Michael Knight’s Blog

The base rate might not have moved since March, but mortgage interest rates have been tumbling in recent weeks.

 The Bank of England’s Monetary Policy Committee has left interest rates at 0.5% for the ninth consecutive month.

 However, even though the base rate is unchanged, mortgage rates are falling. Nationwide is reducing the rates on some of its mortgages this week while Abbey and Alliance & Leicester are among lenders that have already launched new lower-rate deals recently.

 And it’s not just the cost of mortgages coming down. There is at last a glimmer of hope that things are improving for borrowers with only a small deposit to put down. Choice has been extremely limited for those with a deposit less than 25%, but the number of lenders offering loans up to 80%, 85% and 90% of the property value is at last increasing.

 Michael Knight said “It is encouraging to see the number of lenders offering suitable, better priced options for first-time borrowers increasing recently. If mortgage lenders start to give a helping hand to first-time borrowers we could see an improvement in the housing market.”

 Speak to Michael Knight now on 0845 0291962

 Which lenders have reduced their rate?

Nationwide is cutting some of its fixed and tracker rates by up to 0.29 percentage points.

 Other lenders to have reduced rates in the last week include:

•  Abbey have reduced rates by up to 0.2%
• Accord has slashed rates by 0.4%
• Alliance & Leicester reduced rates by up to 0.25%
• Cheltenham & Gloucester have reduced slightly by 0.1%
• Leeds Building Society have dropped by up to 0.26%

Should you opt for a fixed or tracker product?

Many homeowners on trackers have really benefited thanks to the low base rate and most mortgage analysts expect the Bank of England rate to remain at 0.5% for at least the next couple of months.

 Tracker rates reflect this, with the best two-year base rate tracker on the market at the moment from Newcastle Building Society with a current rate of 2.49%. That makes it more than 1% cheaper than the best fixed rate deal over two years. . it is also available to homeowners with deposits of just 20%, although it has a £994 fee.

 However, rates can of course go up as well as down and the fact that he base rate has now languished at just 0.5% for so long means that the next move is almost certain to be up, the only question is: When?

 Anyone on a tight budget may therefore be better off opting for a fixed rate as they then at least know that their mortgage payments will not change for the next two, three or five years.

What should you do now?

There are various ways of approaching this but a good start would be to have a discussion with a whole of market mortgage broker. We at Michael Knight Mortgages will always look at both direct and intermediary led products so you can have the peace of mind in knowing you will have impartial advice.

 Call Michael Knight or Ross Robinson on 0845 029 1962.

Many people are very happy with the NHS for emergency treatment - break a leg or have a heart attack and you know you’ll be seen straight away. Where the NHS can fall down is in the treatment of less acute but still lifestyle affecting conditions. Waiting times can be a real issue and if you’re worried about the delay, then potentially you’re making the situation worse.

Another concern is the condition and cleanliness of NHS facilities - aging buildings and equipment can be very difficult to keep in a tip-top state. With private care, while you can opt for a stay in an NHS hospital, many people prefer to use a private facility such as a BUPA hospital.

Boiling it down, there are 5 major benefits for taking out Private Medical Insurance:

•  peace of mind - you have access to a 24 hour GP helpline where you’ll speak to a real doctor
• High quality of care - access to the best specialists
• Choice of where you’re treated and the specialist you want
• Convenience of when you’re seen and treated - you remain in control
• Speed of getting specialist advice - reduces the worry of delays and cancellations of treatment

While the benefits are clear to most people, there is also a concern that this type of cover is expensive and that all conditions are not covered. As in all insurances, the more comprehensive the cover, the higher the financial commitment but you can tailor most plans to cover your personal requirements. This can make the monthly cost more affordable while still giving you the cover you want and need. 

Let’s look at some example costs:

• male non-smoker aged 35 - from £32.89 per month
• female non-smoker aged 45 - from 41.91 per month

The above costs are for indication purposes only; if you want specific details for your requirements, please contact me for an illustration.

The above costs can be decreased if you take regular exercise and with some providers, you can benefit from subsidised gym membership. So not only do you improve your health and fitness, you pay less to do so!

If you have a pre-existing condition, then generally this will not be covered. However, in certain circumstances, if it has not recurred in at least the past 2 years, it can then be included for future coverage. The best way to find out is to make an application and see what the insurer says.

