Fewer buy-to-let investors remortgage loans

The number of landlords who decided to remortgage their buy-to-let loans using the services of a financial adviser declined by 9 percent during the final months of 2009, in comparison to figures released for the third fiscal quarter. Paragon Mortgages found that only 30 percent of landlords turned to a financial advisor in order to remortgage their buy-to-let loan, while this figure stood at 39 percent three months earlier. John Heron, Paragon’s managing director, predicted that the number of landlords who decide to remortgage will likely continue to decline, until signs of life return to buy-to-let lending and new, competitive loan products begin to appear. One of the key reasons why so few landlords are considering the option of remortgaging their loan is because the reversion rate is often more beneficial than the relatively few remortgaging options currently available.

While the number of buy-to-let products remains far lower than before the start of the financial crisis in autumn 2008, Paragon reported that more landlords seeking to expand their portfolio of properties are now able to secure loans. The Financial Times published statistics which suggest that 52 percent of landlords who sought to extend their portfolio were successful in receiving a buy-to-let loan. This figure represents a modest increase from the 48 percent rate, which characterized the third quarter of 2009. Additional statistics also suggest that the number of first-time landlords seeking the assistance of financial advisors in obtaining loans increased during the final months of 2009. But the continued lack of buy-to-let products remains a concern for landlords. Observers agree that the rental sector’s future growth prospects rest in large part on the availability of new loans.

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Legal & General launches two-year fixed rate products

Legal & General Mortgage Club is to launch three exclusive two-year fixed-rate mortgage products with Accord Mortgages.

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The new products, with rates starting from 3.49 per cent, are available to a maximum 75 per cent loan-to-value (LTV) and an arrangement fee of £995.
There is a two-year fixed rate product available at 3.49 per cent, a 3.59 per cent remortgage deal with valuation fee refunded on completion and free legal fee, and a 3.59 per cent deal with valuation fees refunded and £250 cashback on completion.
Martyn Smith, head of mortgage products at Legal & General, said: "The mortgage market is hotting up and competition is increasing.
"These are really competitive fixed rate deals and will be very attractive to anyone worried by the recent news on inflation."
Iain Smith, sales director of Accord, said: "We are committed to working with our key lending partners to provide them with great products and when we couple this with first class service from our dedicated case managers we think we have the winning formula."


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Skipton's U-turn signals mortgage rates are on the rise

HOMEBUYERS will this weekend be reeling at the clearest signal yet that mortgage costs are set to rise, after the Skipton reneged on its home loan guarantee, pushing monthly repayments up for its borrowers by 40 per cent.
Its 100,000 borrowers were guaranteed that the society's standard variable mortgage rate (SVR), which homebuyers move to when their "special" deals come to an end, would never be higher than three per cent above base rate. Currently, 29,000 customerADVERTISEMENT

s are paying a competitive 3.5 per cent. However, a further 35,000 are shortly due to join them, reverting two-thirds of customers on to an unprofitable deal.

The society says it can no longer operate on this basis, and is invoking an "exceptional circumstance" clause to wriggle out of the promise.

From 1 March, the SVR will rise to 4.95 per cent, pushing up monthly repayments on a £50,000 interest-only loan by £60, from £145.83 to £206.25; on a £100,000 loan by £145.84, from £291.66 to £412.50; and on a £150,000 mortgage by £181.25, from £437.50 to £618.75.

The society claims it is only falling into line with many of its competitors, who have been charging around 5 per cent or even higher for some time. Yorkshire Building Society's SVR, for example, is 4.99 per cent, and its broker subsidiary Accord has recently upped its rate to 5.99 per cent. The Scottish is charging 5.29 per cent.

However, the Council of Mortgage Lenders estimates that the average is 3.74 per cent, with organisations such as Nationwide, Lloyds TSB Scotland and the Cheltenham & Gloucester, which had 2 per cent base rate guarantees, charging 2.5 per cent. Nationwide has upped its SVR to 3.99 per cent for new borrowers, but has no get-out clause for other customers.

The worry for borrowers is that not only must they absorb this hike but many more to come, not least given last week's news of rising inflation.

Darren Cook of Moneyfacts said: "Lenders are going to have to concentrate on repairing their balance sheets and that will not be completed in 12 months. The credit crunch will take years to recover from."

Nevertheless, some borrowers will feel aggrieved and complain to the Financial Ombudsman that they are being treated unfairly. As the "exceptional circumstance" clause was included in their mortgage agreement, their only grounds would be that the phrase was never defined.

Mortgage brokers are advising borrowers to think seriously about remortgaging elsewhere, not least because the Skipton is offering them a 90-day window to exit their loan, during which it will waive all charges including a £120 admin fee. Being able to easily remortgage will depend on the amount of equity you have in your home. Those with less than 15 per cent to put down will struggle to better 4.95 per cent and will have to stay put.

