Money

Mortgage lending jumps by a fifth

Press Association — 2013-05-22T08:00:00+00:00

Mortgage lenders have reported one of their strongest months since 2008 in a further sign that Government efforts are prompting an upturn in the housing market.

The Council of Mortgage Lenders (CML) estimates that £12.1 billion worth of loans were advanced in April, marking an increase of one fifth (21%) year-on-year.
The total also represents a 4% increase compared with March and follows a string of studies indicating that Government initiatives to reinvigorate mortgage borrowing are having an impact.

CML chief economist Bob Pannell said: "The true underlying position is that April is likely to have been one of the strongest months for lending activity since late 2008."

The findings were released as official figures showed that house prices rose by 0.4% month-on-month in March to reach £235,000 on average, marking the first monthly increase seen this year.

House prices are now 2.7% higher than they were a year ago, following a smaller annual uplift in February, the Office for National Statistics figures showed.

The CML has reported an uplift in first-time buyer activity in recent months, helped by various Government schemes designed to make it easier for people to borrow.

The number of mortgages on the market has increased sharply and lenders have slashed their rates since a Government scheme called Funding for Lending was introduced last August. Other initiatives called NewBuy and Help to Buy are specifically aimed at giving people with smaller deposits a leg up.

The CML's previous figures have shown that first-time buyers accounted for 45% of all house purchase loans in March, up from 43% in February.

However, Mr Pannell pointed out that the sharp year-on-year rise recorded by the CML has been "flattered" by a temporary dip in activity this time last year which happened after a stamp duty concession for first-time buyers came to an end.

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Nationwide reports home loans boost

Press Association — 2013-05-22T06:30:00+00:00

Filed under: Mortgages

Nationwide boasted a record share of the mortgage market after seeing a big rise in the number of first time buyers joining the property ladder.

The building society increased gross mortgage lending by 17% to £21.5 billion in the year to April 4, accounting for 15.1% of all UK residential mortgage lending.

During the year it provided loans to more than 42,000 first-time buyers, a 75% rise on last year and meaning that the society was responsible for almost one in five of all first-time buyer mortgages in the UK.

Announcing annual results, Nationwide also said a record 123,000 customers switched their main banking relationship to the society during one of the most successful in its 26-year history of offering current accounts.

Executive director Chris Rhodes said: "Dissatisfaction with the big banks is leading people to vote with their feet.

"We opened new current accounts at a rate of one thousand per day over the last year and many of these were people switching from another provider."

Nationwide's current account base rose to 5.2 million and its market share of main and package accounts is currently 5.7%, up from 5.1% in 2012.

The group's underlying profit for the year rose by 56% to £475 million after an 18% rise in total income to £2.52 billion.

While arrears rates for its retail customers were well below the industry average, the performance of its £20 billion portfolio of commercial property assets has impacted on short term profitability.

Nationwide blamed weak tenant demand and a resumption of declines in property values for an increase in the division's bad debt provision charge in the year to £493 million from £247 million a year earlier.

Chief executive Graham Beale said: "We are working with our borrowers over the medium term to keep them in business and to protect members' interests."

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Bank eases mortgage hikes policy

Press Association — 2013-05-21T07:00:00+00:00

Filed under: Mortgages

The Bank of Ireland (BOI) has partially backtracked on a steep rise in mortgage rates for customers who thought their repayments were fixed for life.

It has written to 1,200 of the 13,500 homeowners facing sharp increases - despite taking out tracker deals linked to the historically-low Bank of England base rate - to tell them they will no longer be applied in their cases. The bank said the Financial Conduct Authority (FCA) was "supportive of our approach in excluding these customers".
Customers were told of the decision to raise their rates - which in some case would double, lifting payments by hundreds of pounds a month - earlier this year. Many had taken out loans with BOI subsidiary Bristol & West. The changes came into effect this month.

But consumer group Which? said it believed they were being treated unfairly, pointing out that some were sold a "lifetime tracker". It urged customers to complain and called on the FCA to ensure better communication from banks about clauses in mortgages.
On Tuesday, the bank announced that it had identified and written to two groups of customers "where we will not be applying the increase to their base rate tracker mortgage". These included 1,000 homeowners who were using flexible facilities on their mortgage account and "received a specific administrative letter linked to their transactions that might have caused some customers to believe the differential was for the term of their mortgage".

The second group of around 200 customers were those who had switched their mortgage to a base rate tracker. The bank said they received documentation saying rates could change but their mortgage conditions did not detail the circumstances under which this would happen.

Des Crowley, chief executive of Bank of Ireland UK, said: "We have said from the outset that we will review all customer complaints individually and that we are committed to treating customers fairly throughout the process. It is on this basis that we have removed these customers."

But the move still leaves more than 12,000 customers with a steep rate hike - having believed they would stay low because they were linked to the Bank of England rate, currently 0.5%. BOI has told them it was changing the "differential" it applies to the tracker rate.

A typical change has seen a buy-to-let mortgage holder previously on a rate of 2.25% - made up of the base rate plus 1.75% - rise to 4.99%, representing the Bank rate plus 4.49%. For residential customers, changes will be introduced in two stages. From this month, they will pay the Bank rate plus 2.49%. On October 1, it goes up to Bank rate plus 3.99% - currently 4.49%.

BOI blamed the rise on increased funding costs and the need for banks to maintain greater levels of capital. It has set up a phone line for anyone worried about the impact of the changes. It said customers were free to move to other providers and that no early repayment charges would apply. Most of those affected had buy-to-let loans.

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New shared equity scheme announced

Press Association — 2013-05-21T02:30:00+00:00

Filed under: Mortgages

A new £120 million shared equity scheme designed to help home buyers shows that the Scottish Government steps in to help people in tough times, according to Deputy First Minister Nicola Sturgeon.

The Government will provide the cash over the next two years to help both first-time buyers and existing homeowners looking to buy new-build property.

Ms Sturgeon said the scheme will help buyers and the construction industry. Ministers are working with key figures in the house-building sector to develop the initiative.

"People in Scotland who should rightly be able to afford a mortgage are still facing real challenges buying a home," Ms Sturgeon said at the Homes for Scotland annual conference, where she made the announcement.

"We are well aware of the challenges that people face and want to continue to do all we can to help.The £120 million funding announced today will not only help people to buy their first home, it will also help second-steppers to be able to sell their home and to move to another property."

Those who successfully apply to the scheme will buy the majority share of a new-build property, with the Scottish Government buying the rest. When the property is sold on, the Government then receives a cash sum proportionate to its share.

Jim Preston, the new chairman of industry body Homes for Scotland, said a well-funded shared equity scheme can be a "game changer".

