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

The most recent comments to emerge from the government has been that of Margaret Beckett, Housing Minister, who implied that there were signs of recovery in the market and advised first time buyers to snap up bargains.

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The hopes and dreams of millions of home-owners and first-time buyers have received a number of positive announcements from the Government recently. We have seen dramatic cuts in interest rates, an announcement of a stamp duty amnesty on properties worth £175,000 or less, a new shared equity scheme for families earning less than £60,000 and earlier financial support for people struggling with their mortgage repayments.

But the lack of readily available mortgages seems to be little sign of ending and lenders remain very cautious, whether they are assessing re-mortgages at the end of a fixed rate deals or when looking at new applications.

The good news is that it is possible to improve your chances of securing the mortgage you want. These steps could help improve your chances.

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The significant and dramatic reductions in the Bank of England interest rate in the past few weeks has seen a flurry of interest in the area of tracker mortgages, that is those that follow the base rate to at least some degree.

The average tracker mortgage, according to available data, has fallen from 6.27 percent in October of this year to only 3.27 percent now, in early December. So what does this mean for the consumer?

How much can be saved with a tracker mortgage?

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In a move that will have surprised many market analysts the major UK back HSBC has announced plans to increase its mortgage lending in 2009. Despite the current downtrend in both lending and housing sales the bank clearly sees an opportunity to be exploited, and it could be that this speck of light at the end of the tunnel may spur other lenders into looking at the future with renewed optimism.

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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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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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