Otherwise, Punter Southall mortgage adviser John Postlethwaite says: "I think there are strong arguments for locking into some of the five- year fixes currently on offer. There are various offers around 5 per cent, and when you think that the long-running average for base rate is 5 per cent, then it's hard to see how these won't offer good value over the coming years."

HSBC will fix your rate at 4.73 per cent for five years with a £999 fee, if you have a 40 per cent deposit. Yorkshire will fix at 4.99 per cent with a 25 per cent deposit and £495 fee.

But if you believe that the base rate will take some time to reach 3 per cent, then you should explore a tracker. If you can put down 35 per cent, you can track at 2.08 per cent over base with a First Direct lifetime offset tracker which has no early redemption charges.

This would cut your monthly repayments on a £50,000 loan to £107.58, saving £98.67 from March; save £198.36 with a £100,000 loan, costing £215.14; and finally, save £296 monthly with a £150,000 loan, costing £322.71 monthly.

However, you will have to pay remortgaging costs, including a survey, although First Direct will give you £400 towards legal bills.

The Woolwich has a similar deal, tracking at 2.13 per cent over base, although it has early redemption penalties during the first two years.

However, you only need a 30 per cent deposit, and the bank will pay your legal and survey remortgaging costs.


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Is it time to fix your mortgage?

Homeowners kicking back and enjoying sustained low rates on their mortgage could be jolted into taking action sooner than they thought...

Recent figures have revealed the annual rate of inflation leapt from 1.9% to 2.9% in December, prompting some economists to say that the Bank of England base rate - which has been slumped at 0.5% since March last year - may start to rise again, sooner than anticipated.
Current state of play

Tracker mortgages - that mirror movements in the Bank of England base rate - are by far the most popular deals, according to brokers. This is because, not only are initial rates cheaper than their fixed rate counterparts, but there has been a consensus that the base rate would not climb any time soon.

"People who have even just a little slack in the budget have been taking a calculated risk and opting for a tracker as interest rates looked set to stay low," explained David Hollingworth at mortgage broker L&C Mortgages. "The best tracker deals are priced about 2.5% to 3.0% on a two-year term, while the cheapest fix for the same period will cost from 3.5%."

But if base rate starts to climb, so will the monthly outgoings of those homeowners on tracker deals - and this is causing a marked shift in sentiment.

According to recent research from Santander Mortgages, of the 880,000 homeowners due to remortgage in the next six months, only 13% say they will opt for a tracker deal compared to 33% two months ago. And the number of those likely to opt for a fixed rate has increased from 20% to 23% in the last month alone.

Phil Cliff, director of mortgage marketing at Santander UK, said: "With many commentators predicting a base rate rise this year, homeowners now seem more inclined to play it safe with a fixed rate deal."

Getting into a fix

But what's out there for homeowners who want to fix in their rate? Some lenders have actually been edging down the prices of these deals. Santander recently slashed the rate on some of its two-year fixes by up to 0.4%. The bank now offers a deal priced at 4.99% in return for a 20% deposit and £995 fee.

Yorkshire Building Society was quick on its heels, launching a two-year fixed rate mortgage priced at 3.29% for borrowers with access to a 40% deposit. This represents the lowest two-year fix available direct to consumers, says the mutual - but be warned as the deal also comes with a hefty £1,195 arrangement fee.

And the end of last week saw Legal & General launch a range of two-year fixes in conjunction with Accord Mortgages. It includes a two-year fixed rate priced at 3.49% for those with a 25% deposit and a £995 fee. "Competitive fixed rate deals will be very attractive to anyone worried by the recent news on inflation," said Martyn Smith, the company's head of mortgage products.


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Remortgages: Defending a Man’s Castle?

In the present state of the economy, and considering the fragile and tentative recovery that many believe that we are experiencing, the property market is continuing to be frequently used as a barometer of the effects of the recession. While the latest statistics would argue that the United Kingdom is still within the recession and experiencing the effects with more severity than ever, property market experts are reluctant to write off the recent upturn in mortgage lending.

Donna Green examines the divide between the mortgage and remortgage market, considering the impact of the latest news that the sectors of mortgage lending and equity release are on the long road to economic recovery.

The latest news that the division between the mortgage and remortgage lending rates has widened throughout 2009 demonstrates that while some sectors are experiencing a resurgence in economy, others continue to experience the full effects of the downturn. The Director General of Self Home Income Plans, Andrea Rozario, has given an analysis of the equity release market within the property industry, however acknowledged the nature of division evident in recovery.

“While equity release providers are experiencing high levels of customer demand, a significant impact on the quarter's business figures has been the lack of liquidity in the overall market.”

Furthermore, the stagnant characteristics that the markets are currently offering details a difficult set of circumstances under which to make specific financial decisions regarding properties. As previously reported, the record low interest rates set by the Bank of England are allowing many mortgage providers to offer competitive rates on mortgage loans, in many cases eliminating any demand for refinancing or remortgage loans.

