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January 2013 January 2013 Newsletter With the country now officially out of recession, unemployment figures down and inflation still very much under control I guess you’d be forgiven for thinking it would mean the mortgage market would be showing strong signs of recovery. Unfortunately not. Lenders are still being very cautious with their funding and with the FSA taking further measures to restrict lenders, such as limiting lending into retirement and interest only mortgages, the market is anything but healthy. But it isn’t all doom and gloom.....

Housing Market-Predictions for 2013 Housing Market - some optimism for 2013? As 2012 draws to a close, the picture of the Housing market is a mixed one. Whilst the market is still subdued with sales still less than 950,000 for the year (which is just over half what they were in 2006) nevertheless they are predicted to grow in 2013 to possibly their highest level for 5 years. The Royal Institute of Chartered Surveyors (RICS) have reported increased buyer enquiries in November, suggesting a boost in the market likely for Spring.

House price rises for 2012 continued to demonstrate the north-south divide with eight of the top ten towns showing the highest growth rate, all coming from London and the South East led by Southend which recorded an annual growth of almost 15%. 2013 is also looking optimistic with the RICS, Rightmove and the Office for National Statistics predicting a rise of around 2% for the UK as a whole, with prices in London and the South East expected to be the strongest. Peter Bolton King, RICS global residential Director commented ‘There is certainly some optimism creeping back into the housing


Housing Market - predictions for 2013 Market, and it is encouraging to see an increase in potential buyers’ Mortgage rates have fallen in 2012, driven by the Bank of England’s ‘Funding For Lending’ scheme. The prediction for the Bank of England’s base rate is that it is unlikely to rise above the current 0.5% during the early part of 2013 and with inflation settling back to 2.7% in October and Money Market rates also falling, the good news is that the low mortgage rates are probably going to continue in 2013 for those with large deposits, and may even improve for borrowers with a smaller equity.

The main barrier to the market is likely to be the lenders themselves, who are continuing to opt to maintain healthy profit margins and squeeze borrowers to cover their extra funding costs. Even with the latest round of cuts, they are targeting only the best borrowers. The tighter lending restrictions, disappearance of Interest-only mortgages and stricter controls over lending into retirement, have all had an adverse effect on the numbers of new mortgages. Only when proper competition returns will the situation ease and the Property Market return to something like the bouyant situation experienced in the early noughties.

The FSA has recently published it’s latest proposals designed to put ‘common sense’ at the heart of the mortgage market. There were wide expectations that interest-only mortgages would be banned as part of the review, given that 77% of all interest only mortgages have no means of repayment, borrowers instead relying on the expectation that rising property values will enable them to repay their mortgage. There are fears that there could be a ‘ticking time bomb’ should this not happen. Interest only have however had a stay of execution given that lenders have been taking steps throughout the year to restrict and even ban this type of mortgage. One of the measures that has been announced is that lenders will now be required to ask for more in-depth information on potential mortgage customers to assess their income and outgoings and conduct affordability tests. This is intended to prevent borrowers taking on a mortgage they cannot afford if, and when interest rates start to rise again. Lenders will also no longer be able to take advantage of their borrowers who are unable to obtain a mortgage elsewhere through new lending restrictions, by treating them less favourably than other customers, charging them higher interest rates. Martin Wheatley, managing director of the FSA, said: 'These new rules will help create a more sustainable market that works well for everyone, whether they are a borrower or a lender. These and many other new rules will come into effect in April 2014 as part of the FSA’s mortgage market review, however most lenders have already implemented the changes ahead of the deadline. There will inevitably be a cost to the additional measures which the FSA are now requiring. Lenders have warned that it will take longer and cost more to get a mortgage agreed in the future.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED ON IT


Interest Only Mortgages Mortgage lenders have been slowly restricting Interest Only mortgages to a point whereby they are almost impossible to obtain any more. The move has been driven by the FSA, who have been concerned at the numbers of mortgage borrowers in UK who have an Interest only mortgage with no means of paying it back. The crackdown on lenders has meant that, starting with Santander at the start of 2012, most of the high street lenders have either restricted their Interest Only mortgages to less than 50% loan to value or in the cases of Nationwide and the Co-op, banned them altogether. So even if you have an interest-only mortgage with a traditional repayment vehicle such as an Endowment policy or ISA, you will still not be able to take a mortgage with them.

So is now the time to do something? If you are in a position whereby you still have an interest only mortgage, then maybe this is the moment, when interest rates are low and you can fix your mortgage at a very reasonable rate, you should consider switching your mortgage across to a Repayment mortgage. The earlier you start, the

more impact it will have on your debt over the lifetime of your mortgage, even if it only seems like a small amount to start with. And if the switch would mean that the increase in your mortgage payments would prove unaffordable, why not switch a part of the mortgage across, so at least you are making a start. Many lenders will also allow you to pay extra each month over the counter or by standing order without penalty. If you’d like some information on what it would mean to your mortgage or what you can do, let us know and we will happily advise you.

Secured Loans - an effective alternative? If you feel you are locked in to your current mortgage, unable to borrow more because it is so good, then help may be at hand. Many of us are continuing to enjoy the low standard variable interest rates and Tracker deals on mortgages we took out in the mid to late 2000’s. However some would still like to borrow more money either to consolidate expensive loans or credit card debts, to pay for large purchases such as cars or holidays or make those home improvements. The normal option of re-mortgaging is no longer the obvious one as it means the loss of the very cheap mortgage deal we are currently enjoying.

A Secured loan may just be a solution to those problems. Whilst Secured loans are generally more expensive than a normal mortgage, they are often more flexible than many mortgages and because they can be taken over a longer term, can work out cheaper on a monthly basis than the more often used Personal Loan or Credit card options. The loan is secured against your property in the same way that a mortgage is and this allows the greater flexibility that normally would be offered by a re-mortgage. If you’d like more details, let us know.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED ON IT


Mortgages

15 Duke Street Chelmsford CM1 1HL

Tel 01245 359536 enquiries@themaps.co.uk

MAPS Mortgages is a trading style of Hometouch Mortgages Ltd who are authorised and regulated by the Financial Services Authority. Number 306063


Newsletter Jan 2013