Are self-service mortgages the way forward?

Term reduction has become a key aspiration for mortgage holders, with almost three quarters wanting to reduce their mortgage term or increase their payments to reduce the balance over time, according to research featured in Intelligent Finance’s ‘End of Term’ report.

Its publication coincides with the launch of a new self-service offset proposition which could save mortgage holders tens of thousands of pounds in interest. When questioned, more than half of mortgage holders expressed an interest in a self-service mortgage facility.

Flexibility is key to mortgage freedom

Unsurprisingly, nearly a third of people say paying off their mortgage or monthly mortgage repayment is their biggest financial concern. The appetite for more flexibility is clearly strong, with almost half of all borrowers believing their current mortgage arrangements are restrictive.
If given the choice, nearly three quarters of people would reduce their mortgage term or increase their mortgage payments to reduce the balance over time. One in five would welcome the ability to lower the amount on their regular mortgage payment.

Holistic approach

At last, people seem to be looking at their mortgages holistically rather than being seduced by headline rates. Six in ten mortgage holders are fully aware of the total cost of their mortgage over its full term, almost double the amount from just 18 months ago.
Mark Parker, managing director at Intelligent Finance said: “We now have a new generation of mortgage holders who view their finances holistically and want more flexibility and the option to pay off their mortgage as soon as possible, rather than go on borrowing into old age.”
“Offsetting delivers exactly this. We’re putting mortgage holders firmly in the driving seat, right where they belong.”

Self-services mortgages: how it works

With an offset mortgage you could reduce the amount of interest you pay on your mortgage. Instead of receiving interest on your savings, ISA and current account, you pay none on the equivalent amount on your mortgage.

Intelligent Finance has enhanced its award winning offset mortgage with a self-selecting offering. Customers can now select their preference of shorter term, lower payments or reduced debt and Intelligent Finance will then ensure it happens automatically.

Look what you could save

A mortgage customer with a 25 year old 90% LTV offset tracker mortgage, borrowing £250,000 on a repayment basis against a property worth £290,000, with £10,000 in savings, £3,000 monthly salary paid into a current account and £50 a month additional savings would have the following choices:

Shorter Term: reduce the balance on your mortgage balance faster, and possibly repay your mortgage earlier - save £44,737.19 in interest and shave 2 years and 4 months off the term
Lower Payments: make your monthly payments as low as possible - save £25,615.80 in interest.

Reduced Debt: reduce the amount you owe without affecting the term of your mortgage - save £34,828.70 in interest.

Landlords set store by mortgage advisers

Booming buy-to-let market sees strong reliance by landlords on mortgage advisers…
Mortgage advisers are providing a much needed lifeline to nearly three-quarters of landlords (74%) who seek advice, according to research undertaken by BDRC for Alliance & Leicester Mortgages.

Almost a third of landlords said they relied on brokers for advice a ‘great deal’ when it comes to letting properties and a further 46% relied on them a ‘fair amount’.

Overall, over half of landlords (55%) are relying on advisers for making them aware of new buy-to-let deals, giving advice on the deals and arranging the actual mortgage with the buy-to-let lender.

The findings identified three key roles that advisers play. Landlords saw the new product information they receive from advisers as the most important factor as it is harder to obtain anywhere else. Joint second was an adviser’s ability to source new deals and arrange the buy-to-let mortgage for them.

Mehrdad Yousefi, head of intermediary mortgages at Alliance & Leicester, said: “From our research, it is clear that advice plays an important part for buy-to-let investors.”
“Landlords need their advisers to obtain information that they can’t easily get hold of themselves as well as helping them get the best mortgage product for their needs.”

“Advisers provide a sounding board which, for many, is crucial in the decision making process and could impact hugely on the landlord’s finances. The fact that half of landlords taking advice remain loyal to one adviser shows just how much they really do value this relationship.”

Landlords arrange to see their mortgage broker on a regular basis – with one in ten seeing their adviser weekly and over a third (40%) seeing their adviser at least once a month, Only a very small number (2%) wait for the adviser to contact them.

Buy-to-let has been one of the success stories of the mortgage market in recent years. Whilst it has traditionally been favoured by professional landlords, good returns and a flourishing housing market has attracted a wider range of investor. However, it is evident that landlords value the sound advice and support that advisers can offer.

Mehrdad Yousefi added: “It is evident that mortgage brokers have an important role to play in the buy-to-let market, now and in the future. As landlords gain more experience, they may develop confidence and feel better equipped to make their own decisions and then may choose to go direct to a lender.”

“However, advisers can sometimes provide better, more competitive deals which may not be accessible if they go direct to lenders.”

