Michael Knight’s Blog

According to the Halifax today, average house prices rose by 1.9% in January 2009 long with a slight rise in borrowing. This reverses the fall in December of 1.6%.

It can be dangerous to look at one month in isolation as there can be irrational fluctuations and indeed, prices in the 3 months prior to January compared to previous three months were 5.1% lower.

But, in todays doom and gloom, a bright spark of potential recovery can’t be sniffed at. That and seeing everyone enjoying the snow (if they’re not travelling of course!) means February is already more fun than January!!

If you would like to comment on this article, please call on 0845 029 1962 or mail at michael@michaelknightmortgages.com

This is becoming a more and more common question from many of my clients who’s mortgage deal is coming to an end in 2009 and the value of their home is dropping fast. They are concerned that they may fall into negative equity through no fault of their own. These clients may have bought 3 or 4 years ago and built a decent level of equity over time, maybe 20% to 30% or even more.

This level of equity may have dropped to only 10% but could decrease even further by the end of 2009 putting these clients into negative equity. If you do fall into negative equity, this need not be a problem unless you want or need to move.

The main concern of these clients is whether or not they will have a problem in getting another mortgage when their special deal ends. The truth is that they will not be able to move to another lender or in all liklihood get another special deal from their current lender.

Is that a bad thing?

Reassuringly, this is not a bad thing in the current market. At the end of your special deal, the default action of the lender is to place you on their Standard Variable Rate (SVR) regardless of the loan to value. In years past, this was not a good move as the SVR was uncompetitive. Nowadays though, SVR is generally competitive and has the benefit of no fees or tie-ins so you have all the benefits of low rates and absolute flexibility.

This may change in the future but for now my advice is as follows:

• reduce unsecured debts as much as possible before the end of your special deal to improve your affordability. Lenders are taking affordability more and more seriously when looking at new and existing customers.
• if you have a tracker mortgage and your payments have fallen, try to overpay to reduce the overall level of debt more quickly. This can offset some of the house price drop and improve the range of deals that may be available to you.
• even if you have a good level of equity in your home, the best deals are being offered to those customers who owe less than 60%. House prices are still dropping so it is worthwhile finding out what the current value is and if you are on the borderline, try and reduce the mortgage balance as quickly as possible.
• talk to a good whole of market mortgage broker for some down to earth advice.

To summarise, no action can be the best option with regards to new mortgage deals but you can take some control over your financial future by being prudent and reducing debt levels by as much as possible. It may be boring but if you can do this, you will be in a far stronger position when the economy turns up again - whenever that may be!

If you have any questions or queries about this article, or indeed about other articles you may find in my blog, get in touch and I’ll do my best to help you. Call me on 0845 029 1962 or email michael@michaelknightmortgages.com

While many mortgage holders with tracker products are celebrating recent falls in the Bank of England base rate, the reverse is true of most investors. With interest rates falling to 4% and in most cases lower, this can have a significant impact on the income this can produce. Alongside rising prices for essentials such as gas and electricity means that budgets are being stretched as never before for those on restricted incomes.

For those people aged 55 and above and own their own home, equity release can be a solution to increase income or provide a lump sum for home improvements, helping children out or even a luxury cruise. Equity Release is not suitable for everyone however and it is essential that advice is obtained by a suitably qualified person.

You should look for a product which offers at least the 2 following features:

• a no-negative equity guarantee
• guaranteed right to live at the property for life (or moving to long-term care)

Products now are more flexible and you can choose to take the full amount released, or more commonly at the moment, in ‘portions’. The latter option called drawdown has gained favour as interest rolls up less quickly and potentially more can be passed on in the estate on death.

As well as providing income or a lump sum, releasing equity will reduce the inheritance tax liability as the debt is taken into account when looking at the overall value of assets. As a result however, it is advised that the family is involved in discussions to ensure that any decisions made are mutually agreed. Independent legal advice is also essential to make sure any agreement entered is fully understood as it can be expensive if the wrong option is taken.

Michael Knight Mortgages for Equity Release is authorised by the Financial Services Authority to offer advice on this area and many pertinent questions are answered on the website www.releasequity.com.

If you want to find out more, why not call me on 0845 029 1962 or email michael@michaelknightmortgages.com.

Following a recent client review, it came to light that on two secured loans taken out (not via myself I hasten to add!!), a grand total of over £11,000 had been added for Payment Protection Insurance premiums! For those of you not in the know, this cover is designed to protect the customer in the event of being unable to work through accident, sickness or unemployment by covering the monthly repayments until return to work.

A worthy intention you might think. However, the policies only protect for 5 years and obviously if the loan term is longer, then there is only partial protection.

