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Wed 27th Feb, 2008
Posted in Bad Credit, Consumer Credit, Homeowner Loans, UK Finance, interest rates, mortgages, Remortgaging, Consumer debt, Homeowners, Financial products, Property, Financial news, Housing news, Borrowing, Secured loans at 2:15 pm by admin
Thousands of Britons have been warned to prepare for a shock as they face crippling mortgage repayments as a result of the global credit crunch which has been affecting the financial markets.
Some people on fixed rate mortgages could be facing repayment surges of up to 60% as the terms of their fixed rate mortgages come to an end in the coming months. This could result in the number of repossessions ballooning as there are more than two million homeowners who are facing the prospect of their cheap fixed rate deal coming to an end over the next 18 months.
Many of our banks have begun to tighten up on their lending criteria as a result of the credit crunch which finds its roots the US’s sub-prime sector, responsible for organising bad credit loans. The credit crunch was also responsible for the downfall of Britain’s fifth largest lender Northern Rock in September.
Almost everyone who is going to be coming off a fixed rate mortgage deal will be likely to have to pay more even if they do manage to get a new fixed rate deal it will not be as affordable as the one that will have just ended.
However those at biggest risk of facing massive increases in home loan repayments is anyone who has a black mark on their credit rating. Lenders have tightened up lending criteria considerable and are less likely to take on risk. As a result thousands of Britons are going to be forced to switch to their lenders standard variable rate once their fixed rate deal comes to an end. The standard variable rate can cost as much as 2.5% more than the fixed rate deal they are currently on.
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Tue 26th Feb, 2008
Posted in Consumer Credit, Homeowner Loans, UK Finance, mortgages, Homeowners, House buying, Financial products, First time buyers, Property, Financial news, Housing news, Borrowing, Secured loans at 12:36 pm by admin
Although there is lots of speculation out there that the property boom is finally coming to an end and we may even be heading for a crash its legacy will live on for a very long time. A new report released recently has shown that the number of properties on the market that are valued in excess of £1m has more than trebled in the past five years.
The report released by the Halifax estate agents shows that in June 2002 there were 2,250 sales of properties that exceeded £1m. However that figure has drastically increased in recent years and figures for June 2007 showed that almost 6,200 homes were sold for more that £1m.
The massive boom in the market has sent house prices soaring and it is estimated that there are more than 88,000 houses worth more than a million. This is in stark contrast with only 33,000 just five years ago and shows just how big of an impact the housing boom has really had.
The house price boom has helped increase the number of people who are now worth more than £1m but it has also had its downside. More and more people who are looking to get onto the property ladder find it increasingly difficult as the cost of housing is now so great and the cost of getting a home loan so high. As well as this many people who have bought their first home recently will have little hope of seeing the kind of returns from their investment that we witnessed through out the 90s and into the 2000s as their high loan repayments make moving an impossible dream.
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Posted in Consumer Credit, Homeowner Loans, UK Finance, mortgages, Homeowners, House buying, Financial products, First time buyers, Property, Financial news, Housing news, Borrowing, Secured loans at 12:28 pm by admin
While there are signs everywhere that the housing market is heading towards a slowdown these signs increasingly show that we might not be heading towards a crash but far more likely a slow progressive decline.
However there are other factors that might work together to prevent us from having a house-price crash. Two main underlying factors have been identified by experts across the sector and generally enjoy widespread support.
First of all the UK economy is far stronger today than it was in the early 1990s when we last saw a house price crash. On the back of the strength of the broader UK economy we should be able to avoid going towards a full blown property crash.
Currently experts are advising that we have sound economic fundamentals as well as very strong employment which will both contribute to keeping demand for housing strong.
The second factor helping the UK economy avoid a full blow crash is the fact that there are now more households in the UK than homes available. Following the basic principles of economics while demand for housing is greater than supply prices won’t come down. This is tempered by the lower availability of home loans for households who cannot stretch to the monthly loan repayments.
It is currently estimated that there are around 180,000 new homes being build across the UK every year. However in order to meet demand for new homes the Government estimates that a figure more in the region of 230,000 would be necessary. This would only help keep up with annual growth however and not actually the total amount of people in Britain that want a home.
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Fri 22nd Feb, 2008
Posted in Bad Credit, Consumer Credit, Homeowner Loans, Banking, UK Finance, interest rates, mortgages, Consumer debt, Homeowners, Financial news, Borrowing at 1:48 pm by admin
With news that the US central bank has decided to cut interest rates by half a percent there is now uncertainty as to what the Bank of England is going to do.