Want to find out more? Why not get in contact and we can start looking at what provider and product will be best suited to your own needs. Call now on 0845 0291962 or mail at michael@michaelknightmortgages.com

It’s been quite a while since I last posted a blog on here and many things have happened in the last 6 months or so. From the re-emergence of the housing market to a change of network to taking on a new adviser!

First things first, the market has picked up and I feel that confidence is returning. Houses are being sold but there remains a shortgage of stock. Is this because you need a HIP in place now before putting your house on the market? As a result of a shortgage of stock, prices have bounced a bit but we’ll have to see if it will be maintained longer-term.

The second point noted has had an equally large impact on business. My old network had been taken over by a company called Network Data Ltd who were already reported to be experiencing financial difficulties and not paying their creditors. After months of lies and smokescreens, the plug was pulled leaving Appointed Representatives up in the air and no income!

Happily, I have found a new network which has financial strength and  equally as importantly, a commitment to providing first-class levels of support and products. Now with them for four months and yet to find a significant fault.

Which takes me on to my last point - a new trainee adviser on board. Welcome goes to Ross Robinson who I have known for the last 4 or 5 years. We met when he was an estate agency manager and I was employed to run the mortgage side of things. We’ve kept in touch and recently he asked how to get into financial services. It was only after I had joined my new network that it became apparent how and that was for him to join Michael Knight Mortgages.

It’s not quite as easy as it sounds though as Ross has had to study for, and pass the first two papers for CeMAP (Certificate of Mortgage Advice and Practice). With some hard work, he did just that and passed his induction course with flying colours.

I will be acting as his supervisor which has meant I too have had to undertake additional training to do so. Ross is now entering onto 6 months of close supervision after which time he will be able to arrange mortgages and source insurances rom the whole of the market.

So, all in all, a very interesting 6 months out here in broker land. Roll on 2010!!

If you have any questions or queries about this article, please call me on 0845 029 1962 or email michael@michaelknightmortgages.com

1. What is it?

A scheme designed to allow older homeowners a way to ‘release’ money from their homes to spend as they wish without having to sell or move.

2. Are there different schemes?

There are two main types; lifetime mortgages and home reversion plans. Both are regulated by government watchdog, the Financial Services Authority. 

3. Home Reversion

This plan involves selling all or part of your home, at a substantial discount on its market value, to a third party for a lump sum or regular income. In return, you have the right to remain living there as long as you wish. When the property is sold, usually after your death, the reversion company receives its share of the property, including any increase in value from the sale proceeds.

4. Lifetime Mortgage

Currently the most popular way in the UK of unlocking cash from your home - letting you borrow a set sum against its value. You can then continue to live there and pay no interest during your lifetime. Instead, the interest is ‘rolled up’ and added to the loan, which is paid off from the proceeds when the house is sold, normally when you die or move into residential care.

5. Flexibility

Cash released by a lifetime mortgage is usually in the form of one lump sum. Newer, flexible and increasingly popular products such as Prudential’s Lifetime Mortgage allow you to take out money as and when you need it, which could reduce the total interest owed when the house is sold. This facility is subject to maximum limits and under exceptional circumstances, could be restricted.

6. Any Requirements?

Yes. To be eligible for a lifetime mortgage, you normally need to be over 55 and have paid off most or all of your mortgage. You may need to pay valuation and legal fees, so ask about all charges before committing. Other eligibility criteria apply.

7. Right for you?

Equity release schemes may not be suitable for everyone. They may for example, affect your eligibility for certain state benefits, your tax position and some options when selling your home or moving. (See point 10)

8. Any other options?

Before taking out a plan, consider other options for meeting your financial needs, such as releasing value in your home by moving to a smaller or lower-value property or using other assets you may have to help fund your retirement.

9. Think SHIP

The equity release industry is now fully regulated but it’s worth considering whether a company subscribes to Safe Home Income Plan’s (SHIP) code of practice. Members agree to abide by a voluntary code of practice designed to safeguard homeowners.

10. Talk to someone

Seek financial advice if you’re interested in equity release, but still have questions you’d like answered. Discuss your plans with your family too, as any scheme will reduce the amount of money you can leave as an inheritance. At Michael Knight Mortgages, I am fully qualified to discuss this very sensitive area with you. Why not call on 0845 029 9162 or email michael@michaelknightmortgages.com

Equity Release can have an important role to play in pension planning. As all good financial advisers know, putting money into a pension fund is often one of the most tax efficient savings potentially available. With higher rate tax relief at 40%, the more that one can put into a pension fund the better.