The obvious downside is that the cost is absolutely massive in comparison to the benefit and may not be appropriate to the customers needs. In fact, there have been recent fines to major providers such as Alliance and Leicester for mis-selling of these policies.

You can buy separate insurance at a fraction of the cost of the cover described above. For instance, my client had been charged £8,500 to cover a monthly repayment of £475 for 5 years. Even worse, interest is charged on the premium for the term of the mortgage. This is the monthly equivalent of £141! A standalone premium would be in the region of £16.50!!

There are various reasons why you may have been mis-sold Payment Protection Insurance and finding out is free and simple - call me on 0845 029 1962 or email michael@michaelknightmortgages.com .

Looking to buck the gloomy news which is being reported everywhere, I have launched Michael Knight Mortgages to address the real needs of my clients.

Major concerns at the moment revolve around redundancy, repaying debt  and reducing costs.

I am pleased to say that I have access to a brilliant unemployment policy where you can cover your mortgage repayments (plus additional costs) for up to 24 months. Very competitive premiums and flexible starting periods means you only pay for what you need.

Many people are finding that keeping up their loan and credit card repayments is proving more and more difficult. There are a variety of debt solutions but finding a trusted source for that advice is not as straight forward. With my good reputation for giving customer centered advice in plain  english, I can advise on the best solution for you, whether it is a debt managment plan, IVA or even bankruptcy.

For those who want to rein in their necessary expenditure, I offer an excellent range of insurance products for buildings & contents, life and critical illness cover and income protection. In fact, with the latter two areas I am so confident I will reduce your premiums (on a like for like basis), if that is not the case, I will pay you £25!

More blogs giving more detailed information will be following shortly. If you can’t wait, why not give me a call on 0845 029 1962 or email michael@michaelknightmortgages.com

Gordon Brown announced today a plan which will enable those people who suffer unemployment or significant drop in income due to the credit crunch to defer some or all interest on their mortgage for up to 2 years.

The key point is the interest is DEFERRED. At the end of the 2 years, if you have been deferring £500 per month, you will owe an aditional £12,000.

With house prices still on the way down, is this a good idea? More people will have negative equity thus limiting future movement.

On the surface, this looks like a sympathetic move by the Government. You have to ask whether it is as it will be pushing people further into debt.

Perhaps the better option would be to come to an arrangment with creditors whereby debt is written off at a reduced rate e.g. a debt managment solution.

If you want to talk about this development, call me straight away and I can see if it could be of help to you. Call on 0845 0291962 or email at mike@bartonmortgageservices.com

in a recent mortgage review meeting, my client revealed that he had enquired with 4 or 5 estate agents as to the possible selling price of his property. He bought it 2 years ago for just under £100,000 and has just received market appraisals ranging from £95,000 to £120,000!! Looking on several valuation sites, I think the value is very much at the bottom of those quotes bearing in mind prices have fallen year to date by 14%.

My question is: how do estate agents value a property - do they use evidence or simply stick a finger in the air!!

No wonder estate agents suffer from poor public perception, perhaps professional qualifications would help.

Call me on 0845 0291962 or email at mike@bartonmortgageservices.com

The widespread reduction in lender standard variable rates today following the Bank of England drop of 1.5% yesterday could mean mortgage brokers having little or no role in todays market. If the cheapest products in market have no set up costs or early redemption charges and can be easily sourced on the internet, then why should customers use a broker?

As it happens, I think there is still a purpose for brokers - not everyone is a perfect fit for prime providers and in todays market, even a small blip on your credit record can put you out of the running. That and the requirement of a significant deposit still makes it a minefield for the unsuspecting customer.

First-time buyers are particularly vulnerable and tend to be overwhelmed with all types of insurances they either do not understand or need.

Taking your insurances via a lender tends to be expensive as they only offer their products and in a lot of circumstances you are dealt with by an inexperienced clerk who is heavily targetted to sell all insurances regardless of need.

Brokers tend to be more experienced and in it for the long run - we’re not going anywhere and rely on providing a high level of personal service to get repeat business.

Support your local broker, you need their expertise and advice! Call me on 0845 0291962 or email at mike@bartonmortgageservices.com

With permission from Paul H, his remortgage completed last week - base rate tracker plus 0.99%. When we were discussing options, his repayments were scheduled to be £914.80. With base rate dropping to 3%, his repayments will actually be £817.81, a drop of £96.99!! It would have been more but Paul’s term is only 17 years.

I have advised Paul to keep payments at the original level so he immediately will be speeding up eventual repayment of the mortgage.

One happy customer!!!

No!

At least, not for while.