£9,500 ‘cost of moving’ tab

The overall cost of moving house has more than tripled over the last ten years. It now stands at £9,486, up from £2,925 in 1996.

The most recent research by propertyfinder.com showed that on average, people looking to move home in the UK can currently expect to pay £450 in removal costs, £1,000 in lawyer fees, £3,027 in estate agent’s fees, and a massive £5,009 in stamp duty. Ten years ago, these figures stood at £376, £857, £1,257 and £543 respectively.

Warren Bright of Propertyfinder said: “On top of rapid house price inflation, home sellers have to contend with the soaring costs of moving home. The largest factor is stamp duty, which now accounts for over half of moving costs on the average home and has risen almost tenfold in ten years!”

“Without doubt, the Chancellor has been the largest beneficiary of the booming housing market.”

While the costs of moving home have risen by an annual average of 12.5%, inflation has averaged 1.5% per annum over the same period.

These higher costs effectively have to be borne by a homebuyer’s mortgage, adding just under £60 to the monthly cost of a borrower’s repayments, around £700 every year!

The extra costs are discouraging people from moving up the property ladder, said the report, and there is a resulting shortage of properties on the market, particularly at the bottom end. The website’s monthly confidence index suggests people currently expect house prices to rise by 6.4% over the next twelve months - and 31% of home seekers would account a rise primarily to the fact that there are too few properties coming up for sale.

Soaring prices ripple out from London

House price inflation in England and Wales has grown to its highest level for almost four years, figures out today show.

Average house prices grew by 0.8% in March - up from 0.7% the previous month, according to Hometrack's latest survey, pushing the annual rate of inflation up to 6.7% - the highest year-on-year growth since June 2003.

The report also suggests London prices are increasingly "disconnected" from the rest of the country and causing a ripple effect by driving up prices in the commuter belt.

Richard Donnell, Hometrack's director of research, said, "The headline figures continue to be distorted by a robust London housing market that appears largely disconnected from the rest of the country where the impetus for price growth is far more subdued."

The firm’s monthly survey shows that average house prices in London grew by 1.8% over March, the largest monthly increase in the capital for over four years. A lack of housing for sale combined with strong competition from buyers resulted in average prices rising across more than 80% of postcodes during March.

Over March the highest increases in average values were seen in Sutton (3.5%), Merton (3%) and Brent (2.4%) compared to 1.6% in Westminster.

The strength of house price growth in London is also having a clear knock on effect on the suburbs around the capital. Average house price growth was 0.8% in both East Anglia and the South East over March. The strongest growth was seen in Berkshire, Kent, Suffolk, Buckinghamshire, Hertfordshire and Surrey which all saw above average growth.

Away from the markets influenced by the London economy, house prices remain largely subdued. House price growth across the remaining seven regions of the country ranged from between 0% in Wales to 0.3% in the South West.

Missed opportunity’ to help first time buyers

As yesterday’s budget dust settles, industry specialists are left frustrated and annoyed that the Chancellor managed to touch on the importance of first-time buyers but still left them out in the cold.

The Budget failed to reform stamp duty levels, with the current exemption remaining on properties up to a value of £125,000, despite the average house price in the UK now running at over £200,000.

“As national house prices continue to rise and the cost of living increases it is first time buyers who are really suffering,” said Peter Bolton King, chief executive at the National Association of Estate Agents. “Once again the Chancellor has refused to address some of the most important issues head on."

“It’s about time the government took real steps to ease their plight,” he added.

Easing his tone a little, Peter Bolton King said he was pleased to see the stamp duty incentive being applied to zero-emission homes in the new build sector, but wanted the measures to go further, covering DIY installed green home improvements.

The budget was a lost opportunity to redress the burden of stamp duty, according to the Alliance & Leicester. “Our research reveals that the majority of [first-time buyers] are caught in this tax trap, preventing them from getting a foot on the property ladder,” said director of mortgages, Stephen Leonard. “Two-thirds of first-time buyers are looking for homes over the current £125,000 stamp duty threshold.”

“House prices have risen over 11% in the past year, and as the current average house price for a first time buyer stands at £151,030, the limit needs to be at least this amount to have any effect,” Leonard added.

Paul Smith, chief executive of haart estate agents, is another frustrated by the Chancellor’s line on stamp duty. "Stamp duty is an all-encompassing tax for everyone and it particularly deters first-time buyers, who are already struggling to raise the capital for a deposit, from entering the market - the very people the government says they want to get back into the market. It is crucial for the survival of the housing market that first-time buyers are encouraged to enter," he said.