The problem for many people though , is that while they have potential capacity to put money into a pension fund, having significantly less than the maximum amount currently of £1.6m allowed, they cannot afford to make cash contributions.

For these homeowners who are aged over 55 and are still earning. equity release can be a very tax efficient solution.

The following example shows how this can work in practise:

A homeowner aged 60, earns £100,000pa, has limited savings ability and owns a house worth £1,000,000. The home owner would like to retire in 5 years time but has insufficient pension.

The homeowner takes a lifetime mortgage plan to fund contributions to a pension plan. If they do not already have a pension plan, this may entail setting up a SIPP.

The client makes contributions totalling £200,000 over 5 years to the pension plan. The pension fund claims basic tax relief each year , and after 5 years growth at the risk free rate of 5.0% and allowing for typical fund expenses, the fund is worth £266,000.

The homowner funds the contributions by borrowing in total £150,000 on the lifetime mortgage and by claiming the higher rate tax relief on the pension contributions. After 5 years, the mortgage balance including interest rolling up at 6.49% is £174,000

Netting out the two figures, the homeowner on retirement has a pension fund which is worth £92,000 more than the value of the loan.

In order to evaluate whether or not this route may be appropriate, it is essential you work with suitably qualified pensions and equity release advisers. Happily, at Michael Knight Mortgages I have linked with MKB IFAs in Earls Barton to offer a complete service in this respect. Naturally this is a very complex area so if you are interested in finding out more, call me on 0845 029 1962 or michael@michaelknightmortgages.com

Equity Release may in the past have been as a last resort, but it is now regarded as a real opportunity for parents to help children while they are still advised.

As has been widely reported in the press many children are either struggling to get on the property ladder or, if they are fortunate enough to have been able to purchase a property, are saddled with large debts. In the past they might have relied on their inheritance to help them onto the property ladder or to clear debt. However, as people are living for longer and as a result the age at which many people might expect to inherit money from their parents has increased significantly.

Parents who own their own home can use equity release to free-up capital locked in their home, to give their children, thereby helping them to get on the property ladder or clear debt. Rather than wait until parents pass away to inherit, children can get the benefit of their inheritance early and parents can have the pleasure of seeing them enjoy it.

Equity Release schemes in the past have had a rather dubious reputation. However, today the reality is very different.

The regulation of these products by the Financial Services Authority gives clients significant protection. In addition, there is SHIP (Safe Home Income Plans) www.ship-ltd.org , an industry association which insists their members MUST include the following assurances:

• a no-negative equity guarantee
• guaranteed tenancy for life

All advisers specialising in equity release must hold additional qualifications before being able to give advice in this complex area. If you have any questions or qureries about equity release, call me now on 0845 029 1962 or mail michael@michaelknightmortgages.com

In the past, equity release may have been seen as a last resort but it is now regarded as a real opportunity for people to take tax planning steps that would not otherwise be available.

While the recent changes to inheritance tax may have reduced the number of estates liable to IHT, there are still a significant number of households that are potentially liable to pay the tax. For these clients, Equity Release offers a potentially attractive option.

Equity Release will not be appropriate for every client but it can, in the corrct circumstances, be a valuable part of and IHT-saving strategy. The first stage will always be to consider the more obvious forms of planning. Fpr example, it is essential that clients have wills in place that make maximum use of tax-planning opportunites, particularly where business property is concerned.In addition, all IHT exemptions should be fully utilised and, where a client has suplus free assets, outright gifts (PETs or Potentially Exempt Transfers in IHT talk!) should be made if possible.

This is an involved area and I have linked with a well-reputed local IFA which specialises in IHT planning. Utilising our experience and skills will ensure you have the best of advice and the most tax efficient solution for your needs.

All Equity Release products offered by Michael Knight Mortgages offer great peace of mind for my clients as they have a no negative equity guarantee and you are certain of being able to remain in your home until death or moving into long-term care. Check the following site www.ship-ltd.org which is the body that looks after the interests of equity release providers.

Call me now on 0845 029 1962 or mail at michael@michaelknightmortgages.com for more information or arrange for an informal discussion.

