house4sale

information on the UK property market

Posts Tagged ‘re-mortgage’

Mortgage fraud rising

July 13th, 2009

The CML (Council of Mortgage Lenders) has published a report highlighting an increase in the number of fraudulent applications, mainly from buy-to-let property investors.

Prior to the credit crunch it was relatively easy for someone on no income to obtain a 100% mortgage for buy-to-let simply by stating what they expected their future income to be. Now times have changed, anyone wanting a mortgage for buy-to-let needs at least 25% deposit and they have to have an income.

But, some investors seem to be making false statements on applications, either by “forgetting” to mention an outstanding loan or credit card balance, or incorrectly stating their self-employed income.

Many mortgage lenders are now investigating applications and carrying out more detailed checks to prevent the fraud. In some cases the lenders will even employ third party companies to analyse the application and check against credit files for any discrepancies.

Overall this is good news in that it will reduce the number of risky mortgages, however there needs to be a balance. Whilst credit needs to be carefully reviewed before approving an application, if lenders look for “any excuse” not to lend then it will depress house prices as there will be less buyers. Another factor to consider is rental remand, as the UK population grows there will be an increased rental demand, if there are insufficient buy-to-let properties this will increase the cost of renting.

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Posted in Buy-to-Let, Mortgages

Tags: Buy-to-Let re-mortgage

Mortgage debt is reducing

July 3rd, 2009

Two years ago equity withdrawal from re-mortgaging property was running at around £14 billion a quarter, a rate of over £55 billion per year. But now the tide has turned, and by a massive amount.

In the first quarter of this year it was a net mortgage repayment, not withdrawal, we actually repaid over £8 billion in mortgage debt, at this rate it equates to over £36 billion per year “repaid”. These are truly astonishing figures.

It is not difficult to see the effect this has on the UK economy, a swing from £55 billion potential spending (from mortgage withdrawal) to £36 billion cut-back in spending as mortgage debts are repaid. No wonder our high street retailers report such declines in sales.

But perhaps more interestingly, with such large amounts of mortgage debt being repaid, why aren’t banks doing more to lend to people to buy their own home? Surely the net repayment of mortgage debt would enable the banks to do more for those trying to buy their own home? It would seem that the tax-payer-backed banks are having their cake and eating whilst we struggle to pick up a few crumbs.

Come on banks, help us property buyers!

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Posted in Mortgages, Property Buyers, UK Economy

Tags: Property Buyers re-mortgage

Getting a mortgage

June 24th, 2009

Doing some research today on mortgages. Overall there are some signs of improvement however the common theme amongst most lenders is that the lowest interest rates were for mortgages with low LTVs (loan to valuation). For example the Woolwich at time of writing was offering a mortgage at just 3.24% but the LTV was 60%, in other words you need to find a 40% deposit to buy your house.

Of course this is not of much help if your equity in a property has fallen to say 20% or so and you want to re-mortgage, in fact in the current market for many this is not an option. Worse still for those in arrears who are either trying to re-mortgage (today its almost impossible) or taking a desperate action for a quick house sale rather than wait for repossession.

Overall it appears that with the shortage of credit the banks are building loan books (mortgages to the likes of you and me) with very low risk ratings, e.g. with a 60% LTV it is very very unlikely the bank will ever lose money should the property get repossessed. This helps the banks improve their own risk ratings, and in the longer term it will help them improve overall availability of mortgages and place these within the reach of first time buyers. Time will tell.