Green effort
In line with the increasing zeal of many to over-embrace the green objective, the Chancellor did make stamp duty concessions for zero-carbon homes

Taking effect from October, stamp duty will be waived on new homes costing up to £500,000 that meet the zero-carbon criteria. In addition, those eco-homes built to the same standard but costing in excess of £500,000 will have £15,000 knocked off their stamp duty bill.

But Helen Adams, managing director of first-time buyers' advice site, FirstRungNow.com said: "Removing stamp duty from the purchase of zero-carbon homes is worthy and welcome but at the moment the number of these homes is very low – something for house-builders and sellers to work on.”

Wrinklies driving home ownership growth

New government statistics reveal a rise in the number of single households as the single biggest factor accounting for around 70% of household growth until 2026.

The figures also show higher levels of household growth in the North and the Midlands and a levelling-out of growth in the wider south east compared to previous projections - providing more evidence that economic growth is spreading throughout the country.

Communities and Local Government’s New Projections of Households for England and the regions to 2029 shows the number of households is projected to rise by 223,000 new households each year.

The new figures show an annual rate of growth from 2004 to 2026 of 223,000, compared with 209,000 in the last estimate in 2003.

The number of households in England is projected to increase from 21.1 million in 2004 to 26.0 million in 2026 and to reach 26.5 million in 2029.

The key reason for the growth is the continued rise in the number of single households, amounting to 155,000 of the 223,000 of projected growth (70%). More than one third of these one person households are over 65 years reflecting an ageing population and an increasing average life expectancy, now projected at record highs of 81.6 years and 85.2 years for men and women respectively. These figures reflect a significant increase in male life expectancy in the last few years.

Net international migration continues to account for a third of household growth.
Housing minister Yvette Cooper said: "These figures show why it's right to build more homes to meet the needs of the next generation. We have a growing population with people living longer and more of us are living alone.”

"These figures show the need for more homes is not restricted to London or the South East. Increases in jobs and economic prosperity across the Midlands and the North are increasing demand for housing nationwide.”

"If we don't build more homes we will see house prices rising even higher, with young people struggling to afford a home of their own."

Property shortage to ease soon – temporarily

Rightmove said a shortage of supply was driving prices higher in spite of higher borrowing costs and the prospect of a further rate rise.

The property website said average asking prices rose by 1.5% (£3,381) last month as the spring market strengthened and shrugged off fears of another interest rate rise.

According to the report the continued shortage of supply has more than compensated for the impact of the January rate rise. Compared to a year ago, buyers face prices that are £24,784 higher, an annual increase of 12.2%, up from 11.5% in February.

But the shortage may be temporarily eased as the Budget details will be out of the way this week and the spring surge will soon be on us, boosted by people deciding to sell before the June 1st deadline when compulsory home information packs begin.

This weeks Budget news may or may not hold something for first-time buyers but commercial director, Miles Shipside said: “Any tinkering with demand by raising stamp duty thresholds with one hand or raising interest rates with the other is likely to be insignificant compared to the potential impact of several hundred thousand extra sellers trying to avoid the extra obligations and costs of the biggest ever legislative change to the housing market in England and Wales.”

“Ironically, the extra supply and choice this will create will give hard pressed buyers some relief from the unhealthy price spiral. It is also a factor that must not be ignored when decisions affecting the housing market are being considered by policymakers at what could be a sensitive time.”

Only a respite

“As we have seen recently,” said Miles Shipside, “raising interest rates can be used to influence the direction of prices in the short term but do very little to address the underlying cause of house price inflation. Crucially they cannot address the increasing demand for housing driven by the needs of a growing population.”

Separate bedroom trend explained

New scientifically-driven research has put a question mark over claims, in recently-published research, that snoring and busy lifestyles are forcing couples to seek separate bedrooms.

One in five Britons say that, given the option, they would choose to have a separate bedroom from their partner, according to data collected by PARSHIP’s scientific assessment of more than 600,000 Europeans. But this growing trend isn’t being driven by sleepless nights; it’s more a matter of psychology.

Millions of single people across Europe have completed the dating firm’s propriety psychometric test to assess compatibility in relationships. 22% of Britons and 21% of their European counterparts said that, if they shared a two-bedroom apartment with their partner, they would prefer to have their own room – although they would want at least one of the bedrooms to offer the option of spending the night together. The vast majority, 78%, claimed a shared bedroom would be a must in their relationship

Dr Victoria Lukats, psychiatrist and the firm’s relationship expert says it's a person’s need for their own personal space that's driving this trend.

“Although a snoring partner, hectic lifestyle and children will certainly cause sleeplessness for many couples,” she said, “the truth is that none of these appear to be the main issue in couple’s decision to opt for separate rooms. In actual fact, one fifth of people have such a marked need for their own personal space that sharing a bedroom could be a real turn-off.”