He said: "Home building is one of the most effective ways to stimulate the economy because of its strong employment and output multiplier effects. With strong evidence to demonstrate the significant positive impact shared equity schemes can make, a well-designed and funded initiative could be a game changer in Scotland.

"Timing, however, is crucial and we therefore look forward to working closely with the Scottish Government to ensure this option is made available to help home buyers here without delay."

Paul Smee, director general of the Council of Mortgage Lenders, said: "We welcome and support the Scottish Government's efforts to stimulate the house-building sector and we look forward to working constructively with the Government to help deliver this scheme."

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Where are Britain's highest tax bills?

Sarah Coles — 2013-05-20T09:33:00+00:00

Filed under: Mortgages

A small corner of leafy Surrey has taken the top spot in the league table of the highest income tax bills per person. Residents of Elmbridge pay an astonishing £1.18 billion in income tax every year. That puts a number of the major cities in the shade.

So who else is paying a fortune in income tax?

Biggest bills

Research by accountancy firm UHY Hacker Young found that there are only 130,000 people generating this income in Elmbridge, which works out as £16,100 each, making this the area with the highest income tax bill per person.

Visiting Elmbridge reveals that the size of the area's income tax bill shouldn't come as a huge shock. The leafy towns of Esher, Weybridge and Walton-on-Thames are filled with mansions, private estates, country clubs, golf courses, and riversides packed with millionaires. The proximity of Chelsea's training ground in Cobham has also brought well-paid sportsmen to the area.

It has become a haven for celebrities - from Elton John to Jensen Button, and is known locally as Britain's Beverly Hills. It's also the ideal spot for the banker to bring his family - just a chauffeur-driven 50 minute commute from the City.

Plus, of course, unlike the cities where rich and poor live in each other's pockets, the home counties bring the rich together out of reach of the less affluent.

The rest of the top ten is made up of:

St Albans £10,900
Windsor and Maidenhead £10,200
Guildford £9,830
London £8,580
Wokingham £7,490
Dacorum £7,490
Reigate and Banstead £7,000
Tonbridge and Malling £7,000
Wycombe £6,820
National average income tax £4,398.

Clearly London and the Home Counties dominate. Mark Giddens, Head of Private Client Services, says: "There is a growing regional mismatch within England and Wales, with wealth and tax bills becoming concentrated within a handful of cities home to lucrative industries, or a collection of leafy suburbs."

He adds: "Governments have attempted to boost the attractiveness of other regions in the UK to top earners, even encouraging some public sector organisations to relocate to different parts of the UK. However, the pull of the South East, culturally, politically, and financially is still very strong for the highest earners."

Away from the South, one city bucking the trend is Aberdeen, which has seen the fastest growth in income tax bills over the last five years. Average taxpayers in Aberdeen saw the amount of income tax they pay jump by 17.6% to £5,950 last year from £5,060 five years ago. This is nearly twice as fast as the growth of London's average tax bills and 12 times faster than the growth of the national average income tax bill.

Giddens says: "Aberdeen has been transformed since the 1990s with the growth of the oil industry. It's now a major global energy hub and one of the pillars upon which the Scottish economy is built. There is a lot of wealth in the city, with plenty of millionaires that have built oil services companies from the ground up."

Total tax bills

In terms of total income tax, the major cities dominate the list, with the plush home-counties towns pushing their way into the top ten.

London £33.7 billion
Greater Manchester £4.41 billion
Merseyside £2.19 billion
Leeds £1.49 billion
Edinburgh 1.45 billion
Birmingham £1.43 billion
Elmbridge £1.18 billion
Glasgow £898 million
St Albans £846 million
Bristol £843 million

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What type of borrower are you?

Christina Hoghton — 2013-05-19T05:00:00+00:00

Filed under: Mortgages

One of the questions people often ask about mortgages is 'which is the best deal?', and they often feel aggrieved when they don't get a straightforward answer.

But it is an impossible question to answer accurately because there simply isn't one best mortgage product out there. All borrowers have completely different needs and preferences.

It's different strokes for different folks.

How do you choose?
Every borrower is an individual and you will need to look closely at your finances, personal circumstances and attitude to risk to assess the sort of deal that is best for you. If you really aren't sure, then an independent mortgage adviser can work with you to find the right deal for your exact needs.

However, there are certain mortgages that can broadly suit some types of borrowers - and while these are by no means set in stone, working out what kind of borrower you are from the options below can offer a useful starting point when it comes to choosing a new homeloan.

Single buyer
Single buyers cover a very broad spectrum, from those stretching every last penny of their income to get on the first rung, to buyers who are comfortably able to afford the property they desire. Chances are you are somewhere in between.

However, all single buyers have one thing in common - total exposure to your monthly mortgage commitment. If your interest rate rises, you can't share that burden with somebody else - you need to cover it yourself, and that may be a reason to opt for a fixed rate mortgage to give you some security of payments.

You may also be interested in fee-free mortgage deals, since you will need to cover all of the upfront expenses of homebuying yourself. For example Virgin Money currently offers a two-year fixed rate mortgage at 2.74% with no arrangement fees.

In addition, single buyers should consider income protection insurance to cover their mortgage costs if they are unable to work because of accident, sickness or unemployment, as there is nobody else to make up your shortfall in income.

Double income no kids yet - DINKYs
Couples in full-time work with no children often have a decent disposable income, and minimal fixed outgoings. This gives them a lot of freedom when it comes to choosing a mortgage.

For example, if you have a bit of leeway in your budget because you are both working you have the flexibility to opt for either a fixed or a variable rate, and this opens up more potential deals.

There are currently some pretty low rate variable mortgages for those who are happy to gamble that interest rates will remain low for the long term - and can afford to get it wrong. For example you can take a two-year discount mortgage from HSBC for 1.75% if you have a large 40% deposit.

Of course, many DINKYs are also first-time buyers and, while some have plenty of disposable income, not all do. It's also the case that many have never had experience of running a household budget before. If you are not confident about managing your finances, it could be worth considering fixing your rate to help you get used to budgeting.

Young family
Young families often tend to be strapped for cash, particularly if one partner is temporarily not working to look after the children, or if they are forking out a lot of money on childcare.

When budgets are tight fixed rate mortgages come into their own as they offer you security of payments for a set period, which really helps families manage their money.

Whether you choose a short- or long-term fix is up to you, but consider that you commit to a fixed rate for the length of the deal (or face steep penalties to get out early), so if you think your family will need more space in a bigger home in the future, a short-term fix rate may be more sensible.

While in theory you can transfer a mortgage to a new property, in practice it isn't always plain sailing. Two-year fixed rates are available from as little as 1.74% from Chelsea Building Society.

