Tuesday, 19 April 2011
Wealthy face remortgage trap
Borrowers who have seen their bonus income cut are finding it difficult to refinance their mortgage, with many having to stay on their lender’s standard variable rate
London market continues to hold up
This good news comes from the latest National Mortgage Index compiled by Mortgage Advice Bureau and Coreco Group. According to the Index mortgage applications (excluding remortgages) were up 26.7% in March compared to February and 67.4% of applicants chose fixed rate deals in March compared to 60% in February.
The average LTV on mortgage applications (excluding remortgages) in London was 66.2% in March compared to 68% in February, revealing the substantial deposits that London buyers, who are in a position to buy, are putting down.
The average mortgage loan size was £271,506 in March compared to £255,244 in February, an increase of 6.4%. The average deposit put down by a mortgage applicant in March was £138,624.
The average age of a purchase mortgage applicant in London in March was 38 years 5 months.
On the remortgage side, the average LTV on remortgage applications in March was 52.6% compared to 51.4% in February, while the average loan size dropped from £314,631 in February to £237,110 in March, a 24.6% drop.
Commenting, Andrew Montlake, director, London-based independent mortgage broker Coreco Group, said: “The London market continues to exist within its own bubble, with enquiry levels and applications holding up despite economic pressures. The biggest issue in the capital is a lack of housing stock, which continues to stifle the market.
“Whilst first-time buyers have always been considered to be the lifeblood of the housing market, they now seem to have been supplanted by the cash buyer, who is now accounting for a growing proportion of the market, certainly in London.
“The majority of cash buyers are foreign investors who have been active for a while, and in particular those investors who are keen to investigate markets outside the Middle East where recent issues have caused unrest.
“Certainly this year we have seen a dramatic rise in the number of enquiries for large mortgage loans on £1m plus properties, as many traditional cash buyers look to take advantage of low mortgage rates and property prices to snap up properties that in a few years time will look like a very good deal as the economy improves.
“There was also a rush to push through purchases before the higher rate stamp duty increase kicked in. “This increase in demand for large loans has been met by a rise in supply from high street lenders returning to this section of the market, showing that large loans are no longer the preserve of the private banking fraternity.
“This is welcome news for consumers, as this not only reflects a growth in consumer choice in a market that has proved relatively buoyant in the last few months, particularly in London, but it helps to break down the smoke and mirrors approach that some brokers adopt with so-called “large loans”.
“On the remortgage side, a fall in the average loan size could be an indication that many homeowners are now choosing to pay off a portion of their loan before remortgaging, rather than ‘capital raising’ which was so prevalent pre-credit crunch.”
Monday, 11 April 2011
Without a Remortgage Many Homeowners Will Have to Make a Shift in Their budget
Homeowners have a lot of weight on their shoulders right now and the thought of pursuing a remortgage can just seem like one more thing on a very long list of items to do. However, it may do the homeowner good to move up the remortgage item to the top of the list and make it a priority. Forecasts from analysts are calling for the interest rate to increase from 0.5 per cent to 2.0 per cent next year. Planning for that increase in the interest rate could make all the difference and a remortgage could be the defense of financial stress.
It has been determined in many surveys that there are a majority of homeowners that are not familiar with their current mortgage rate or deal. If this is truly the case then there will be many that will be shocked when that first interest rate increase occurs and they see the impact on their monthly mortgage. The extra drain on the household budget could be very difficult.
Andrew Sentance, a Monetary Policy Committee (MPC) member, who has been asking for an interest rate increase for months has warned that the longer the rate goes unchanged the more households should prepare for a much larger first time rise. In a recent statement he stated that to prepare and get ready for what might lie ahead that families should be aware of City forecasts and take to heart what could happen. This means that those with an average mortgage should be looking to add another £100 a month in mortgage expenses to their budget.
To avoid the risk from an interest rate homeowners have been looking to secure fixed rate remortgages. Despite the increase in remortgages, there are still a very large number of homeowners capable of leaving their lender but sitting on a variable standard rate mortgage just waiting for their expenses to go up when the interest rate rises. Once it does the remortgage deals available now will be long gone and a shift will need to occur in the homeowner’s budget. If there isn’t much shifting that can be done, then a meeting with a remortgage expert could be helpful to ward off the forecasted warnings.
It has been determined in many surveys that there are a majority of homeowners that are not familiar with their current mortgage rate or deal. If this is truly the case then there will be many that will be shocked when that first interest rate increase occurs and they see the impact on their monthly mortgage. The extra drain on the household budget could be very difficult.
Andrew Sentance, a Monetary Policy Committee (MPC) member, who has been asking for an interest rate increase for months has warned that the longer the rate goes unchanged the more households should prepare for a much larger first time rise. In a recent statement he stated that to prepare and get ready for what might lie ahead that families should be aware of City forecasts and take to heart what could happen. This means that those with an average mortgage should be looking to add another £100 a month in mortgage expenses to their budget.
To avoid the risk from an interest rate homeowners have been looking to secure fixed rate remortgages. Despite the increase in remortgages, there are still a very large number of homeowners capable of leaving their lender but sitting on a variable standard rate mortgage just waiting for their expenses to go up when the interest rate rises. Once it does the remortgage deals available now will be long gone and a shift will need to occur in the homeowner’s budget. If there isn’t much shifting that can be done, then a meeting with a remortgage expert could be helpful to ward off the forecasted warnings.
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