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Fixed-rate loans became more popular in April suggesting that borrowers are looking for security over future mortgage payments, according to the Council of Mortgage Lenders. The proportion of borrowers taking out fixed-rate products increased to 59% in April, from 54% in March. This is the largest proportion since December last year.

There are clear signs of lenders tightening lending criteria in the face of ongoing funding constraints and a softer house price outlook. The average first-time buyer put down a deposit of 13% in April, which is the highest level in over 3 years. First-time buyers typically took out loans for 3.3 times their income, down from 3.35 in March. The average home mover loan was 2.96 times their income, down from 3 in March.

There was a monthly increase in lending volumes in April, although activity remains weaker than a year ago. Gross lending increased by 8% in April to £26.1 billion, from £24.1 billion in March, after two consecutive months of decline. This was 5% down from April 2007, but this annual rate of decline was lower than in recent months; gross lending in March 2008 was 24% lower than March 2007.

There were 50,700 loans for house purchase worth £7.7 billion in April, up 9% in volume and 10% in value from March. There were 18,500 loans to first-time buyers, up 4% from March but 36% lower than April last year. There were 32,300 loans to home movers, up 13% from March and 38% lower than April last year.

Remortgaging accounted for 42% of gross lending in April and has continued to perform better than house purchase as large numbers of borrowers exit fixed-rate mortgages. There were 83,000 loans for remortgage worth £11 billion, up 14% in volume and 11% in value from March.

CML director general, Michael Coogan commented:

“Monthly house purchase lending volumes continue to be lower than last year’s levels and there will be a further weakening in coming months as recent approvals data has shown.

“The squeeze on mortgage funding has led many lenders to tighten their lending criteria. While tighter criteria make it more difficult for some borrowers to obtain a mortgage, they also reduce risk in a slower housing market.

“There has been a resurgence of fixed-rate lending as borrowers are seeking certainty. This trend is likely to continue as the anticipation of future Bank base rate cuts has diminished.”

Astonishing 14 times rise in number of fixed deals charging application fees of more than £750, says MoneyExpert.com

The number of fixed mortgages with high fees has rocketed by as much as 1,368 per cent in the past 18 months as lenders get tough on customers looking for the best deals, according to analysis by MoneyExpert.com*.

The independent financial comparison website says that in September 2006 - before the credit crunch hit the UK - only 22 fixed mortgage deals charged application fees of £750 or more.

That figure has since grown to some 323 fixed mortgages - 34 per cent of the total fixed mortgage market, according to MoneyExpert.com.

And according to the website average application fees on fixed mortgages have risen by 66 per cent over the same period, from £517.19 in September 2006 to £860.25 now. The highest stipulated fee 18 months ago was £1,499 on Halifax's two-year fixed mortgage for homeowners with a 25 per cent deposit or more.

But now the Halifax charges a fee of £3,999 on a three-year fixed deal for its existing customers who have homes worth between £500,000 and £2 million.

Sean Gardner, director of MoneyExpert.com, said: "Such high mortgage application fees will come as something of a shock to many homebuyers. We're just not used to these levels of charge.

"Anyone looking to remortgage or to buy a property for the first time will need to recalculate their options if they haven't factored in fees. The days of fee-free mortgages are over and frankly getting anything under £1,000 is something of a coup. And with stamp duty reaching an average of £4,950 per property moving home is becoming more and more expensive.

"Lenders are sick to death of risky borrowers and they won't be taking any chances in the near future. That means high fees, high interest rates and very little manoeuvrability when it comes to negotiating your mortgage. "

The MoneyExpert.com analysis shows that there are currently some 939 fixed mortgage products on the market from 77 different providers.

MoneyExpert.com offers a unique service which enables people to find the financial products which best meet their specific needs, and which they are more likely to be successful in being accepted for. It includes exclusive research conducted by MORI, which reveals providers' service levels. This information is married up with a financial database which lists the products suited to the customer. For the first time, people can review a product's price, features and also the level of service offered by the provider to enable them to make a more informed choice.

MoneyExpert.com aims to demystify the complex world of personal finance, and to help inform customers of the choices available. The service can be found at www.moneyexpert.com

Poland mortgage finance market is anticipated to grow at a CAGR of 30.17% to cross Euro 70 Billion mark by 2011, says RNCOS in its new research report, “Poland Banking Sector Analysis”.