Borrowing big
Just because you are taking out a large mortgage doesn't mean your budget is stretched, as you could be a high earner. However, if you take a variable rate and then interest rates rise, you will really feel the difference in monthly repayments if you have borrowed big. So it could be worth considering a fixed rate mortgage.

What is very important is that you focus on the interest rate, not the arrangement fee you will need to pay, because the interest rate becomes more important the larger the loan.

This means it can often be worth paying a large arrangement fee if it bags you a super low rate of interest. First Direct's five-year fixed rate at 2.64% for example is a stunning rate (available on loans up to £1m), but you will need to pay a steep fee of £1,399 to bag it.

Modest mortgage
Those needing a small mortgage don't necessarily live in a small home. If you are nearing the end of your mortgage term you could have a small sum remaining, and if you want to remortgage you may have your pick of deals, particularly if you have a lot of equity in your property.

One thing to be aware of with small mortgages is that a large arrangement fee can skew the overall cost, so it can be worth looking at mortgages that come with low fees, or even fee-free deals.

These mortgages may come with a slightly higher interest rate than the best buys, but could work out cheaper overall. The Post-Office's five-year fix at 3.35% isn't the cheapest rate on the market (though it's still very competitive), but it does come with the bonus of no arrangement fee whatsoever.

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1m families struggle with home cost

Press Association — 2013-05-16T05:00:00+00:00

Filed under: Mortgages

More than a million struggling British families are spending at least a third of their income on housing costs, a think-tank has revealed.

Work by the Resolution Foundation shows 1.3 million households on low to middle incomes are spending more than they can reasonably afford on mortgage payments, rent and maintenance costs - forgoing other essentials such as food to pay their bills.
e incomes are spending more than they can reasonably afford on mortgage payments, rent and maintenance costs - forgoing other essentials such as food to pay their bills.

The highest proportion of those families with unaffordable housing costs live in London (16%) and the South East of England (15%), while just 2% live in Northern Ireland, and 3% per cent in England's North East.

Vidhya Alakeson, deputy chief executive of the Resolution Foundation and joint author of the report, said: "Many families are struggling to find any type of housing which fits both their needs and their budget.
"Often they are making difficult choices which mean going without other essentials to pay their housing bills or living in overcrowded conditions - all this at a time when other living costs are rising.

"We've become used to the idea that buying a property is now an impossible dream for millions of people on low to middle incomes - in a typical case it would take 22 years just to save the deposit.

"But, increasingly, private rent is also becoming unaffordable, even though, for many families, it is the only option."

The analysis draws on detailed information about how much families are spending on housing, particularly at the lower end of the market.

The Resolution Foundation said the result of excessive housing costs is that families often have to make trade-offs with other areas of their spending such as furniture, clothing, travel or even food.

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10 tips for interest-only borrowers

Christina Hoghton — 2013-05-15T07:00:00+00:00

Filed under: Mortgages

The announcement that over a million interest-only mortgage borrowers won't be able to pay back their mortgage if they don't take action now makes very grim reading indeed.

According the Financial Conduct Authority's (FCA's) review into the sector, the average shortfall faced is a massive £71,000.

If you're an interest-only borrower without a clear strategy in place to repay your debt, you need to address your problem now. If you do nothing the worst case scenario is that you could lose your home.

Below are 10 tips to help you get on track with your homeloan:

1. Speak to your lender now
Find out the type of deal you are on and what happens when that comes to an end. You also need to know your end of term date and what you owe on that date. Ask your lender if it has changed its interest-only lending criteria since you took out your deal - chances are it has - and how does this impact on you?

Martin Wheatley, chief executive of the FCA, said that lenders will contact interest-only customers, but you also need to tackle your problem. "Borrowers do need to respond and engage with their lenders on how they plan to repay. My advice is to not bury your head in the sand - understand the terms of your mortgage agreement and take control."

2. Visit an independent mortgage broker The interest-only mortgage market has changed beyond all recognition in the last five years, with lenders restricting their criteria massively. Many have completely pulled out of the sector and only 12 lenders remain, though lending criteria differs massively, from the level of equity you have, to your specific type of repayment vehicle, if you have one.

You should consider speaking to an expert mortgage adviser. They understand exactly what lenders will and will not accept, plus they have access to with some lenders that only operate through intermediaries, not direct to the public.

3. Switch to a repayment mortgage If you want a cast-iron guarantee that your mortgage will be repaid in full at the end of your term, you need to switch from an interest-only to a repayment type deal. However, in reality this will increase your monthly repayments significantly and it may be the case that many interest-only mortgage borrowers simply can't afford to do it.

For example a £150,000 mortgage charged at 4% interest would cost £500 a month on an interest-only basis and £792 a month if you switch to repayment over a 25-year term. It's a sharp jump, and if you have a shorter term remaining the increase will be much more significant.

If you can't afford it, consider at least switching a portion of your mortgage onto a repayment basis.

4. Overpay your mortgage One way to deal with an interest-only shortfall is to overpay your mortgage while rates are low. This will reduce your outstanding balance, giving you less to repay at the end of your term.

Mark Harris, chief executive of mortgage broker SPF Private Clients, explains: "With interest rates at record lows, sensible borrowers will take advantage of lower mortgage payments by using the cash they are 'saving' each month to overpay on the mortgage and reduce the capital they owe. Most lenders will let you overpay by up to 10 per cent of the mortgage amount per annum without penalty."

5. Extend your term If you are facing an interest only shortfall and you don't have long left on your mortgage, it might be possible to agree an extension to your mortgage, with your existing lender, or a new one. It gives you a bit of breathing space to find the money to repay your debt.

According to Jonathan Harris, director of broker Anderson Harris: "If you only have a short time left to raise the money to pay off the capital on your mortgage, consider extending the term. If you switch at least part of the mortgage to repayment at the same time, this will minimise the jump in payments plus ensure you are making inroads on the capital you owe.

"However, much depends on your age. If you are nearing retirement, lenders may be reluctant to let you extend your mortgage past the age of 65."

6. Set up an investment vehicle If you took out a mortgage without a repayment vehicle alongside it, rethink your strategy. Not only will a repayment vehicle give you more chance of amassing enough money to repay your original mortgage debt, it will also make you more acceptable to lenders when you want to switch deals, since many insist that you can show you have an acceptable repayment vehicle in place.

Of course, this path is only suitable for those who still have a long stretch left on their mortgage term, as you need time for your money to grow sufficiently to pay off your mortgage.

7. Boost your savings If you don't want an investment product and prefer to keep your money in cash, at least consider boosting your savings by setting more aside each month.

Stuttering house prices over the last few years have proved that interest-only borrowers cannot rely on capital growth alone to repay their debt. After all, if you are in negative equity even selling your home won't be enough. It is essential to plan ahead.

