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.

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.

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

In days gone by, at the end of your special deal, you had a good look around (hopefully via a whole of market broker!) and moved to another lender as the rate was better and it cost nothing to do so. In 2008 the market started to change with the restriction in credit meaning that lenders decided that keeping their existing customers made financial sense.

This was good news in a way for customers as taking a new deal with the same lender is much less hassle than moving to a new lender. However, in exchange for the simplicity, lenders were able to charge high arrangement fees with customers reluctant to go elsewhere for fear their credit rating or loan to value would prove to be insufficient.

In a way therefore, competitive retention products have killed a vibrant open market for customers to shop around in. Often lenders will only offer 1 or 2 products to existing customers which means only rarely are their true needs satisfied. Still, if you’re between a rock and a hard place………………….

So what should anyone do if their deal is coming to an end in the next 6 months? Easier said than done but reducing the existing mortgage balance or clearing other debt is a must. Lenders are looking at loan to values more than ever when calculating the interest rate they will offer and other credit in the background makes you a more risky proposition, particularly if you are close to your limit.

Obtain your credit record and make sure nothing  untoward appears on it - identity theft is on the increase and the time to discover it’s happened to you is not when you’re looking for new finance. Ensure you are still on the voters roll, mistakes happen and clients I know have been removed for no reason. Make sure you make all repayments to credit commitments on time as even one late credit card payment can have an adverse impact on your record.

So, in answer to my own question, I don’t believe re-mortgages are dead. Every person’s situation is different and needs to be examined. Even if it means you do take a replacement product from your lender, at least you know it’s the best deal you can get.

Call me 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

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!!!

You won’t find me in this position many times but the lack of understanding about how mortgage rates are set dismays me. In the past, bank base rate has been a governing factor in guiding mortgage rates as it has been slightly above that at which banks lend to each other e.g. LIBOR. This has changed and has been until now some 1% higher.

LIBOR will not drop to 4% any time soon so you will not see mortgage rates at similar levels (unless you’ve got a great existing tracker deal) for a while yet.

Commentators have perpetuated the myth that banks work in OUR favour and owe us a drop in rates. We must remember that banks operate SOLELY to make a profit for themselves and their shareholders. The fact the majority have taken OUR money to bail them out of difficult circumstances is irrelevant. The sooner they can pay off the payments they have taken, the sooner they can get back to spending their money as they see fit.

Rant over, jolly frustrating for all of us on fixed rates but good luck to those with competitive tracker products.

The Monetary Committee announce today a massive drop to base rate by 1.5% to 3%. This reflects the panic running through the Government that recession will quickly move into depression and backs up the US Treasury dropping their base rate to 1% a short while ago. Whether or not this drop will be enough to give the electric shock required to the UK economy and spark a recovery remains to be seen.

Many economists belive that base rate could dive to as low as 2% in 2009 as the global credit squeeze takes further hold with potentially an uplift in 2010.

We will have to wait and see what happens - this confirms we’re in deep trouble, let’s see what the sheep in the stock market do!!

The Government has just announced that stamp duty will not be payable for first time buyers up to a property price of £175,000. This has risen from £125,000 and represents a first attempt to stimulate the housing market. Time will tell if this has the desired effect or is too little too late.

Watch this space.