The report says that mortgage lending, taking off from a very low base, is now thriving in Poland. However, the penetration level of mortgage lending in Poland is very low, merely 6% of the GDP, signifying that the market is at its nascent stage. As the mortgage-based lending is significantly low in the country, Polish banks could tap the enormous opportunities to expand their loan facilities and raise revenue. Moreover, high growth rate in the Polish real estate market is also supporting the mortgage financing, as people will shift their preference to buying new homes instead of living on rent.

The RNCOS report further says that the boost to the mortgage financing will allow Polish banks to hike the lending interest rates that will eventually increase the interest-based income in future.

According to a Senior Research Analyst at RNCOS, the mortgage lending market in Poland is intensely competitive, with smaller banks particularly offering competitive products with profit on mortgage loans as low as less than 1%. Moreover, to increase the stronghold on the market, banks provide extensive help to customers and cover all expenses such as real estate valuation.

Further, the report also provides forecast on various segments of the Poland banking industry such as Assets, Commercial Banks Loans, Personal Loans, Corporate Loans, Consumer Loans, Banking Deposits, and Credit & Debit Card market.

“Poland Banking Sector Analysis” provides an elaborate and rational analysis on the Polish banking industry. It helps clients in identifying the growth opportunities, industry drivers, and challenges for the banking industry in Poland. Moreover, it also studies asset size, income level, and loan facilities provided by the Poland banking industry to give an insight into the industry and identify its future direction.

The popularity of tracker rate mortgages increased in February as the proportion of borrowers choosing fixed-rate loans fell to 52%, its lowest level since March 2005, according to the Council of Mortgage Lenders. The proportion of borrowers choosing tracker-rate loans increased to 35%, from 33% in January and 14% in February last year. Floating rate products have become increasingly attractive compared with fixed-rates as consumers expect further Bank base rate reductions in the coming months.

These mortgage figures typically relate to applications taken out several months ago, and do not reflect the shrinking availability of mortgage products and re-pricing which has been a feature of the market in recent weeks.

First-time buyers in February typically borrowed 88% of the property’s value, unchanged from January, and 3.33 times their income, compared with 3.32 in January. Home movers typically borrowed 71% of the property’s value, up from 70% in January, and 2.97 times their income, unchanged from January.

Mortgage lending activity in February remained subdued. February gross lending totalled £25 billion, down 3.5% from £25.9 billion in January and 2.3% from £26.6 billion in February last year. Loans for house purchase declined in volume to 49,000, down 3.5% from 50,900 in January, and by 5.1% in value to £7.5 billion. The number of loans for house purchase has been more than 30% lower than a year ago for the last three months, and this picture of year on year declines will likely continue throughout 2008.

Remortgaging made up 45% of all lending in February, this is unchanged from January and the highest share since March 2005. Remortgaging activity is likely to remain relatively strong, and will likely represent a higher percentage of all lending for the rest of the year, given the wave of borrowers due to come off fixed and discounted rates in 2008.

CML director general Michael Coogan said:

“The trend away from fixed-rate products continues as expectations of further Bank base rate reductions, probably starting this week, have increased.

“The February figures relate to completions of transactions started several months ago. More recently, there has been consistent evidence of tightening in lending criteria which will lead to shrinking pipelines of new business as the recent Bank of England’s credit condition survey made clear. We expect this process of further tightening in lending criteria to continue in the second quarter as lenders respond to the challenging market conditions.

“Individual lenders are having to balance consumer demand with service considerations, as many of those active in the market are seeing higher levels of applications than they can deal with in the wake of the overall tightening in supply of funding to the market.

"While lower short-term interest rates help a little, we continue to urge the Bank of England to use more broad-based and flexible measures to increase liquidity levels in the UK market so that firms have sufficient funding available to match consumer borrowing demand in 2008.”

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The CML welcomed today’s announcement in the government’s draft legislative agenda of plans to provide more help for first-time buyers, in particular the widening of access to shared equity schemes. In future, all first-time buyers with an income of less than £60,000 will have the opportunity to apply to buy a share of their home.