8. Downsize your home It may seem like a drastic solution but if you have an interest-only problem that you can't afford to fix with either savings or by moving to a repayment deal, you may have to consider downsizing. This could free up some money to help towards repaying your mortgage debt and the sooner you do it the better.

You could even consider combining downsizing with switching part of your mortgage to a repayment basis, doubling your chances of dealing with your problem.

9. Use equity release to help cover your shortfall One option for interest-only borrowers who cannot repay their mortgage at the end of their term is to switch to an equity release home loan. Indeed equity release providers are already licking their lips at the prospect of this source of business. Nigel Waterson, chairman of the Equity Release Council, says: "Equity release can offer the over-55s a practical solution to the interest-only dilemma, with equity from their property providing a valuable alternative to downsizing to meet the additional costs of repayment."

But remember, equity release can be an expensive option so should only be considered as a last resort.

10. Move to a cheaper mortgage rate Finally remember that, as with all mortgages, it is important to ensure you are on the cheapest deal available.

After all, by reducing your monthly commitment you can increase the amount you can afford to overpay, or put into a separate investment vehicle. It may not completely solve your interest-only problem but it will free up more of your monthly income to deal with it.

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Renting means working an extra month

Chris Wheal — 2013-05-11T19:04:00+00:00

Filed under: Mortgages

Tenants spend an extra month paying their housing costs compared to homeowners according to Halifax research that shows that today, Sunday 12 May, is this year's Rental Freedom Day.

It takes UK tenants 132 days working to earn enough to pay their annual rent. Homeowners earn enough to pay off their mortgage a whole month earlier.

Waiting for Rental Freedom Day

Regionally, the North West was the first to achieve Rental Freedom (5th April) this year, just ahead of the North East (8th April), the East Midlands (13th April), and Yorkshire & the Humber (15th April).

The first southern region to achieve Rental Freedom Day will be the South East (17th May), but those in London will have to wait more than half a year, and more than two whole months after the first region for Rental Freedom Day (25th June).

Nationally, the earliest Rental Freedom Day occurs in Northern Ireland (27th March 2013) and was the only area to achieve this in March. For all the other home nations Rental Freedom Day doesn't occur until the second quarter of the year. In Wales the date is 11th April, just ahead of Scotland, where the date is 15th April.

Craig McKinlay, mortgage director, Halifax, says: "Housing costs are usually people's biggest outgoing every month, and our calculations show there is a significant difference between buying and renting. If you rent your home, then you will need to do about a month's extra work to cover the annual cost of renting compared to paying a mortgage."

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MP disputes Ipsa mortgage claims

Press Association — 2013-05-09T14:35:00+00:00

Filed under: Mortgages

The MPs' expenses watchdog has launched legal action to recover £54,000 from an MP who claimed taxpayer cash to pay mortgage interest on a property in his constituency.

Conservative MP Stewart Jackson was one of 29 MPs told to hand over a total of almost £500,000 to the Independent Parliamentary Standards Authority (Ipsa) to cover a proportion of the increased value of properties funded by their expenses.

Mr Jackson has said he is mounting his own legal challenge against Ipsa, which he accused of over-estimating the capital gain on his family home in his Peterborough constituency and then rushing into "heavy-handed and disproportionate" litigation to recover the sum. The other MPs involved have agreed to pay the sums demanded in full.

The watchdog moved to ban the use of Commons expenses to pay mortgage interest in May 2010, in the wake of public fury over "flipping" and other abuses. However, transitional arrangements were put in place permitting MPs elected before 2010 to keep claiming the money up to last August - as long as they agreed to return any potential capital gain.

Of the 71 MPs who claimed almost £1 million between them over the 15-month period, 29 were asked to make payments to reflect the increased value of houses and flats. The largest repayments were made by Tory MP for Clwyd West David Jones, who returned £81,446, and DUP East Londonderry MP Gregory Campbell, who handed over £61,403, both for properties in London.

In both of these cases - and that of Mr Jackson - the MPs were asked to repay more than they had received because the value of their property was calculated to have risen by more than the cost of the interest payments. Mr Jackson has refused to agree a repayment plan as he rejects the valuation placed on his property.

In a statement, the Peterborough MP said: "Ipsa's legal proceedings are heavy-handed and disproportionate, and are clearly intended to bully me into submission.

"The money which Ipsa is demanding retrospectively is more than the total amount I received when I was claiming mortgage interest and the property is now valued at less than we purchased it for in 2005. Ipsa have negotiated with 70 other MPs in a secretive and arbitrary manner but in respect of my case, regrettably, they have refused to negotiate. I am merely seeking fair play and consistency, and will pursue legal action to receive it."

An Ipsa spokesman said: "One of the most damaging aspects of the expenses scandal was the practice where MPs got taxpayer support to own a second home. That is why we said we would stop this, and we have now done so.

"In valuing the property, it was important that we didn't rely on amateur valuations or guesses from the web. Instead, we demanded formal valuations at the start and end, from the Royal Institute of Chartered Surveyors - the most authoritative voice in this field. Stewart Jackson provided us with two RICS valuations. As he has been unwilling to pay the £54,000 due we have issued proceedings to recover the sum through the High Court."

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Average house price to hit £300,000

lovemoney.com — 2013-05-08T05:24:00+00:00

Filed under: Mortgages

UK house prices could balloon by 30% because of the Government's 'reckless' Help to Buy scheme.

The average price of a home could shoot up from £233,000 to £300,000 if the Government's Help to Buy scheme succeeds.
That's according to a new report from leading economists at Fathom Consulting who warn this rapid price inflation could be seen as soon as 2015.

By the group's calculations the scheme could push up prices by almost 30% in two years.
The experts believe what is meant to help clear a blockage in the market could make things worse in the long run and reignite the housing market bubble.

What is Help to Buy?
The Help to Buy scheme was announced in the Budget earlier this year and has been designed to help people get on and move up the housing ladder with just a 5% deposit.

It means those struggling to save up the average deposit of £60,000 or those with a home struggling to move up the ladder because of remortgage problems like negative equity will get targeted help.

The scheme is split into two parts:

The Help to Buy Equity Loan allows first-time buyers as well as home movers to borrow 20% of the purchase price of a new-build property, interest-free, from the Government. This is providing the home costs under £600,000 and the borrower already has a 5% deposit. The loan is repayable once the home is sold and only remains interest-free for five years. It's already available and replaces a previous scheme called FirstBuy which only targeted first-time buyers. £3.5 billion of taxpayer money is being set aside for this part of the scheme.

