January 2013 NewsletterWith the country now officially out of recession,unemployment figures down and inflation still very muchunder control I guess you’d be forgiven for thinking it wouldmean the mortgage market would be showing strong signs ofrecovery.

Unfortunately not. Lenders are still being very cautious withtheir funding and with the FSA taking further measures torestrict lenders, such as limiting lending into retirement andinterest only mortgages, the market is anything but healthy.

But it isn’t all doom and gloom.....

January 2013

Housing Market-Predictions for 2013Housing Market - some optimism

for 2013?

As 2012 draws to a close, the picture of theHousing market is a mixed one.

Whilst the market is still subdued with sales stillless than 950,000 for the year (which is just overhalf what they were in 2006) nevertheless theyare predicted to grow in 2013 to possibly theirhighest level for 5 years. The Royal Institute ofChartered Surveyors (RICS) have reportedincreased buyer enquiries in November,suggesting a boost in the market likely for Spring.

House price rises for 2012 continued todemonstrate the north-south divide witheight of the top ten towns showing thehighest growth rate, all coming from Londonand the South East led by Southend whichrecorded an annual growth of almost 15%.2013 is also looking optimistic with the RICS,Rightmove and the Office for NationalStatistics predicting a rise of around 2% forthe UK as a whole, with prices in London andthe South East expected to be the strongest.

Peter Bolton King, RICS global residentialDirector commented ‘There is certainly someoptimism creeping back into the housing

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

The FSA has recently published it’s latestproposals designed to put ‘common sense’ at theheart of the mortgage market.

There were wide expectations that interest-only mortgageswould be banned as part of the review, given that 77% of allinterest only mortgages have no means of repayment,borrowers instead relying on the expectation that risingproperty values will enable them to repay their mortgage. There are fears that there could be a‘ticking time bomb’ should this not happen. Interest only have however had a stay of executiongiven that lenders have been taking steps throughout the year to restrict and even ban this typeof mortgage.

One of the measures that has been announced is that lenders will now be required to ask formore in-depth information on potential mortgage customers to assess their income andoutgoings and conduct affordability tests. This is intended to prevent borrowers taking on amortgage they cannot afford if, and when interest rates start to rise again.

Lenders will also no longer be able to take advantage of their borrowers who are unable toobtain a mortgage elsewhere through new lending restrictions, by treating them less favourablythan other customers, charging them higher interest rates.

Martin Wheatley, managing director of the FSA, said: 'These new rules will help create a moresustainable market that works well for everyone, whether they are a borrower or a lender.

These and many other new rules will come into effect in April 2014 as part of the FSA’smortgage market review, however most lenders have already implemented the changes aheadof the deadline. There will inevitably be a cost to the additional measures which the FSA arenow requiring. Lenders have warned that it will take longer and cost more to get a mortgageagreed in the future.

Market, and it is encouraging to see anincrease in potential buyers’

Mortgage rates have fallen in 2012, driven bythe Bank of England’s ‘Funding For Lending’scheme. The prediction for the Bank ofEngland’s base rate is that it is unlikely torise above the current 0.5% during the earlypart of 2013 and with inflation settling backto 2.7% in October and Money Market ratesalso falling, the good news is that the lowmortgage rates are probably going tocontinue in 2013 for those with largedeposits, and may even improve forborrowers with a smaller equity.

Housing Market - predictions for 2013

The main barrier to the market is likely to bethe lenders themselves, who are continuing toopt to maintain healthy profit margins andsqueeze borrowers to cover their extra fundingcosts. Even with the latest round of cuts, theyare targeting only the best borrowers.

The tighter lending restrictions, disappearanceof Interest-only mortgages and stricter controlsover lending into retirement, have all had anadverse effect on the numbers of newmortgages. Only when proper competitionreturns will the situation ease and the PropertyMarket return to something like the bouyantsituation experienced in the early noughties.

Interest Only Mortgages

Mortgage lenders have been slowlyrestricting Interest Only mortgages to apoint whereby they are almost impossibleto obtain any more.

The move has been driven by the FSA, who havebeen concerned at the numbers of mortgageborrowers in UK who have an Interest only mortgagewith no means of paying it back.

The crackdown on lenders has meant that, startingwith Santander at the start of 2012, most of thehigh street lenders have either restricted theirInterest Only mortgages to less than 50% loan tovalue or in the cases of Nationwide and the Co-op,banned them altogether. So even if you have aninterest-only mortgage with a traditional repaymentvehicle such as an Endowment policy or ISA, you willstill not be able to take a mortgage with them.

So is now the time to do something?If you are in a position whereby you still have aninterest only mortgage, then maybe this is themoment, when interest rates are low and you canfix your mortgage at a very reasonable rate, youshould consider switching your mortgage across to aRepayment mortgage. The earlier you start, the

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

more impact it will have on your debt overthe lifetime of your mortgage, even if itonly seems like a small amount to startwith.

And if the switch would mean that theincrease in your mortgage payments wouldprove unaffordable, why not switch a partof the mortgage across, so at least you aremaking a start. Many lenders will alsoallow you to pay extra each month overthe counter or by standing order withoutpenalty.

If you’d like some information on what itwould mean to your mortgage or what youcan do, let us know and we will happilyadvise you.

Secured Loans - an effective alternative?

A Secured loan may just be a solution to thoseproblems. Whilst Secured loans are generally moreexpensive than a normal mortgage, they are oftenmore flexible than many mortgages and becausethey can be taken over a longer term, can work outcheaper on a monthly basis than the more oftenused Personal Loan or Credit card options.

The loan is secured against your property in thesame way that a mortgage is and this allows thegreater flexibility that normally would be offered bya re-mortgage.

If you’d like more details, let us know.

Many of us are continuing to enjoy the low standardvariable interest rates and Tracker deals onmortgages we took out in the mid to late 2000’s.

However some would still like to borrow moremoney either to consolidate expensive loans orcredit card debts, to pay for large purchases such ascars or holidays or make those home improvements.

The normal option of re-mortgaging is no longer theobvious one as it means the loss of the very cheapmortgage deal we are currently enjoying.

If you feel you are locked in to your current mortgage, unable to borrowmore because it is so good, then help may be at hand.

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