The latest research from Your Move shows that the property market stabilised in February.

According to the research, property instructions overtook mid-2008 levels; internet traffic was back up to 2006 levels; new buyer registrations ‘boomed’ in January and February; and house price falls are beginning to slow. Whilst more buyers have larger deposits, new instructions are still lagging so the market is undersupplied with fresh stock.

On the lettings side, tenant demand was up by 15% compared with February 2008 and up by 46% year-on-year. New landlord instructions are up and rents are stabilising.

David Newnes, managing director of Your Move estate agents, said: “The banks have still got their hands tightly around the neck of mortgage finance. But if you’re lucky enough to have a nest egg, Warren Buffett comes to mind, “Be fearful when others are greedy. Be greedy when others are fearful.” If landlords can get finance, low interest rates, low house prices and a strong rental market makes now a superb opportunity to invest.

“We’ve endured a painful adjustment in the property market – but I think we could be seeing some light at the end of the tunnel. Lettings are the silver lining of the past year’s market. Tenant demand in February was up strongly on 2008 – by 46%. More importantly, the flood of new stock coming onto the lettings market as some disgruntled sellers became accidental landlords has ebbed, taking the pressure off rents.”

Good to see that impartial commentators are echoing my sentiments and launch of my Rental Property Search and Select Service. With three levels of service ranging from full research, recommendation and ongoing liaison with lettings agents to a simple report on suitable properties, all budgets can be catered for for the investor looking to expand into areas with which they are not familiar.

With years of experience working with estate and lettings agents, I can help you find the perfect rental property to make your money work harder for you.

If you are interested in any details of this article, call me on 0845 029 1962 or email at michael@michaelknightmortgages.com.

Some frequently asked questions for your information:

Can we move house? 

Most equity release schemes allow you to do so if the new home still meets their criteria.
What if our new house is lower priced than our existing house? 

You may be required to repay some, or where the property is of a much lower value, all, of the loan and the accumulated interest, if you have a lifetime mortgage and move to a lower value property. 

The plan provider will usually retain the same percentage of your new home if you have a home reversion plan, with the leftover cash from the sale of the old property being split between you and the provider. 
Can I improve / enlarge my house? 

You will need their approval before you go ahead, but most equity release schemes will agree to hoe improvements. 
Do I have to buy another house one if I sell mine?

Equity Release Schemes are designed to end when the property is sold, so no. You simply repay the loan from the proceeds for a lifetime mortgage (or pay the percentage over to the reversion company for a home reversion plan). The rest of the sale proceeds are yours and there is no further commitment.

What happens if there is a change of ownership?

Following a marriage, divorce or remarriage, part of the equity you have released may need to be repaid, if there is a change of ownership. A new, additional owner may not have the right to stay in the property after the death of the person who took out the equity release scheme. The rules vary between different schemes, so please make sure you understand the details

Equity Release has had a bad press in the past but  it can be a good solution for the right person. With the safeguards in place, such as the ‘no negative equity guarantee’ and ‘guaranteed tenure for life’ plus options such as drawing down capital on a needs basis and / or paying the interest on the mortgage, being able to leave an inheritance while having a more comfortable lifestyle is possible.

Why not call me on 0845 029 1962 or mail michael@releasequity.com for more information?

You have probably started to get a good handle on things, so today I am going to give you some rather more detailed information and question to ask your adviser.

1. Are there any circumstances in which you might lose your house? You need to keep undisputed legal possession of your home for your entire lifetime - on a “single life” basis if you’re on your own or on a “joint life” basis if you have a partner.
2. In the case of couples, does the legal agreement continue for the lifetime of the surviving partner? Does anything have to happen on the first death, such as repayment of the loan in part or in full?
3. Does the equity release provide an income that increases to match inflation? Some will offer this, but it may cost more.
4. Is the plan flexible enough that you can move if you become ill or unable to cope with living in the property? Can you get an additional sum to help with moving costs or with legal fees?  
5. What are your obligations with respect to the property, such as maintenance or insurance, and what are the consequences if you fail to meet them?
6. If your home is owned by a family trust, will this affect the equity release?  
7. If you are receiving income-tested benefits from the government, such as the Community Services Card or rest home subsidies for a partner in care, how will the equity release affect my benefits?

If you have any queries, please call me on 0845 029 1962 or email michael@releasequity.com