The second half of the deal is the Help to Buy Mortgage Guarantee which will get going in January 2014. It aims to increase the amount of high loan-to-value mortgages available to both first-time buyers and home movers. The Government will provide lenders with a guarantee on these high risk loans similar to how the NewBuy scheme operates, but extended to home movers as well as first-time buyers.

The Government will provide £12 billion in guarantees to lenders to encourage these new deals enabling people to buy a new build or an existing property costing under £600,000 with a deposit of only 5%.

Reckless lending
But the two-tier scheme has been branded "reckless" by the former Bank of England economists that make up Fathom Consulting.

The group believes Help to Buy "uses public money to incentivise the banks to lend precisely to those individuals who, absent the scheme, would not and should not be offered credit".

It said that the fact many couldn't buy a property was "keeping a lid" on house prices which are on average about £233,000 according to Office for National Statistics (ONS) data. The think tank uses the ONS figures as it believes they are the most comprehensive measure of house prices. ONS figures show house prices are only around 4% below their pre-crisis peak.

The report calculates that if we have a return to "loose" conditions in the market similar to what we had at the pre-crisis peak with 100% mortgages and sub-prime lending, house price inflation could be 20% higher by the end of 2015.

And it appears there is some proof of the effect schemes can have on prices. Halifax recently revealed that new-build house prices have risen by 12% over the last five years while other homes experienced just a 9% rise. Halifax puts this rise down to schemes like NewBuy.

So instead of a policy to provide a short-term fix, the group has criticised the Help to Buy scheme as wielding the potential for longer term damage.

Andrew Brigden, a senior economist at Fathom, said: "Had we been asked to design a policy that would guarantee maximum damage to the UK's long-term growth prospects and its fragile credit rating, this would be it."

The result according to this think tank is another housing price bubble which will eventually burst and land us in the same or an even worse mess than before.

Fathom consulting aren't the only ones to highlight holes in the new scheme. The Office for Budget Responsibility (OBR) has also said that it could drive up house prices, while a Treasury Select Committee has said it "is very much a work in progress" and "may have unintended consequences".
Read: Government's Help to Buy scheme slammed for more.

Being realistic
House prices are broadly flat at the moment so it is hard to envision any steep rises rocking the boat.

But as the past property boom has shown, it could well happen. House prices trebled over a decade and came crashing down in 2007.

The problem is that the increase of funds into the mortgage market isn't being met by an increase in the supply of homes. So as supply fails to keep pace with demand, house prices can only go up.

Also as the Government becomes a stakeholder in the mortgage market it has a vested interest to keep house prices up. The Treasury Select Comittee report said: "The mortgage guarantee scheme makes the Government an active player in the mortgage market and the committee is concerned that the Treasury now has a financial interest in maintaining house prices to limit losses to the taxpayer."

So there is a very real chance that Help to Buy will inflate house prices once again and cause another housing bubble.

But the scheme would have to be incredibly successful with strong demand to be able to push prices up by 30% and I am not sure that many people will go for it based on the take up levels of similar schemes like FirstBuy and NewBuy.

That said the fact that Help to Buy is open to those wanting to move onto a new home as well as first-time buyers will certainly have a significant impact.

Help to Buy is still being worked out by the Government but at the moment it looks like its success can only cause more problems.

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Your options if you're struggling to pay off your interest-only mortgage

lovemoney.com — 2013-05-03T07:30:00+00:00

Filed under: Mortgages

As a new report highlights how hundreds of thousands of people face a shortfall in paying off their interest-only mortgages, here's what you can do now if you're worried about yours.

Hundreds of thousands of interest-only mortgage borrowers face a "ticking time bomb", with either no plan on how to pay off the capital they have borrowed or a plan that is not on track to clear their debt.
That's according to a new report from regulator the Financial Conduct Authority (the successor to the Financial Services Authority). Its research found just under half of borrowers whose interest-only mortgage ends in 2020 are facing the prospect of not being able to pay off their mortgage in full. And a third of those borrowers need to find more than £50,000.

The boom in interest-only mortgages
With a repayment mortgage, you repay a little of your debt each month, on top of interest. So by the time your mortgage expires (usually after 25 years), your debt is completely paid off. On the other hand, with an interest-only loan, you pay only the interest on your debt. Of course, if you don't have the money to pay off the remaining capital debt after a quarter-century, then you have an almighty problem.

As house prices soared in a 12-year boom lasting from 1995 to 2007, buying a home became ever more expensive. As a result, more and more homebuyers became unable to afford the higher repayments required by repayment mortgages. So they opted for the interest-only option instead.

Interest-only loans are inherently riskier, because they allow borrowers to have a huge debt hanging over them with no sure means of repayment.

But as house prices soared, lenders put these worries to one side and lent recklessly to borrowers via interest-only loans and 100% (no deposit) mortgages.

What can badly hit borrowers do?
Clearly, a large number of borrowers are in trouble. Some have interest-only loans with no visible means of repayment, some are in negative equity (where their outstanding mortgage is larger than the value of their home), and many are struggling to pay their monthly mortgage repayments in full.
So what can you do if you're a struggling mortgage borrower?

1. Contact your lender now
Be pro-active by contacting your lender as soon as you start having difficulty meeting your monthly repayments. If you drag things out and turn a setback into a crisis, then your lender will be far less lenient and understanding.

Ask your lender for a copy of its official arrears, forbearance and repossession policies, so you know how it can help you.

You will probably be offered the option of switching to a repayment mortgage, but bear in mind this is likely to be much more expensive, certainly in the short term. You might also be offered the option of extending the term of your mortgage by, for example, another five years.

2. Pay vital bills first
When times are tough and money is short, you must pay priority bills first. To keep a roof over your head, avoid fines and stay out of prison, pay THEM FIRST, which stands for:

Tax (council)
Hire purchase
Electricity and gas
Maintenance and child support
Fines
Income Tax
Rent or mortgage
Second mortgage
Television licence

Every other bill - including unsecured loans and credit cards - should be ignored in favour of these core bills.

3. Lengthen your term
Increasing the term (duration or life) of your home loan won't reduce your repayments if you have an interest-only mortgage. Nevertheless, it will give you extra time - perhaps five years or more - to make new arrangements to begin repaying your loan (and any arrears) as and when your personal finances improve.

4. Reduce your repayments
If you can't meet your full monthly repayments, then simply pay what you can. But get agreement from your lender first. You will need to give your lender a complete breakdown of all your income and outgoings, assets and debts.

The more you can pay each month, the more likely your new payment schedule is likely to succeed.

5. Start a repayment plan
Once your situation improves, don't stop planning ahead after any arrears are paid off and your mortgage account is up to date again. Instead, take steps to create a proper plan to repay your entire loan when it ends. Otherwise, you may have to sell your home to pay off this debt.

