In the last two months I have seen nine clients all wishing to remortgage their homes. Some of my clients are at the end of a mortgage deal, others are looking to consolidate their expensive secured loans, unsecured loans and credit card debts into an affordable mortgage deal. Whilst some clients are looking for a cheaper mortgage deal as interest rates have dropped. This makes me sound very busy and you would certainly be right. I have been busy achieving nothing! The reasons I have been unable to remortgage my clients are:
1. House prices have fallen and there is little or no equity. Currently house prices are at February 2006 levels and falling according to a recent report from John Varley, group chief executive of Barclays Bank. He has predicted that house prices will fall a further 15% next year (2009) and he feels that unemployment looks likely to rise by 700,000.
2. There are no high loan-to-value mortgage products available anymore.
3. When clients ask me if they should wait or remortgage now. In all honesty my advice is they should hold on as rates will drop some more. The lenders are holding back passing on the Bank of England interest rate cuts and there is more cuts to follow.
4. There are no cheap tracker rate mortgages available and most borrowers are remortgaging to more expensive fixed rate mortgages
5. Homeowners with negative equity will find there are no lenders willing to remortgage their homes - they are at the mercy of their current mortgage lender for a new mortgage deal or they stay on the standard variable interest rate which is the lenders worst interest rate.
6. First-time buyers need around £20,000 to buy their first home - there is currently only two lenders willing to offer a 95% mortgages to first-time borrowers and only with a guarantor (parents on the mortgage to reduce the lenders risk)
7. The sub prime market has all but disappeared, currently three lenders remain all the others have left the country or constricted their lending criteria to borrowers. Lenders are not willing to accept any arrears, defaults or county court judgments on a mortgage, loan, credit card or council tax bill. The Council of Mortgage Lenders believes that half a million households will be more than three months in arrears next year 2009.
8. Lenders have tightened their lending criteria and some have introduced profiling to weed out anyone who passes their criteria that they don't want as a borrower.
9. Lenders have become less tolerant of borrowers with a poor 'payment history'. As more and more people struggle through this recession and miss two or three mortgage, loan, credit card and council tax bills payment they will find that the number of lenders willing to lend money to them will shrink drastically. Those lenders that are willing to lend will be outrageously expensive, currently charging discounted interest rates at 9.49%.
10. Northern Rock won't remortgage their borrowers to a new remortgage deal at a lower interest rate. They will allow borrowers to stay with them but only on their standard variable interest rate, which is the worst interest rate they could offer a homeowner and this is a nationalised bank that we the taxpayers own. Where is 'treating customer fairly' I ask Mr Brown?
11. Buy-to-let landlords are unable to remortgage as mortgage lenders will only lend on properties with less than 75% loan-to-value now. The vast majority of landlords need over 85% loan-to-value mortgage deals with falling house prices.
12. Mortgage interest rates have not fallen in line with the Bank of England base rate. This time last year the gap between the cost to lenders on the swap rate market and the rate that they offered mortgages to borrowers has increased from 1.12 percentage points last year to 2.92 percentage points today. Lenders are not passing on the full rate cuts despite calls from the Government to pass on these cuts onto borrowers.
Gordon Brown the Prime Minister, his Chancellor Alistair Darling and Mervyn King the Governor of the Bank of England seem to have thrown nearly everything they have at this economic crisis. The Bank of England has reduced interest rates down to 2% and they have bailed out the Royal Bank of Scotland, Lloyds TSB, HBOS (Halifax and the Bank of Scotland), Northern Rock and Bradford & Bingley. They have offered the banks billions of pounds of finance to encourage the banks to start lending to the public. In fact we the taxpayers now own nearly 50% or more of all of the above banks.
This Government under Gordon Brown the Prime Minister and Alistair Darling the Chancellor of the Exchequer have introduced many initiatives to help people who find themselves struggling, unemployed or facing repossession. Nobody can say that they have done nothing; they have put this country into billions of pounds of debt. They have and are still encouraging us to spend money. This is difficult when most people are facing an uncertain future and would rather reduce their spending.
This economic gloom is set to continue through 2009 for borrowers with little or no equity; those who have missed mortgage, loan, credit card and council tax payments; those borrowers looking for high loan-to-value residential and buy-to-let mortgages and first-time buyers looking to get on the housing market. Interest rates can drop to zero, but it is not going to ease these borrowers' circumstances, it will only bring more misery to savers. Their situations will continue to worsen as house prices continue to tumble and lenders continue to close their doors to them. Repossessions will rise beyond the predicted 75,000 next year.
What we need is for the government and the lenders to expand their 'Shared Home Ownership' deals to include all first-time buyers purchasing any home under £150,000 and not just on selected developments. This would help all first time buyers to get on the property ladder as they would require smaller deposits. We need a brave mortgage lender that will provide a 95% first time buyers mortgage without a guarantor with a 30 year fixed rate mortgage term that is fully portable allowing the borrowers to move in the future, without penalties. If the government could get the first-time buyer to start buying their first home it would start the housing market and the buy-to-let landlords and those homeowners who are struggling could sell their properties and maybe as a mortgage advisor I could arrange mortgages again.
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