Inter Financial Weblog

 

Archive for June, 2008

Mortgage lenders warned worst yet to come

Friday, June 20th, 2008

The Financial Services Authority (FSA) has warned mortgage lenders that the credit crisis is going to get worse and there may be more Northern Rock type fiascos to come.

The FSA is urging lenders to cut back on new lending in a bid to strengthen their financial positions as well as not to rush into repossessing borrowers’ homes who are struggling with their loan repayments.

The FSA has found a significant rise in arrears and repossessions in the past few months and bad times are yet to come since there are still 1.4 million borrowers out there on cheap fixed rate home loans that are set to come to an end in the coming year.

The FSA has found that most lenders are taking a blanket approach to customers in difficulty and that this has to stop. The announcements were made by the FSA in a speech delivered to the Council for Mortgage Lenders (CML). The CML called on the FSA to support their calls for the Bank of England to pour more money into the financial system, which has dried up in recent months.

The FSA requires lenders to treat customers fairly and considerer customers on an individual basis. However the FSA has told the CML that there is a consistent picture emerging of many lenders now unwilling to consider cases on an individual basis as well as being unwilling to agree to tailored solutions to borrowers’ individual circumstances and are taking a one size fits all approach to recover arrears.

Posted in Borrowing, Consumer Credit, Financial news, Homeowners, Housing news, mortgages, Property, Remortgaging, Secured loans, UK Finance | No Comments »

Interest rate dilemma for Bank of England

Monday, June 16th, 2008

There are mounting fears that the Bank of England is losing its grip on the economy. A combination of rising food costs, fuel hikes and other price rises are stoking inflation which should mean raising interest rates for the Bank.

However as a result of the global credit crunch, banks are starting to hoard money instead of lending which is putting downward pressure on house prices and pushing the monetary policy committee (MPC) towards actually cutting the base rate. Even in this atmosphere of falling house prices, would-be buyers are finding it hard to secure a home loan to make a purchase they can now afford.

The credit squeeze has created much uncertainty in the economy and the nine MPC members seem very reluctant to actually cut interest rates. The members are facing a dilemma in that domestic inflation is heading in one direction while at the same time the international money market is actually going in the opposite direction.

When the Consumer Prices Index went up by 2.1% – which is above the government target of 2% – it would, under any other circumstances, signal an increase in interest rates in order to bring about higher borrowing costs. The interest rate at 5% is still an expansionary rate which will only fuel higher inflation, putting inflation up again to a more neutral level will hopefully neither dampen nor stoke the economy.

However the credit crunch is pulling for interest rates to come down. Uncertainty in the banking sector has prompted banks to cut lending to other institutions and instead hoard cash. Customers are reporting difficulty in securing personal loans, especially for debt consolidation, as lenders are either unable to access the funds, or simply unwilling.

Bank of England governor Mervyn King has warned the MPC that the credit crunch could get even worse in the coming year unless interest rates are cut.

Posted in Borrowing, Consumer Credit, Consumer debt, Debt Consolidation, Debt management, Financial news, Financial products, Homeowners, House buying, Housing news, Inflation, interest rates, mortgages, Personal debt, Personal loans, Property, Secured loans, UK Finance | No Comments »

Split your mortgage between fixed and tracker

Friday, June 13th, 2008

Five interest rate rises in a row last year really hit us hard and despite the subsequent drops, many of us are still left struggling to find the right mortgage. The base rate may have dropped, but lenders are still struggling with liquidity issues – meaning they just cannot access the funds to offer as loans – and so the LIBOR (inter-bank lending) rate remains high.

There are a number of options available to anyone seeking a new home loan however, because finding the right mortgage product is very important. The fixed rate mortgage could avoid the risk of further rate rises in the future, but lenders are also aware of this and increasingly fixed rate home loans come with shorter and shorter renegotiation periods as well as increasing renegotiation charges. So whilst taking out a fixed rate mortgage is always an option worth considering it may not necessarily be your best one.

There is no avoiding the fact that as interest rates stay high, our loan repayments will be steep. Add to this the increasing fuel and food costs and many people are worried. So what are we supposed to do to protect ourselves from getting out of our depth and falling into financial difficulties?

Some lenders have introduced a new option that while slightly unorthodox could be worth some serious consideration. Lenders such as Barclays are allowing borrowers to split their mortgage into two and have half on a fixed term basis and the other half of the loan on a tracker basis. This takes out some of the risk for the borrower but will mean taking extra time in searching to find a lender who is willing to make the deal with you.

The arrangement fee could be higher than with a non-split mortgage and the time in finding the mortgage could take twice as long, however you are splitting the risks involved and if you don’t like to take chances with your money than this could be the option for you. With inflation still running high, cost of living rising sharply but no matching rise in wages, it is wisest to play a cautious game when it comes to your mortgage.

Posted in Borrowing, Consumer Credit, Financial products, First time buyers, Homeowner Loans, Homeowners, House buying, interest rates, mortgages, Property, Remortgaging, Secured loans, UK Finance | No Comments »

« Older posts       Newer posts »