6. Seek state help
State support for homeowners is very limited, but you may be able to claim Support for Mortgage Interest (SMI). This is a benefit paid to mortgage borrowers who get income-related benefits such as Income Support, income-based Jobseeker's Allowance, income-related Employment and Support Allowance, and Pension Credit.

Note that SMI provides help only with mortgage interest, not capital repayments, and is paid at a standard rate (currently 3.63% a year). It's also extremely difficult to qualify for and is paid for up to two years.

7. Sell up and downsize or rent
Finally, one reason why lenders don't repossess more homes is that they actively encourage some borrowers to sell up, rather than have their properties seized. For struggling borrowers with some equity, this can be the best or only solution to ongoing payment crises.

Tough though it may be to accept, always remember that there is no shame in selling up and downsizing or renting, especially in these difficult times.

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Warning for interest-only borrowers

Press Association — 2013-05-02T03:30:00+00:00

Filed under: Mortgages

Homeowners on interest-only mortgages are facing a "wake-up call" after the regulator warned that up to half of these borrowers will not have enough money to pay their loans back.

The Financial Conduct Authority (FCA) fears that consumers are under-estimating the scale of the problem, with around 260,000 people thought to have no strategy in place for repaying their loan.

Consumer campaigners also raised concerns that a "significant" number of people claimed to be unaware how their loan was meant to be paid back when they took the product out and called for further work to make sure some borrowers were not mis-sold deals.

Mortgage lenders have agreed to alert their most at-risk customers to help them avoid "payment shocks". Some of them could end up having to sell their home to pay the loan back if they do not take stronger control of their repayment planning.
Around 2.6 million interest-only mortgages are due for repayment over the next 30 years but research has revealed that one in 10 people on such a deal have no plan for paying the money back.

The report said it was not clear how well some borrowers understood the discussions about how the mortgage was meant to be repaid when they took the deal out.

Some 13% of interest-only borrowers said they were not aware when they took out the deal that they needed a plan in place to repay the whole amount borrowed, not just the interest - and a further 6% were unsure.

However, those who said they were unaware of the need for a repayment strategy were more likely to have taken out the deal longer ago and just one in 40 people (2.5%) who said they were unaware still has no repayment plan in place.

Richard Lloyd, executive director of consumer group Which?, said: "We're worried that a significant proportion of consumers say they did not know they needed a separate repayment plan on their interest-only mortgage.

"We hope the FCA looks into this further to establish whether lenders made it completely clear to interest-only borrowers that they would need a repayment plan, to be sure that there wasn't widespread mis-selling."

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Customers face mortgage rate rises

Press Association — 2013-05-01T12:00:00+00:00

Filed under: Mortgages

Thousands of UK homeowners affected by a steep rise in Bank of Ireland (BOI) mortgage rates are being urged to make complaints.

Borrowers in some cases face rates doubling even though they took out tracker deals linked to the Bank of England base rate - which remains at a historic low of 0.5%.
Some of the 13,500 customers affected, many of whom took out loans with BOI subsidiary Bristol & West, face payments rising by hundreds of pounds a month. BOI has been contacting those affected - most of whom have a buy-to-let loan - about the changes, which take effect from Wednesday.

But consumer group Which? believes they are being treated unfairly, pointing out that some were sold a "lifetime tracker". It says customers should complain to the bank and if they are not happy with the response take the matter to the Financial Ombudsman.

Which? accuses BOI of justifying the changes on the basis of "clauses buried in the small print of mortgages" which were taken out before October 2004.

Which? executive director Richard Lloyd said this was "wholly unfair" and said BOI was "taking advantage of its customers by hiking rates at a time when the base rate is static", and added: "Customers should complain if they were led to believe they had bought a 'lifetime' mortgage and Bank of Ireland must deal with these complaints quickly and fairly."

Mr Lloyd urged the Financial Conduct Authority to ensure that all banks communicated important clauses to their mortgage customers and called for better protection for homeowners in consumer legislation.

A typical change will see a buy-to-let mortgage holder who is currently on a rate of 2.25% - made up of the base rate plus 1.75% - see it rise to 4.99%, representing the Bank rate plus 4.49%. For residential customers, changes will be introduced in two stages. They will pay the Bank rate plus 2.49%. On October 1, it goes up to Bank rate plus 3.99% - currently 4.49%.

One customer, Gary Smith, from Colchester, Essex, told the BBC he faced having to pay an extra £280 this month and a further £200 in October - after taking out a £200,000 mortgage with Bristol and West in 2004. He said: "It was sold and marketed as a tracker rate. I thought I had that margin for life. It's all very frustrating."

BOI blames the rise on increase funding costs and the need for banks to maintain greater levels of capital. It has set up a phone line for anyone worried about the impact of the changes.

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Santander shrinks UK loan book

Press Association — 2013-04-25T11:00:00+00:00

Filed under: Mortgages

Banking giant Santander has continued its retreat from riskier parts of the mortgage market but said it had made strides in winning more business customers.

The lender's profits slumped 22% in the first three months of the year to £282 million, driven lower by the rising cost of deposits and higher expenses.

The bank shrunk its loan book by £2.3 billion during the quarter as its net mortgage lending fell by £2.5 billion. But it said that followed a deliberate decision to do less interest-only lending and cover more of its mortgages with customer deposits.

Santander also saw a surge in mortgage arrears, with "non-performing loans" increasing to 1.83% of assets from 1.51% a year earlier following a lending spree between 2007 and 2009.

The Spanish-owned bank was an active player in the business banking market during the quarter.

Its corporate loans increased 11% to £20.4 billion, including a 15% surge in lending to small and medium-sized enterprises (SMEs). But the bank said its growth will be organic rather than acquisitive, after it walked away last year from a deal to buy more than 300 branches from Royal Bank of Scotland.

Santander UK was formed from the takeover of Abbey, Alliance & Leicester and part of Bradford & Bingley.

Steve Pateman, head of UK banking, said while it may be "slower and harder" the "primary focus is on organic growth in corporate and in retail".

He also dismissed speculation the bank will bid for Yorkshire and Clydesdale banks, owned by National Australia Bank. He said: "The reality is that is no longer a UK-wide business. It's a regional business."

The bank's lending spree saw its market share of mortgage lending climb to about 20%, compared with its normal market share of 12%. Mr Pateman said this was behind the surge in mortgage arrears - which it sees rising further this year before falling next year.

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Warning over mortgage guarantees

Press Association — 2013-04-20T03:01:00+00:00

Filed under: Mortgages

George Osborne's plans to boost home ownership risk skewing the housing market and leaving the Treasury with a significant hole in its coffers, a powerful committee has warned.