The pressure will be growing however for the Bank of England to follow the US central bank in cutting interest rates.
Rates are now one percent lower in the US than they are in the UK and this is widely believed to be the case because of worries the US central bank has over the US economy as a whole and the chance that it may slide into a full blown recession.
Because of the size of the US economy and the influence it has over other smaller economies there is a chance that if the deepening financial crisis over there could lead to a general downturn in growth across the globe.
This would also badly affect the UK economy since we export a large quantity of our products to the US and if they stopped purchasing them we would also be in trouble.
The news of possible interest rate decreases however will be welcome news many of us who are struggling to meet monthly repayments on our home loans because of the high interest rates at the moment.
If interest rates do come down it will mean anyone on a tracker rate will see their monthly loan repayments also come down. However it might not necessarily lead to an increase in demand for housing because of the uncertainty in the market at the moment.
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Thu 21st Feb, 2008
Posted in Consumer Credit, Personal loans, Homeowner Loans, UK Finance, interest rates, mortgages, Remortgaging, Consumer debt, Homeowners, Property, Financial news, Housing news, Borrowing, Secured loans at 11:47 am by admin
Experts are urging homeowners who are looking for a new mortgage not to panic as increases in payments begin to impact on borrowers.
Many homeowners took out two year fixed rate home loan deals in 2006 and many of these deals are now expected to expire. This means that these borrowers numbering over half a million people will be switching to their lenders standard variable rate which will mean that monthly repayments will be far higher.
In order to avoid large increases in your mortgage it is advisable to shop around for a new deal. Currently there are a large amount of new mortgages available below 6% and by looking for a new mortgage as soon as possible will help borrowers avoid having to make higher monthly repayments.
The higher costs of mortgages have had a heavy impact on mortgages and the value of loans taken out last month dropped by 25% over that of the month before. The problem is also exacerbated by the turmoil currently affecting the financial sector, which has resulted in a tightening in lending criteria.
Almost all lenders have already started to pass the on the impact of the turmoil onto borrowers by increasing rates on tracker deals.
Borrowers who have a poor credit history will find it increasingly difficult to secure a mortgage as lenders begin to tighten lending criteria. This could mean that the number of repossessions increase even further as fixed rate deals come to an end.
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Posted in Bad Credit, Consumer Credit, Personal loans, Debt Consolidation, UK Finance, interest rates, Consumer debt, Financial products, Balance transfer, Unsecured loans, Financial news, Borrowing, Personal debt, Secured loans, Debt management at 11:38 am by admin
For most of us, taking out a large personal loan with which to consolidate all our existing debt is a bad idea since most of us will typically end up owing more than we did in the first place according to recent research.
As there are now more and more people defaulting on their loans banks are increasingly feeling the pressure so don’t be surprised to see banks tightening up one their lending criteria as well as pushing rates on personal loan rates higher and higher. For instance the lowest personal loan today is close to 6.9% while just one year ago it was more like 5.9%.
More and more people believe they will never be debt free and over 8 million people who take out loans to consolidate debt will find that they actually owe more after 5 years than they did, according to research from moneysupermarket.com.
The study showed that 12.7 million Britons had taken out loans to consolidate some or all of their existing debt. However 8.4 million of those people continue to build up more and more debt.
A third of people who have taken out debt consolidation loans now feel that they are trapped by debt and that their debt is actually spiralling out of control. Only 13% of people who have to loans feel that it was a positive decision.
If you are thinking of taking out a personal loan make sure you shop around to find the right deal for you.
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Tue 19th Feb, 2008
Posted in Bad Credit, Consumer Credit, Homeowner Loans, Banking, UK Finance, mortgages, Remortgaging, Consumer debt, Homeowners, Financial products, Property, Financial news, Housing news, Borrowing, Secured loans, Insurance at 2:14 pm by admin
Alan Greenspan, the former head of the US Federal Reserve and an economic advisor to Gordon Brown has stated that the UK housing market is headed for some bumpy times. While the current credit crisis has been caused by sub-prime lending in the US home loan market, Greenspan has stated that the UK is even more vulnerable to the current turmoil than the US is. This is because a far higher percentage of mortgage holders in the UK are subject to variable interest rates. This means that if interest rates have to go up, or banks decide to increase their variable rates to make up for losses in other businesses, then it will be felt by many British home loan payers.
