Archives March 2019

How can you get “trapped” into a mortgage.

How can you get “trapped” into a mortgage.

Helping people move up in the world of mortgages.

Recently there have been reports about the FCA allowing people to get onto “cheaper” mortgage rates, after being “trapped” into their current deal.

The Mirror reported the following

“…In fact, an estimated 150,000 people are currently trapped in a bad deal – long after their initial rate ended – but banned from switching to a new one. On average, it costs them around £550 a year more compared to the cheaper product.

But that could soon be about to end, after banking watchdog the Financial Conduct Authority revealed its plan to help them escape.

“We are particularly concerned about consumers – who are commonly referred to as mortgage prisoners – who are currently unable to switch,” said Christopher Woolard, executive director of strategy and competition at the FCA.” See full article here

(By clicking this link you are departing from this regulatory site, neither Coleshill Mortgage Services nor Quilter Group are responsible for the accuracy of the information contained within the linked site.).

But what does that mean? How do people end up being trapped?

Basically when you sign up for a mortgage you may want a fixed rate for your payments. This is often the best way to go, as you then know exactly what your mortgage will cost. Often these fixed rates are only for a set period of time. You will hear quotes like a “five year fixed rate mortgage”. What that means is your rate of paying back will be set at 5 years. So if you pay £500 a month it will not change across that full 5 year period. But then what can happen after that! Well it really does depend on your deal but it can then change to a variable rate; which means the lender will use the current rate of mortgages that it sets. This can mean that it goes up, possibly it could go down!

That doesn’t sound horrendous. But some lenders have an introductory offer and then look to increase the rates of the mortgage after the set deal.

So how do people get trapped. Well after the 2009 house crash, the FCA made changes to the rules of who lenders could offer mortgages too. They made sure that people could afford the repayments and that they were not over extending themselves. Before then there were lots of irresponsible lending that meant people got mortgages they flat out could not afford. With the new rules it was a little more stringent, on what could be lent out. So people on older mortgages, where the deal is not fantastic for them, are not qualifying for a remortgage under the new rules. Which often means they are trapped in the deal they have. As they cannot afford or are not accepted for a new one.

Hence the new rules. These are to potentially relax these new rules for people that are up to date with their current mortgage payments. Almost rewarding them for staying to the deal.

Remember always speak to someone you can trust and make sure you understand the deal you have.

 

 

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

What on earth is a leasehold?

What on earth is a leasehold?

Are leaseholds an unattractive purchase?

There was an article this last week from the BBC, regarding leasehold and the government possibly stepping in to help regulate leasehold dealings.

One of the quotes of the article mentions that people do not quite understand the difference between a leasehold and a freehold.

So very simply – A freehold:

This is when you buy a house and the land it sits upon, you get a mortgage (or buy it outright if you are Mr moneybags) and bid for the house, buy it and it’s yours! Very simple. Beyond planning permissions you can do what you want to that property.

A leasehold is you lease the building or property as such and the owner of the land that the building is on and sometimes the building itself is someone different. A true landlord and tenant relationship.

Leases can be 99 – 999 years, so we are not talking 6 month rentals. In some parts of Italy there are these old piazzas where the surrounding buildings are all built up on top of each other, going up a mountain, and the state owns the building and families lease the building for 1000 years. It’s a strange concept but has been around for a long time. It is often found for commercial properties, so a large commercial company may lease a building, say a Marks and Spencers and they may have a long lease and keep their shop there for 99 years.

The issue with leaseholds is often it can not just be houses but flats aswell. A company will own the building and the land, then leasehold the flats inside the building. What can come with any leasehold is often additional fees. So there can be ground fees, upkeep fees, and then when selling you may have to pay the company for the paperwork needed to sell the property. The problem with this is these fees can be large and therefore make the property an unattractive offer for potential buyers. The leasehold company is also free to increase the fees as they see fit.

There are some advantages, the company is responsible for the upkeep of the land and the building itself, but in terms of what they have to do is very much up to the company.

In government there is a Housing, Communities and Local Government committee and in the article linked below said, regarding leaseholds, the following.

“Elements of the current system, which the committee highlighted as needing attention, include claims of onerous ground rents, high and unclear service charges and one-off bills, unfair permission charges, imbalanced dispute mechanisms, inadequate advisory services, and unreasonable costs to extend leases.”

See full article here

(you are now departing from the regulatory website, Coleshill Mortgage Services or Quilter Group are responsible for the accuracy for the linked site).

If you have a leasehold or looking to purchase a leasehold make sure you understand all the terms and conditions of what you may have to pay and how you are able to extend the lease. Remember a house, building or flat, you may want to pass onto a loved one when you are gone and this may be difficult, or extending the lease may be costly. Just make sure you understand!

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

Help to buy is working!

Help to buy is working!

First time buyers issues have often been in the news, I mean, we have often reported on how hard it is for people to get on the property ladder. It was a little bit of a crisis and was a real sore point for young people and couples. People in their thirties living at home because they just could not afford to get a home, especially in London. The government did react and they brought in the scheme help to buy.

There are a few schemes that are branded under the help to buy; there is the help to buy ISA, where the government will help support your savings within an ISA. The other is where the government will “lend” you money towards a deposit and help you get that leg up to put an offer in for a house. I have very much given a brief overview of what the help to buy scheme is, there is a lot more to them.

If you want to find out more please access the main governments website on Help to Buy. Click Here

(you are now departing from the regulatory website, Coleshill Mortgage Services or Quilter Group are responsible for the accuracy for the linked site).

This has been around for some years and recently it has been reported that first time buyers is the highest it has been for 12 years.

BBC reported the following:

“There were 370,000 new first-time buyer mortgages completed in 2018, 1.9% higher than a year earlier, according to industry body UK Finance.

It says this is the highest number of first-time buyer mortgages since 2006, when there were 402,800 first-time buyers.”

See full article here

(you are now departing from the regulatory website, Coleshill Mortgage Services or Quilter Group are responsible for the accuracy for the linked site).

I mean no matter what you say about government schemes, the numbers peak for themselves. The idea was to increase first time buyers and it has done that.

If you are interested about your options it’s always best to speak to someone you trust.

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