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

A look at a newspaper or a listen to the daily news may give the impression that mortgages are as rare as hens’ teeth, but the truth is somewhat different. It is possible to get a mortgage, even in these days of financial crisis and house price gloom, but it remains to be said that certain criteria need to be met.

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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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As the financial climate tightens knowledge becomes power when it comes to securing the credit deals you want. The best start is by understanding the impact your credit history and rating has on the type of offer you may receive and whether you will receive an offer for credit at all.

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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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Early December saw the UK Government promise a guarantee to homeowners that find themselves in trouble with their mortgage repayments in an effort to stem the expected tide of repossessions that many see as a result of the current economic crisis.

The scheme is aimed at those who find themselves redundant with a mortgage to pay, as such individuals are expected to become more numerous with companies going to the wall thanks to the ‘credit crunch’ that is sweeping the country.The details of the proposal are quite specific, and will only be available on mortgages below a £400,000 limit.

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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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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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