The quite brilliant excuse of the credit crunch has offered an opportunity to dump every bit of bad news into the market. As a consequence bad news is all around us. Amazingly, it’s blamed on the United States which confuses me more.
The UK’s debt situation is actually worse than the U.S. with consumer debt totalling over 159% of income – It was 106% of income in 1995 before the current government came to power. (1)
To blame the U.S. and an inanimate ‘credit crunch’ would be irresponsible. The fact is the economy was allowed to overheat and debt was created on a belief that your house was a never ending upward graph that could be used as an ATM.
Remember it was a matter of months ago that property was still being talked up by so called experts. The result is such that many are now finding it difficult to remortgage, but despair not there are options out there.
Credit from the Far East has dried up and banks have stopped lending to each other. There is a distinct lack of trust between banks and that has meant they are now looking to lend commercially and residentially only to the right projects and people. If you are looking to remortgage, make sure your case is packaged properly before you approach a lender.
The chancellor (said quickly it sounds like chancer) has told us we can expect a few years toughing it out. Great!
This has come at a time where we have record debt, coupled with a colossal rise in the cost of living through oil and food.
In the meantime momentum has turned against property and few if anyone, believes we are in for a short downturn in house prices.
This downturn bears a number of similarities to that of the early 1990s. It must be remembered that a straightforward investment into the building society over the ten years from 1990 would have outperformed property by over 100%. There is no real reason I can see that this will be any different.
With negative momentum, properties are now being down valued and this, coupled with lenders not wanting to lend as much, has really tightened the market to unprecedented levels.
Perhaps the biggest issue is for the person coming off a fixed rate from two years ago. If they are forced onto a standard variable rate, they may see payments rocket by up to 64%. Even if they are offered the best two year fixed rate, they will face a deal 35% more expensive than the one they are currently on.
Those who took out a mortgage with a loan to value over 90% may also find it tricky to remortgage, along with those who have a high multiple of income as the criteria has tightened so much.
Remember you are not alone. There are plenty of people who took out mortgages with a loan to value of 125% via northern rock who will be less than pleased. In a falling market they are already in negative equity by 25%.
There are solutions, however, and you should seek advice of a mortgage Independent Financial adviser to assist you with your planning.
Until six months ago, anyone could arrange a mortgage, but today it’s the job of a seasoned professional who specialises in mortgages. Nationwide announced recently that they are now moving to quality rather than quantity in deciding which mortgage advisers they work with.
A specialist Independent financial adviser (IFA) will know exactly how to position your case with a lender and will invariably have clout because of their buying power. A fee charging IFA is a better option as some lenders don’t pay commission, and a financial adviser not charging a fee may be less likely to use them as they will not get paid.
For a list of tips to assist you in remortgaging call Peter on 0800 0112825, e-mail info@wwfp.net or take a look at our section on Mortgage
Source:
(1)OECD
Think carefully before securing other debts against your home
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