In much the same way, the equity release market has suffered with plummeting demand throughout the recession, however can be seen to be tentatively beginning to recover. The statistics released by Self Home Income Plans document a mid-year growth from the statistics available from the start of the year and since the third quarter of 2008, the amount of equity released from properties has risen, further attesting to the assertions within the property market of an economic upturn.

With the recent news on proposed pension reforms, retirement ages and legal action taken against unprofessional pension providers, these figures come as welcome news to those seeking to draw income from the value of their properties. In comparison with the remortgage market, the equity release market can be argued to have fared better throughout the economic turmoil by virtue of the fact that it is not as heavily reliant upon the economy. Whilst equity release is obviously directly linked to house prices, unlike the remortgage market, it is not wholly underpinned by Bank of England interest rates.

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Purchase loans up by 77% but remortgages plunge

The number of remortgage approvals plummeted by 60 per cent to 21,282 last month from 52,717 in September 2008, according to figures from the British Bankers’ Association.

House purchase approvals rose by 77 per cent over the same period from 23,808 to 42,088, with £5.9bn of house purchase loans approved in September compared to £3.2bn in the same month last year.Legal & General director of mortgages Ben Thompson says: “The remortgage market is as dead as a dodo, according to the figures from the BBA, and let’s face it, this situation is not going to change much for a long time to come. As long as the bank rate stays this low - and why shouldn’t it given today’s GDP figures? - then there is little incentive for borrowers to shift from their standard variable rate.”

BBA statistics director David Dooks says: “Mortgage lending by the high-street banks is continuing to improve from the lows seen earlier this year and the number of house purchase approvals continues to recover.

“Housing market activity will depend, however, on more properties coming on to the market.”


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Five of the best mortgage deals

Borrowers will need a deposit or equity of 40 per cent of the value of the property, although the bank offers a similar loan charging 2.49 per cent to those who have a 25 per cent deposit. There is a fee of £1,199 in either case.
One caveat is that the interest rate is linked to HSBC's standard variable rate (SVR), which it can change at will, rather than the Bank of England's official rate. At the end of the two-year introductory offer, under which the rate you pay is 1.95 percentage points below the SVR (currently 3.94 per cent), the rate will revert to the standard variable rate itself.
David Hollingworth of London & Country Mortgages, a broker, said: "This deal offers an extremely eye-catching rate and there really is no direct competition."
TWO-YEAR FIX FROM FIRST DIRECT, INITIAL RATE 3.49 PER CENT
If you would rather not have to worry about interest rates changing and want to be sure that your monthly repayments are fixed for a set number of years, there are a number of competitive fixed-rate mortgages on the market.
The lowest two-year fixed rate is from First Direct, according to Mr Hollingworth. The rate is 3.49 per cent, but borrowers will need to be careful to factor in the large fee, £1,298, to make sure that it represents the best deal for them. The rule of thumb is that the bigger the loan, the less significant the fee.
This mortgage is also for amounts of up to 60 per cent of the property value. For people wanting to borrow 75 per cent, the lender will charge interest at 3.94 per cent - "this also represents good value", Mr Hollingworth said.
Alternatively, moneyfacts.co.uk, the information service, recommends NatWest's two-year fix for 75 per cent loans at 3.69 per cent with a fee of £799.
FIVE-YEAR FIX FROM NEWCASTLE BUILDING SOCIETY, INITIAL RATE 4.99 PER CENT
Some borrowers are reluctant to fix for just two years, on the basis that many economists expect Bank Rate to remain very low for some or all of that period, making a variable rate such as HSBC's more attractive. After all, why fix at 3.49 per cent for two years if you think you will pay 1.99 per cent for two years with a tracker?
But as few expect rates to remain so low for five years, a longer-term fixed rate could make more sense.
Newcastle's five-year fix charges a rate that ranks alongside the lowest available over that period but is also offered for up to 75 per cent of the property value, where others, such as a 4.95 per cent deal from HSBC, are available only at 60 per cent. Mr Hollingworth said: "This is a great deal for those looking for medium-term security." The fee is £994.
THREE-YEAR TRACKER FROM ABBEY, INITIAL RATE 2.99 PER CENT
Another mortgage that illustrates the fact that borrowers will, initially at least, pay less with trackers than with fixes.
This loan charges 2.49 percentage points above Bank Rate for three years, meaning that you would currently pay 2.99 per cent. At the end of the introductory offer the rate reverts to Abbey's SVR, currently 4.24 per cent.
Borrowers need a deposit of at least 30 per cent and there is a fee of £995, although Abbey will pay for the valuation and legal work.
OFFSET LIFETIME TRACKER FROM WOOLWICH, INITIAL RATE 2.97 PER CENT
Some borrowers would prefer a loan that they can stick with for the whole term, avoiding the need to remortgage every few years.
This mortgage tracks Bank Rate for the entire term, charging 2.47 percentage points above the Bank of England rate. Borrowers need a 30 per cent deposit and will pay a fee of £1,499; there is also an early repayment charge for the first three years.
As this is an offset loan, borrowers can use their savings to help reduce the interest bill.


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