Mortgage famine could continue for years

A recent report has claimed that the continuing mortgage famine that has hit the UK since the onset of the global credit crunch last summer could continue for years to come. Whilst some lenders have been reducing the interest rates on their mortgages, which may have given some hope to potential buyers, one industry official has said that this does not mean that the problems are over, as there is still a huge problem when it comes to the supply of mortgage loans.

Alex Murray of national adviser network Thinc Group stated: ‘This is not the start of a new dawn. Massive supply problems remain.’ He added that until stability was restored to the wholesale mortgage market conditions would continue to get worse, and the shortage when it comes to mortgage supplies would continue. This would impact on the downward pressure on house prices and make it increasingly difficult for consumers to get their hands on affordable mortgages.

Another broker agreed, stating that whilst some lenders were starting to provide finance again it was only based on safe lending, where borrowers have a high deposit to put down and a fairly good credit report. He said: ‘Certain lenders appear to be jockeying again to expand their market, but only where very safe lending is concerned.’

The potential suspension of stamp duty in the meantime continues to impact on the level of housing sales, and one official said: ‘With the Chancellor’s confirmation that he is considering a temporary suspension of stamp duty, housing transactions will diminish further until he sets out his proposals. Who will want to commit to a property purchase now when it is probable that by waiting a few months they could save thousands of pounds?’

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Bad Credit Mortgages

Your credit rating is based on your personal history of borrowing, and will include details of your previous credit and store cards, car payment plans, mobile phone contracts and personal loans. Unfortunately if you miss any repayments it will be noted in your credit history, and if you have a bad credit rating you may find it difficult to apply for credit in the future. This could mean that you will not be able to apply for the good deals on credit cards or loan rates, and if you have a very bad credit rating you could be refused loans and mortgages outright.

There are some mortgage companies that do specialize in providing secured loans for people with a poor credit history, but often these come at very high rates of interest, and with the better deals you will most likely be required to put down a significant deposit. Therefore if you do have a poor credit rating and are still struggling to repay your current debt, taking on a mortgage can often make things even worse. As secured loans, mortgages are tied to the property and if you miss repayments your home could end up being repossessed.

If you are thinking of taking out a mortgage despite your bad credit rating, then it is important you get some professional advice to help you manage your debt. You can get mortgage information from FSA (Financial Services Authority) which is an independent non-governmental body that provides impartial advice on all aspects of finance for consumers, including all types of mortgages. You can visit their website at moneymadeclear.fsa.gov.uk or call their Consumer Contact Centre on 0845 606 1234 which is open 8am and 6pm Monday to Friday. You could also try the Council of Mortgage Lenders, who have a good website that explains about mortgages, and the various types of deals that are available from fixed rate mortgages to tracker mortgages.

Applying for a mortgage

Before you consider applying for secured loans such as mortgages, it is important you think carefully about your finances, and decide what repayments you will realistically be able to afford each month. There are many different types of mortgage packages available, and you should do some research on the Internet or seek professional advice from an independent financial adviser so that you can find the right deal to suit you. The Council of Mortgage Lenders (CML) has a good website, CML.org.uk, which provides a wealth of information on all types of mortgages, and also provides consumer guides on all aspects of home buying. You can also get mortgage information from FSA (Financial Services Authority) which is an independent service that provides all types of impartial financial information for consumers.

Fixed Rate mortgages can be useful for those who find it difficult to manage their budgets, as the repayments are set at one constant level for an agreed period. This will mean you know in advance what you repayments will be, so that you can plan accordingly. If rates go down you will not benefit, but also if they go up you will not have to pay any more until the agreed fixed rate period is over. At the end of a fixed rate period you will normally be automatically switched to a standard variable rate mortgage deal.

Tracker mortgages are slightly more complex. These are a type of variable rate mortgage in which the interest rate is set above or below the base rate. This then tracks the base rate up or down, and will only change if the base rate does. This will mean you will not be able to accurately predict what your mortgage repayments will be over a year, as rates could rise and fall several different times, but it does mean that you will be able to take instant advantage of any lower base rates.

Understanding Mortgage Refinance

A number of property owners who have current loans are looking at repaying their existing loans using mortgage refinance. A mortgage refinance planner is a useful financial tool if you want to pay your current loans with a lower interest rate.

With home refinance, you can improve your cash flow according to your budget. You should make sure that the fees that you would be paying with refinancing are far less than the savings on the interest that you would be setting off when you pay up your old loan.

It would be a good idea to talk to a financial expert on mortgage refinancing if this option is suitable in your present situation.