Mortgages, Remortgages and Further Advances
Wed 4 Nov 2009
They used to say that buying or moving home was the most stressful activity you could experience in life, but it would seem that just trying to find the best mortgage deal is hard enough today.
So what is happening in the mortgage market as a whole?
Back in the 1990‘s, in the last property down turn, we didn’t have a shortage of mortgage funding as we do today. This time the mortgage availability is the key issue alongside the actual fall in property prices. So as the availability of funding to lenders has been reduced so the lenders have had to drastically reform their lending criteria to try and make more profit while cutting their costs. Now whilst the Bank of England Base Rate has been falling the lenders have actually kept their rates much the same as before and hence their profit margin has improved – not quite what the Chancellor had in mind.
So what about the borrowers coming to the end of their existing fixed or discounted deals?
There are many people who are keen to remortgage now who are finding that they cannot due to the above problems. For them it’s a difficult situation in that they are now susceptible to their existing lenders’ uncompetitive rates. Those facing the biggest difficulties will be borrowers coming off a two-year fixed rate (which were priced competitively at the time), or those who took out a mortgage with a high loan to value ratio. These groups may find it tricky to remortgage, along with those who need to borrow at high income multiples as lending criteria have tightened so much.
Where they go next very much depends on the LTV (Loan to Value): the lower their LTV the more attractive the deals. After all these borrowers are at the lower risk end of lending which in turn reduces the lenders long term costs. In some cases some lenders have reserved the maximum 60% LTV borrowing for the best deals while some have stretched as high as 75%. However, those coming out of deals at the 75% to 90% LTV have some tough decisions to make.
Many people, says Graham Lear of Loughtons Independent Financial Advisers in Bovey Tracey, will therefore find that they need to seek professional mortgage advice in order to obtain a remortgage.
For more thoughts on Financial Planning matters Loughtons can be contacted on Tel 01626 833225, by email on admin@loughtons.co.uk or simply check out the web site on www.loughtons.co.ukWe are right on your doorstep. |
