Dispatches recently reported thousands of people were accepted for 125% interest only mortgages by the five leading banks and some bank clients that were allowed to obtain a mortgage of 10 times their earnings. How could this ever be described as responsible lending?

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Where is the UK mortgage market at present and where is this financial market heading? The reports in the press now detail many bad news stories for the housing market and that the mortgage sector is going through what must feel like to many as a dramatic re-assessment of it practices and lending procedures.

As many as 23,000 home owners whom have taken out 100% mortgages since March this year face a negative equity situation at present. However, this only totals 5% of mortgages accepted in this same period. The information from the Council of Mortgage Lenders (CML) comes as figures from within the industry support the fact that the housing market is slowing down further.

HIP-Consultant.co.uk deal with many estate agents and home sellers through providing our Home Information Packs solution. It is common place that agents are only selling about a third of the levels they have become accustomed to. It seems inevitable many estate agents will close or consolidate their positions due to the challenging conditions.

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