Other measures announced in the legislative programme that will be welcome to lenders and their customers include:

An initiative to enable the Housing Corporation to allocate up to £200 million to buy new properties on the open market, to be made available either for first-time buyers to purchase through the Homebuy scheme or for social renting. Although this will have only a relatively modest impact on the housing market, it has the potential to widen the first-time buyer shared equity scheme.

Proposals to give the Bank of England greater flexibility to respond to credit market conditions by allowing short-term non-disclosure of liquidity assistance. Lenders believe the Bank should be able to respond flexibly to changing conditions in credit markets.

The CML also welcomed the separate announcement today of a market study of the sale-and-leaseback sector by the Office of Fair Trading. Lenders favour regulation of sale-and-leaseback to deliver fairer and more consistent treatment of home-owners who may be considering this option as a means of dealing with mortgage payment problems.

Commenting on the proposals, the CML’s director general Michael Coogan said:

“The government’s announcement on shared equity means that its approach is now more logical, providing help based on the income rather than the occupation of buyers. It will remove an anomaly by which providing help for one group of less well-paid workers makes access to home-ownership more difficult for others earning similar salaries but working in different jobs.

“The OFT market study in sale-and-leaseback is also welcome, and we hope it will be completed by September, as promised, and acted upon quickly. The reality is that sale-and-leaseback companies are already targeting home-owners in difficulty. The quicker we have effective regulation of the sector to provide protection for consumers, the better the safety net for borrowers in financial difficulty will be.”

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Consumers contine to put their faith in IFAs for advice on protecting themselves against the housing slump and volotile markets.

Unbiased.co.uk’s Advice Drivers report shows a massive increase of 50% in requests for independent financial advice on mortgages in the first quarter of 2008 relative to the previous three months

UK consumers continue to support independent financial advice by requesting advice on investment (up by 33%) and specific investment products (up by 62%) on the final quarter of 2007

New figures from Unbiased.co.uk, the find an Independent Financial Adviser search, reveal that the number of consumers seeking independent financial advice on mortgages and investment rose dramatically in the first quarter of 2008 relative to the previous three months. Increased demand in these two product areas resulted in 30,000 more people using the ‘Find an IFA’ service in the first three months of 2008, than in the final quarter of 2007; an increase of nearly a third (31%).

Unbiased.co.uk’s Advice Drivers report demonstrates once again consumers’ commitment to independent financial advice, with Unbiased.co.uk receiving over half a million requests for details of local IFAs in the last 12 months. As the housing market has begun to slow, consumers have continued to put their faith in IFAs to advise them on how to finance their home loans. The number of consumers seeking advice on mortgages has risen by nearly two thirds over just three months, with nearly 30,000 people requesting details of a local IFA to advise them on mortgages in the first quarter of 2008.

The Advice Drivers report also highlights consumer demand for advice on investment and also specific investment products such as ISAs and Unit Trusts. These product areas showed greater uplift in the last few months than in the same “ISA season” in 2007, reflecting consumers’ faith in IFAs to guide them through choppy markets as we are currently experiencing.

David Elms, Chief Executive of Unbiased.co.uk, commented:

“Our latest report demonstrates that when economic conditions are unpredictable, consumers seek independent financial advisers as their guides through hazardous markets. Consumer needs are constantly changing and whole-of-market IFAs are the best-positioned of all advice types to serve these needs.”

The figures reveal an increasing level of demand for advice on personal protection and also a fall in requests for advice on equity release and expatriate services relative to the last quarter of 2007.

The top ten Advice Drivers in the first quarter of 2008 were as follows:

Top ten Advice Drivers: Jan - Mar 08* Requests for IFAs % of total

1 Personal Retirement Planning 47,454 31%

2 Investment & Savings 38,832 25%

3 Mortgages 29,535 19%

4 ISAs/OEICs/Unit Trusts 15,086 10%

5 Stakeholder Pensions 12,947 8%

6 Taxation Planning 10,211 7%

7 Personal Protection 8,378 5%

8 Investment Trusts 4,677 3%

9 Equity Release 4,763 3%

10 Saving for Children 4,538 3%

TOTAL (All drivers) 138,732

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Almost every edition of lunchtime and evening news headlines on the TV has finance related news these days, the financial markets are plumeting and every month, sometimes every week, another bank asks for additional funding. RBS are the latest bank to admit it's after an additional £10 billion from it's shareholders.