“In contrast, other people have a high need for personal intimacy and want to share everything with their partner.”

“What we do know, is when two people differ widely in their need for intimacy, then there is likely to be conflict at some point in the relationship. That’s why a high degree of compatibility between two people is so important if the relationship is to last.”

Faye Rowe, editor of insidedivorce.com, a site for people going through a divorce or separation, believes that these statistics are worrying.

She said: “Our own research shows that one in five British marriages is currently on the rocks and 22% of people say that a lack of sex and intimacy are the main reason for their relationship breakdown.”

“If you still have a healthy sex life, even though you sleep apart, then that’s all well and good but, for many people, sharing a bed is an important part of being a couple – and potentially it could even save your relationship.”

Young look abroad to get on property ladder

New figures reveal the emergence of BARBies (Buying Abroad, Renting in Britain)...

High property prices in the UK, a fear of rising interest rates and stamp duty are driving young people to look at buying property abroad, according to a new survey by Hiscox, the specialist insurer. Almost 40% of young people would consider buying abroad as a first step to getting on the property ladder.

Overall, 88% of people say excessive house prices are the main barrier to buying in the UK with this figure rising to 97% among 18-24 year olds. Two thirds (65%) of respondents quoted rising interest rates as a barrier; 58% stamp duty; and 36% felt the whole process is too long and complicated in the UK. Almost a third (29%) had real concerns the housing market would crash in the next couple of years.

Indicating the emergence of a new social group for the Noughties - the BARBies (Buying Abroad, Renting in Britain) – the survey found that over a third of people (35%) fear they will never be able to afford a house in the UK, and more than a quarter (27%) of these would consider buying abroad just to get themselves on the first rung of the property ladder.

Worried BARBies
Young people under 35 are the most anxious about their failure to get on the housing ladder, with 37% worried that they will never become a UK home owner. People living in London and the East Midlands are the most worried of any region (21% and 24% respectively).

BARBies are primarily seeking good investment potential. Three quarters (74%) now see buying abroad as a more affordable option and among 18-24 year olds this percentage increases to 84%. Other perceived advantages of buying abroad include a better rental income than the UK (48%) and a simpler purchasing process (27%), not to mention the fact that they might be able to combine renting with using the property as a holiday home (70%).

Perhaps unsurprisingly, given the relative cost of living, non home owners currently living in the South East are most likely to be thinking of buying overseas property as an investment (38%). In the battle of the sexes, men are much more likely than women to consider this option (33% compared with 22%).

Steve Langan, UK Managing Director at Hiscox, commented: “More young people than ever before are finding their route into the UK property market blocked and are turning to overseas property investment as a more affordable and potentially lucrative investment option. In the 1980s, Yuppies started to push UK property prices up and the signs are that twenty years later the BARBies could do the same for property prices abroad. We’re already insuring thousands of homes abroad and we are seeing a strong rise in the number of foreign properties being bought: our client base more than doubled in the past year alone.”

Asking prices point to ongoing ‘second wave’

Asking prices for homes in England and Wales have reached their highest level since February 2005 with a monthly rise of 0.7%, according to the latest asking price index report from Home.co.uk.

This increase is part of an upward trend spanning the last ten months. These indications suggest the UK is experiencing a second wave of house price inflation and renewed confidence in the housing market.

The Home.co.uk asking price index uses current price data, which incorporates the usual discounting activity that takes place as sellers try to attract enquiries. The Bank of England estimates that asking price data is around six months ahead of HM Land Registry data and three to four months ahead of mortgage approval data (Halifax and Nationwide).

Despite three interest rate hikes, asking prices are rising once again in England and Wales, albeit at a more sustainable rate than observed in the run up to 2004. Market house prices rose 3.5% overall, in the last year, which is broadly in line with wage rises and the Retail Price Index.

“The greatest contribution to this month’s rise came from Greater London where market sentiment is very positive,” stated business development director Doug Shephard. “Asking prices in London increased by 2.5% in the first quarter of 2007, although in most other English and Welsh regions house price rises are more subdued, being at or below the overall Q1 figure of 1.1%.”

The recent drop in the consumer price index, Gordon Brown’s favourite measure of inflation, has taken the pressure off Monetary Policy Committee members to vote for another rise in interest rates. Whether or not inflation is truly under control remains to be seen, yet so far so good, as the MPC seems to have pulled off a fine balancing act between curbing inflation and stopping the housing market in its tracks.

The Home.co.uk asking price index currently stands at 101.7 [100 = May04], its highest level since February 2005. Following steady growth since the soft landing in May 2006, the index has yet to return to the record level of 103.8 registered in September 2004. If the current rate of growth continues, asking prices will surpass this previous record in Q4 this year.