MPs fear the Chancellor's decision to introduce mortgage guarantees makes the Government an active player in the market with a financial interest in maintaining house prices.
The Help to Buy scheme is "very much work in progress" and is likely to have a number of unintended consequences, the Treasury committee warned.

They included potentially landing the Government with large losses on the mortgages it has guaranteed because the lenders fee structure it intends to put in place to cover the costs will be "extremely difficult" to price in a way that "sharply curtails Exchequer risk".

In a critical report, the committee said confusion in the days after the Budget over whether the measures would allow people to buy a second home with government backing showed the need for ministers to "think schemes through carefully before announcing them".

The MPs add that they "struggle to see the rationale for the taxpayer to stand behind loans for people wishing to own a second property".

The intervention in the housing market may not even help first time buyers - the group the Government insists it is keen to support - and Mr Osborne's claim that increased demand will boost supply is "unconvincing", the committee's report on the Budget found.

"There is a risk that if mortgage lenders begin to exercise reduced levels of forbearance, repossessions may rise and house prices subsequently lower than they would otherwise be," the report added. "If this happened, and unless this risk was fully priced into the fee, then the Treasury could end up facing large losses on those mortgages it has guaranteed."

Committee chairman Andrew Tyrie said: "The Government's Help to Buy scheme is very much work in progress. It may have a number of unintended consequences. Without further detail it is not possible to estimate its effects. The questions the Committee has asked the Government need answering."

The Treasury committee's wide-ranging report into last month's Budget also called for an end to the traditional practice of briefing some parts of the media on the contents ahead of delivery in the Commons. It comes after a copy of the front page of the Evening Standard, which was given advanced information, was tweeted before the Chancellor rose to his feet in the chamber.

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Santander to contact 270,000 over bungled SVR rise

Sarah Coles — 2013-04-19T09:30:00+00:00

Filed under: Mortgages

The Financial Conduct Authority has told Santander it will have to contact over 270,000 mortgage customers, after it raised the cap on its standard variable rate (SVR) in 2008 without being clear.

So what does this mean for customers?

The error

The SVR cap is the absolute maximum level that a lender can increase its SVR to. Santander increased that in 2008 - from 2.5% plus the Bank of England base rate to 3.75% plus the base rate. It has since raised the cap to 4.99% plus base rate - and its current SVR is 4.74%.

In 2008 it should have given borrowers clear information about the change. However, the Financial Conduct Authority (FCA) has been examining the process, and concluded that the letters Santander sent out were unclear - and some people didn't get one at all.

It has insisted that the bank contacts everyone affected at some point between next week and the Autumn, explaining what happened and what should have happened. They must also invite the customer to complain if, for example, they feel they have lost out financially.

Can you get redress?

The FCA warns, however, that although hundreds of thousands of people are being contacted, only a small minority will be entitled to redress. This is because redress largely depends on whether customers could have moved to a better deal - which will depend on their individual circumstances.

If you have been affected you will receive a letter which will explain how the change affected you specifically. It will also outline your options.

If there is anything unclear in the letter, Santander has launched a dedicated helpline for customers affected by the issue on 0800 389 6370, and it has added a page to its website to explain the issue.

If you want to make a complaint the FCA has more information on its website about how to go about it.

In the first instance you will need to contact Santander and outline your complaint. Only if they do not respond within eight weeks, or respond in a way you disagree with, should you take it to the Financial Ombudsman Service - which will provide an adjudication. If you are unhappy with their response too, you can consider whether you have enough of a case to go to court.

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How to pay off your mortgage early

lovemoney.com — 2013-04-15T09:00:00+00:00

Filed under: Mortgages

Today marks the day that we have earned enough to cover mortgage repayments for a year. But how do you go about paying off your mortgage sooner?

Halifax has declared today, the 13th of April, to be UK Mortgage Freedom Day.

Research from the bank shows that today, the 103rd day of the New Year, UK homeowners will have earned enough to cover their annual mortgage bill.
The bill works out as £6,597 for most people and those earning an average of £23,450 a year could pay it off if everything they earned from January 1st until today was dedicated to their mortgages. So an unlikely situation for most!

But what other realistic ways can you break free of the shackles of a mortgage and pay it off earlier?

Take stock
Before you set about trying to pay your mortgage off early you should make sure it's the right move.

If you have credit and store cards, these usually have interest rates that are much higher than mortgages, so it's worth clearing these first. You can take out a 0% balance transfer card to get rid of this debt sooner.

You might also want to think about contributing to a pension scheme instead of paying back your mortgage early. Pensions are a tax-efficient way to save as the Government will top-up whatever you put in with tax relief.

Save and boost income
Paying off your mortgage early revolves around having extra money to play around with, so it is important you have some savings or can build some up.

The first place to start looking for ways to save money is your expenses. You can use Lovemoney's MoneyTrack tool to analyse what you spend and where to find ways to cut down. It might mean making your own lunches or walking to work - any changes you make will add up.

After you've established where you can save, you can try to earn a bit extra to get a boost. There are plenty of ways you can do this like selling your old items, using a skill, taking on extra work, entering competitions, switching to better deals on bills or even taking in a lodger.

Check out How to sell successfully on eBay, How to make money in the evening and Rent A Room scheme: tax-free cash from your spare room for more.

Shorten your term
Most bog-standard mortgages last for 25 years, but if you are able to shorten the term you can finish paying it off sooner and pay less interest overall.

The downside is that your monthly repayments will balloon.

For example, on a £150,000 mortgage with a rate of 5% taken out over 25 years, you will pay £877 a month assuming the rate stays the same for the term. Shortening the term to 20 years will make your monthly repayments shoot up to £990 a month

But if you can afford it you will save £25,482 in interest.

Make overpayments
Overpaying is another great way to be free of your mortgage debt earlier.

You can do this in lump payments or every month depending on what you have available and how your lender charges interest. If your home loan accrues interest daily then you should overpay whenever you have the funds, but if it is annually you will need to time it right.

If you get it right you can pay your mortgage back much earlier.

For example, if you had a £150,000 mortgage with 25 years on the clock with a rate that remained at 5% for the term, your monthly payments would be £877. But if you chose to overpay your mortgage by £150 each month you could shave six years and three months off your term and save £31,616 in interest.

Most mortgages allow you to pay back up to a tenth (10%) of the amount outstanding without any early repayment charges, but you will need to check with your provider to be sure of exactly what's allowed.

Get an offset mortgage
Another way you can pay your mortgage off early is with an offset mortgage.

These work by linking a savings account with your mortgage deal. Any money you put into the savings account is taken off the outstanding mortgage balance - meaning you are charged less interest. So instead of earning interest on your savings you pay less on your mortgage debt.