The first casualty of the credit crunch both in the USA and UK looks like the mortgaged homeowner. Here in the UK it started with interest rates being cut to try and encourage consumer spending and bolster the economy. Then house prices stalled and are reported to have fallen by a few percent, although they're still up on 12 months ago. Next mortgage products were pulled off the high streets by lenders worried about their lack of funding and losses in the adverse mortgage market. Something like 60 per cent of all mortgages available in the UK were pulled, fixed rate products and 100 per cent mortgages made up the majority of the 60 per cent. This is because most consumers were looking for some certainty and grabbing fixed rates as quickly as possible. The 100 per cent mortgages were pulled because they are too risky an investment for the banks going forward.

Today you're unlikely to get a mortgage unless you have a deposit saved up and if your deposit is less than 5 per cent you might be restricted in your choice of lenders. The thing that really irritates me is that around 8 years ago, when I bought my first property, it was standard practice to have a 5 per cent deposit. OK, I admit that 100 per cent mortgages were available and infact the housing company from whom I bought my house offered me a 100 per cent mortgage. However, I knew that a 100 per cent mortgage wasn't the most sensible way to start off on the property ladder and so after following the advice of my parents I saved up a 5 per cent deposit. It's only within the last decade that banks have jumped on the marketing bandwagon and made finance and credit into some sort of superbrand marketplace. People have almost been encouraged to use 0 per cent credit cards and low rate loans to basically get what they couldn't normally afford. The rise of the internet over the last decade has also contributed to this and it's made getting finance even easier for everyone; even perhaps for people who shouldn't be getting any form of credit in the first place.

So mortgage rates are increasing even though the Bank of England has made recent base rate cuts. Lenders are also increasing the upfront fees on mortgages. Even though the cost of getting a mortgage is increasing people shouldn't panic. The fees can be high, sometimes over £1000, but I think that now the banks are insisting on a 5 per cent deposit it's only a good thing. Consumers should be thankfull that this is happening again. If only the banks had continued to insist on a minimum deposit, with every mortgage, over the last 10 years, then maybe some of this could have been avoided? In my opinion, if you cannot afford a 5 per cent deposit then you shouldn't really be thinking about taking out a mortgage. Similarly, if you don't have at least 50 per cent of your monthly take home salary left over after your mortgage payment has been made then perhaps you should consider not going for a mortgage.

http://www.thefinancialblog.co.uk/

Author: Mark Lauterwein

The principle behind the offset mortgage is simple. Interest payments on savings contribute to reducing, or offsetting, the amount owing. Seven years ago there were only a handful of providers but the idea has taken root and there are now more than 40. Market analysts anticipate a further increase in the coming years.

The reason for this growth can be explained by considering the benefits of offset mortgages. In general, offset mortgages come with good competitive interest rates. These competitive rates are often attached to further flexibility in that the customer can make an over- or underpayment without incurring a penalty. However, the key benefit to those with something set aside in the bank relates to the savings that can be made on the total amount owing. This can be dramatically reduced. For example an offset customer with a combined mortgage and ISA account who has a property mortgaged to the tune of £175,000 can reduce the term of payment by 5 years and save around £80,000 in interest payments merely be paying an extra £50 a month into the combined account.

In Britain, interest generated by current account savings is taxed as income by the government and since 1983 the rate has been 20%. However since an offset mortgage works as a kind of combined account this rule does not apply. And this means big savings can be made.

Really, offset mortgages are an exciting product well suited to those who can afford to make occasional overpayments (i.e. when in receipt of an annual bonus). These are the customers who stand to gain the most from the tax incentives associated with offset mortgages. In this respect, providers of these mortgages are also actively looking to win the custom of entrepreneurs.
 

If your fixed rate mortgage comes to an end this year you'll be one of the 1.5 million people re-mortgaging and you could be shocked at the effect interest rate increases will have on your wallet because you'll definately end up paying out a higher monthly amount.