With less money in people’s pockets, they will not be able to pay the same prices for homes and housing growth will “grind to a halt” according to Mr Greenspan. In a newspaper interview Greenspan is reported as saying “There are going to be some difficulties. You’re already beginning to see the mortgage rates moving. A lot of the two-year fixes are beginning to unwind, and the teaser rates are going. It’s going to turn, it’s got to turn.” Not good news for anyone who has just paid out heavily for their home.
Greenspan also warned that as inflation creeps up, the Bank of England may be forced to significantly increase interest rates into the double digits to keep prices from escalating too quickly.
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Posted in Consumer Credit, Banking, UK Finance, mortgages, Remortgaging, Financial products, Financial news, Borrowing, Secured loans at 2:12 pm by admin
The FSA has announced that it will be requiring a number of mortgage lenders in the UK to prove that they are solvent, and that their finances are robust enough to get through the current financial conditions. As it is becoming more difficult for banks to get credit on the money markets, the FSA is focusing its attention on lenders who extend loans far more than they take in in deposits. This includes such lenders as Bradford and Bingley, Alliance and Leicester and Paragon, which specialises in lending for the buy-to-let market.
The FSA is extremely concerned that bank customers are losing confidence in their institutions and are eager to prevent a panic racing across the sector. With the share price of Alliance and Leicester dropping by almost a third today, regulators’ fears that a Northern Rock domino effect could be hitting the entire sector.
The way in which the FSA is proposing to deal with the issue is to ask those lenders which it assesses to be most at risk to prove that they are solvent, and that they have enough funds not only to meet all their upcoming liabilities, but also to continue to offer mortgages to customers. Any bank that does not have enough funds will have to seek a loan from the Bank of England just as Northern Rock has had to do, and will then be able to repay the loan when conditions improve. In the mean time, what this means for mortgage payers is more uncertainty for the time being.
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Mon 18th Feb, 2008
Posted in Consumer Credit, UK Finance, Credit Card, interest rates, Financial news, Borrowing at 12:22 pm by admin
Most people will be aware that the global financial markets are currently suffering from a severe loss of liquidity. What this means is that there is less cash floating around, and it is becoming harder for banks and financial institutions to borrow money or raise finance for new lending projects. This means simply that banks have less money to extend to customers as loans.
In turn, the shortage in credit, will mean that the price must go up. As more people want to borrow less money, the rate at which they are willing to pay for the money will go up. The interest rates that financial institutions therefore have to pay each other in order to get access to funds will also go up therefore.
For credit card providers, this is likely to mean that it will now cost them more to get access to the money that they lend you when you use your credit card. The more they pay for credit, the more they will have to charge for credit. However, historically, increases in the cost of borrowing, such as interest rate rises, have had less of an impact on credit card rates than they have had for example on mortgage rates.
This is because the margins on credit cards are much higher, and the interest rates that the typical credit card user pays on their borrowing is far above what the bank pays for credit. Therefore, even if banks are paying more for credit, this may not have much of an impact simply because customers already pay so much more for credit card borrowing than banks have to pay.
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Posted in Consumer Credit, Banking, UK Finance, mortgages, Financial products, Property, Financial news, Housing news, Borrowing, Secured loans at 12:20 pm by admin
With the recent difficulties that Northern Rock has been experiencing, many borrowers have been asking themselves who it is safe to borrow from. While it appears so far as if Northern Rock is the only UK financial institution to be experiencing difficulties due to the current financial turmoil, it is one of the largest mortgage lenders in the UK, and many other banks which operate similar business models to Northern Rock, such as Alliance and Leicester and Bradford and Bingley are also having to reassure investors that they are stable and well funded.
So if you are taking out a mortgage, how are you to know whether or not the lender you have chosen is stable and in good shape? Well one thing that you can do is keep an eye on the financial press. Many of the things that eventually become serious crises are first reported here and you will be able to react before the rest of the crowd if you are aware of any issues as soon as possible.
Another way is to rely on the reputation and generally the size of the lender. Old, large lenders who have been in the market for years tend to be safer and more reliable than new internet-based lenders. Another thing you can do is look at the types of loans that the lender offers. If a lender is offering massive loans then they may be riskier than more cautious banks. Finally, check that the lender adheres to and follows the British Banker’s Association (BBA) code of practice, as not all lending institutions follow it.
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