Easter NewsletterWe are now in the Easter break, that traditional springtime period when many people’s thoughts turn to a bit ofSpring cleaning, home improvements and moving home.

The mortgage market is still in a state of flux but thereare some positive signs out there and we approach thehouse buying season this year with a lot of optimism

A Happy Easter to all our clients!

April 2012

Happy Birthday - 3 years at 0.5%It’s three years now since the Bank ofEngland base rate rate reduced to 0.5%in response to the turmoil of thefinancial climate at the time. It hasremained at that all time low withoutany sign of movement, the longest holdfor 60 years.

The drop in the base rate led to most lendersslashing their Standard Variable rates (SVR) tofall into line with the new reduced cost ofborrowing. The Council of Mortgage Lenders havepointed to an increasing trend for homeownersto revert to the ‘SVR’ especially those on formerexpensive fixed rate deals.

This means that when the term of their fixedrate deal comes to an end they switch to theoften cheaper SVR rather than re-mortgageon to another fixed rate product.

There are signs however that this option iscoming to an end. Some lenders, mostnotably the Halifax and Bank of Ireland -have announced increases in their StandardVariable rates. The Co-op are the latest tojoin the trend, recently announcing anincrease their standard variable rate to4.74% to take effect in May.

The standard variable rate is arbitarily set byeach individual lender and can vary quite

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BEREPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED ON IT

Interest-Only MortgagesRIP

More lenders are now restricting their Interest-only mortgagesto a maximum of 50% loan to value which means for many

borrowers they are simply no longer an option.For many people, the Interest only mortgage helped provide a flexible option to buying a houseby keeping monthly payments low, however lenders have been gradually moving to reduce theoptions for interest only mortgages at the behest of the FSA.

So for those who currently have an interest only mortgage, thenet effect is they will be locked into their existingcircumstances, unable to move or borrow for improvementsunless they change to a Repayment mortgage.

If you are in that situation then maybe now is the time to thinkabout moving to a Repayment mortgage, whilst interest ratesare still low. The longer you leave it, the less time you will haveto repay the mortgage debt and the fewer options you will havein the future.

considerably. It takes into account not onlythe Bank of England base rate but also thecost of funding mortgages and the rates itpays to savers. It would appear that whilstthe Bank of England base rate has remainedunchanged, the latter two factors are thereason for the recent increases.

The Co-op points to more ‘savvy’ savers whoare shopping around for better returns whichin turn is pushing up the cost of mortgages.

This appears to be also impacting on to new mortgage products being offered by the banks. Inthe last few weeks many mortgage lenders have been quietly re-pricing and increasing theirfixed rate deals offered to new borrowers and further restricting their lending policies. Wereported for example at the beginning of the year a return to 95% lending with one or twobuilding societies starting to offer 95% mortgages to First Time Buyers - these have recently allbut disappeared.

Whether this worrying trend is set to continue, we shall see, but whilst the Bank of Englandbase rate is likely to remain at it’s all time low for the forseeable future, general mortgagerates - it would appear - may not.

There is no need to worry if you already have an interest-onlymortgage because the changes apply to new mortgages only,however problems may occur if you need to borrow additionalmoney for home improvements because this will be deemed anew loan and you will only be able to borrow around 50% of thehouse value, which in many cases will be less than the originalmortgage.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BEREPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED ON IT

Insurance - a time to review?December 21st 2012 is not a date highlighted in manydiaries - at the moment. But come the end of 2012things will change in the world of insurance. Thechange is substantial and it does affect you. It’sprobably the most significant change in the insuranceindustry since it’s inception 700 years ago.

Insurance is all about pricing risk and the vast amount ofinformation and statistics collated by the Insurance industry haverevealed many interesting facts - men for example tend get lessill than women and so currently income protection and healthinsurance is cheaper for men. Women meanwhile statisticallylive longer than men and so their life insurance premiums arelikely to be cheaper.

For many years the Insurance industry fought hard to be made an exception to the directivehowever it lost its ability to opt out in March last year and will be obliged to put this into effectby - you guessed it - 21st December 2012.

This is about to change due to the 2004 EU Gender Directivewhich outlaws discrimination on the basis of gender.

You might be forgiven for thinking that this will just equalise the cost of insurance, so forexample life insurance will become more expensive for women but cheaper for men.Unfortunately that will probably not be the case. Early estimates show that the Insuranceindustry are going to have to put aside over £1 billion in capital to provide protection againstthe uncertainties of this new market. In addition there is a new tax structure affectingprotection and this will also come into force at the end of the year.

The net effect of this will be to push up premiums across the whole protection piece and someobservers are predicting life insurance premiums for women could rise by as much as 30%.

So what should you do?

Nip this in the bud. The new pricing should start to filter through towards the end of the year,so this is a good time to sit down and review your insurance. Life insurance premiums have beencoming down over the last ten years so that policy you took out many years ago could actuallycost you less on current terms, so maybe consider finding out if it is worth trading in that oldpolicy for a new cheaper one. Consider what sort of cover you might need both at the momentand possibly in the next few years and bite the bullet - look at taking it out now. Generallypeople have protection for many years and saving yourself a few months premiums at themoment could be a false economy in the long run.

This year represents the Insurance industry’s ‘stock clearance sale’ and there willbe bargains around. Make sure you don’t miss out and review while stocks last -unlike certain furniture stores, the sale really does end on December 21st.

Mortgages

MAPS Mortgages is a trading style of Hometouch Mortgages Ltd who are authorised and regulated by the Financial Services Authority.Number 306063

15 Duke Street

Chelmsford CM1 1HL

Tel 01245 359536

enquiries@themaps.co.uk