So if you had a £150,000 home loan but had £10,000 in a linked savings account you would only pay interest on £140,000 of that debt.

Your money can sit in a savings account and allow you to make lower monthly repayments on the mortgage, but if you maintain the higher repayments you are effectively overpaying and shedding years off your term.

Another great thing about an offset mortgage is that if you need the savings you have built up you have easy access to them. It is tougher to get back any overpayments on other mortgages and doing so is at the discretion of your lender.

Also this type of deal is particularly beneficial to higher rate tax payers as they can save 40% in tax on their savings if they use it to "save" with an offset mortgage.

> Answer one of our Lovemoney surveys and you could win a brand new iPad!

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At Lovemoney, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free Lovemoney broker. Call 0800 804 8045 or email mortgages@lovemoney.com for more help.

This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at Lovemoney), before acting on anything contained in this article.

Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term may revert to the lender's standard variable rate or a tracker rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.

Your home or property may be repossessed if you do not keep up repayments on your mortgage.

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April 13 is 'mortgage freedom day'

Press Association — 2013-04-13T02:10:00+00:00

Filed under: Mortgages

Homeowners have typically earned enough cash by April 13 to cover their mortgage payments for the whole of 2013, a report has found.

But people living in the rental sector will have to wait another month on average - until May 12 - before they find themselves in the same position, Halifax found.
Halifax pinpointed April 13 as "mortgage freedom day", after working out that on the 103rd day of the year, people will have earned enough from their average annual take-home pay of £23,450 to cover their yearly mortgage repayment costs.

The calculation is based on yearly mortgage repayments costing £6,597 typically for a new borrower, including capital and interest payments. The figure is also based on typical house prices of around £161,400, as well as someone having a 30% deposit or equity in their home.

Every penny of someone's income for the year so far would have to be channelled just towards mortgage payments in order for them to have mortgage freedom for the rest of 2013.

Meanwhile, someone living in the rental sector will have to earn another month's pay until they have covered the average yearly rental payment of £8,892.

Due to house price and wage variations across the UK, there were huge differences in the dates when people up and down the country could theoretically have earned enough to cover their yearly mortgage payments.

Mortgage freedom day in Northern Ireland was on March 16, whereas in Scotland it was on March 21 and in Wales it was last Tuesday (April 9). Homeowners in England will have to wait until Tuesday this week (April 16) until they have earned enough cash this year to cover their annual mortgage costs.

Craig McKinlay, mortgage director of Halifax, said: "For most homeowners, mortgage payments are the biggest outgoing every month; knowing they've earned enough to pay off their mortgage for another year should be a reassuring thought.

"These calculations also highlight the significant difference between buying and renting. If you rent your home, then every year on average you will need to do about a month's extra work to cover the cost of renting compared to a mortgage."

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You are daft if you don't remortgage today

lovemoney.com — 2013-04-11T11:55:00+00:00

Filed under: Mortgages

Many of us are holding out for massive savings before we consider remortgaging. And that's just daft.

Interesting research from Lloyds TSB shows the varying reasons we aren't remortgaging, even though we could save hundreds of pounds per year by doing so.
Lloyds has found that, while 31% would consider remortgaging for any saving at all, the average saving most require before they remortgage is a massive £171 per month.

It's curious that people shop around for car insurance to save sometimes as little as £30 per year, but we require savings of £2,050 per year before we shop around for a mortgage.

Even after non-mortgage costs (such as legal costs, valuation fees and exit fees), you might still be looking at savings of £1,500 during every year of the deal. Over one year alone, you save 50 times more than you did when you shaved £30 off your car or home insurance.

Yes, there is more work and time involved in searching for and choosing a remortgage deal, but not 50 times as much.

The question is, if £30 is important to you, why is it not important within a mortgage? Most likely you're making the mistake of thinking that anything less than £135 is a small amount compared to your overall mortgage size, rather than thinking that hundreds or thousands of pounds extra a year is an awful lot of money to you.

Other reasons we aren't remortgaging
Another reason given for not remortgaging is people feel they're on a low enough rate already. But the Lloyds research found that half of homeowners were unaware that fixed rate mortgages have been cheaper than variable rate mortgages for over a year now.

Others aren't remortgaging because they fear associated costs would be too high, so that they won't save money overall. For some people this will certainly be the case, but I suspect that many with these worries don't spend a little time testing that hypothesis, which could cost them hundreds of pounds before next Christmas.

The riskiest reason for delay
Some of those who aren't looking to remortgage now are doing so because they want to see if mortgage rates will fall further.

I'm well placed to see the risks in relying on hopes such as these, not least because I have been collecting a database of forecasts for many years now, and I have found that experts and amateurs alike are terrible at predicting the future. What's more, we get it more severely wrong at the times we most desperately need them to be right.

If you're wrong about your forecast, the cheaper deals might disappear more quickly than you can apply for them. That might sound far-fetched, but if a sudden fear of higher rates emerges, lots of borrowers will overwhelm lenders with applications. Lenders will choose the cream from the top of the pile of forms, and then they will close the deal down, only to offer a more expensive one later to successful applicants. This could cause a wave of further applications as people panic about higher rates, which could push rates up higher and faster still.

In any event, lenders can raise their fixed rate mortgage prices overnight even if they just expect more applications to come in or costs to rise. What's more, they don't have to wait for the Bank of England to raise the base rate.

Even if you're right and rates do sink further, your delay might not pay off. Remember that, while you wait to switch, you're paying more money than with cheaper deals. The savings you make in the future have to more than make up for that cost.

Timing the bottom reliably is impossible. It makes more sense to forget that and think about what you can afford. Also, since you can't see the future, you could think of it in terms of history. Historically, the fixed rate deals currently available are extraordinarily cheap. By this historical measure, even if you miss the bottom, you have secured yourself a fantastic price and peace of mind.

I find the five- to ten-year mortgages to be especially cheap, with some deals costing less than 3% (or a bit more with lower fees). I like these longer deals at today's prices despite the fact that some of them, even today, are more expensive than lenders' standard variable rates.
The safety you get from them, provided your circumstances are right for a longer tie in, cannot be underestimated, nor can the benefit of securing a long deal at historically low rates that requires no more switching, and no more switching fees or legal costs, for some time to come.
What do you think? Have you remortgaged? Or are you still hanging on? Let us know your thoughts in the comment box below.

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At Lovemoney, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free Lovemoney broker. Call 0800 804 8045 or email mortgages@lovemoney.com for more help.

This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at Lovemoney), before acting on anything contained in this article.

Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term may revert to the lender's standard variable rate or a tracker rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.

Your home or property may be repossessed if you do not keep up repayments on your mortgage.

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