Just 4 years ago you might have been lucky enough to get an interest rate under 4 per cent, in some cases end less, however the best fixed rate mortgages today are all over 5.5 per cent. The 100 per cent mortgage and 125 per cent mortgage, where lenders provide more money for you than the house is worth are not available any more either, so first time buyers will find it more difficult to get on the property ladder. Lenders are also tightening their lending criteria and so if you do not have a good credit rating you might be offered even higher interest rates because you are perceived as a higher risk to lenders.

It's not only mortgages that have been affected, interest rates on personal loans have increased and again lenders have tightened their lending criteria on loans and credit cards. With credit cards it's not so much that interest rates have increased but it will be harder to get your application accepted now and people looking transfer a balance from another credit card or loan will have to pay a handling fee. Sometimes when transferring a balance the new credit card company will allow you to transfer a smaller balance than you may have hoped for.

According to John Charcol in February this year 52 per cent of all mortgages taken out were fixed rates, in 2006 this figure was 42 per cent and the same period in 2007 was 69 per cent so you can see how interest rate rises affect borrowers.

There are two issues to look out for with fixed rate mortgages; firstly the interest rates are higher, like I said earlier a good average fixed rate mortgage deal will be in the region of 5.5 per cent. Secondly you also need to look out for the associated fees and charges with your mortgage, look at when these fees or charges are payable, i.e. upfront and ask if you can add any of the fees to the mortgage. For example if there is a £1,000 set up fee can this £1,000 be added to the amount you borrow?

Sometimes this is easier than trying to find an additional £1,000. I know I rarely have a spare £1,000 lying around! Sometimes these fees can be a percentage of the total amount your borrowing, typically around 1 or 2 per cent. The thing to bear in mind is that adding these fees to your mortgage can increase the cost of monthly repayments, you need to find out the difference and weigh up all your options.

http://www.thefinancialblog.co.uk/

Author: Abbi Rouse

People should be careful not to automatically select the first cheap mortgage deal that comes along as the cost of fixed-rate products rises, a new study reveals.

Research conducted by mform shows that over the past 12 months application charges on some of the cheapest fixed-rate deals have surged. In April 2007, fees on the five best-buy two-year fixed products stood at 999 pounds. However, at present such costs have reached 1,478 pounds. Meanwhile, fees on three-year deals have increased from 578 pounds to a current figure of 1,132 pounds.

Following on such from higher fees, homeowners may see that despite taking out a fixed-rate mortgage product they continue to experience difficulties with managing numerous monetary demands. Such areas may well include personal loans, utility bills, credit and store cards and transport costs.

With a reported 116,000 Britons set to come to the end of their fixed-rate mortgage deal each month, it was stated many could be in line for a "shock" due to the increased fees on their new borrowing. As such, consumers were urged to take the time to ensure that they are getting the best fixed-rate deal possible.

Francis Ghiloni, marketing and business development director for mform, said: "After all the panic of recent weeks in the mortgage market people may be tempted to grab the best deal they can and may focus on rates to exclusion of everything else. They could be in for a nasty shock when it comes to the fee which is charged as they have rocketed in the past year. They should be focusing on the true cost of their taking into account fees as well. There are still good deals out there for people with strong credit ratings and with substantial deposits or equity in their home. Unfortunately many will not be eligible for them as lenders are increasingly taking a hard line."

It was also revealed that at present the West Bromwich Building Society offers one of the cheapest two-year fixed-rate mortgages, charging 5.49 per cent. HSBC and the Cheshire Building Society were also cited as those providers with fixed-rate deals of less than six per cent. Meanwhile, products from Halifax and Lloyds TSB Scotland were shown to be among the most competitive for three-year deals. Here the money lenders were indicated to be charging interest rates of 5.69 and 5.54 per cent respectively.

For those concerned about how the prospect of higher mortgage costs will effect their overall capacity to manage their finances, taking out a consolidation loan might be of assistance. By applying for such a loan, consumers may be able to merge numerous monetary constraints - including areas such as mortgage repayments, credit card arrears and pre-existing loans - into a single affordable monthly payment. Earlier this year, David Kuo, head of personal finance for the Motley Fool, claimed that getting a debt consolidation loan can "make sense if you are faced with a myriad of claims on your money". Pointing out that four out of ten consumers have made an application for a consolidation loan, Mr Kuo advised those seeking out this type of borrowing to take steps to ensure they do not go back into the red.