UK Personal Finance

We aim to provide you with as much information and news as possible regarding the UK loan and mortgage markets. Whilst also providing general money saving tips on all aspects of your personal finance.

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A recent survey by Nationwide has shown that the effects of the higher interest rate are causing the growth in house prices to stall. In June house prices grew by 11.1%, in July prices grew by only 0.1%. This has therefore cut the annual rate of growth to 9.9%.

This has been surprising as in the past three months house prices have been up by 2%, compared to the three months before that and down from Junes comparable figure of 2.2%. The survey has shown that house prices should be lower in the second half of the year.

The Bank of England has raised interest rates five times this year in an attempt to decrease inflation. The Banks key rate is now at 5.75%, it believed by analysts that the rates will reach 6% before the end of the year.

Consumer spending and house prices should slow down in the second half of the year. The sharp slowdown in house prices in July may show that homebuyers will start to think twice before straining due to the higher interest rates.

It used to be a known fact that remortgaging would save you money. However, due to the huge rise in arrangement fees is this still the case? The answer is of course that it depends. You definitely will still be able to save money by switching to a mortgage deal with a better rate, the expensive part is how you go about doing it. You need to shop around to find a better mortgage package as your current lender could offer you a better deal, saving you money in the long run as you will not need to involve a solicitor. You need to think carefully about how you plan to remortgage as in the long run it could save you thousands of pounds. It has been estimated that around half of all borrowers are stuck on a Standard Variable rate (SVR) or other expensive mortgage rates.

Example of short term and long term switch

Short Term: A fixed- rate mortgage rate recently came to an end for Mr and Mrs Clark, this means that they are now paying their lenders full SVR of 7.5%. So, the Clark’s decide to remortgage, they agree to change to another fixed rate but they do not want to fix for a long period of time in case the interest rates fall. The Clark’s choose to fix for two years at 5.05%.

The new package allows the Clarks to borrow £100,000 at 5.05%, which is fixed for two years. The arrangement fee on the remortgage is £999, the lenders valuation is £750 and the solicitors will cost £500. That comes to a total of £2,249 in fees. The Clarks feel they don’t want to pay that, so they add the arrangement fee (£1,749) to the new loan amount and they pay the solicitors fee from their savings.

The Clark’s new mortgage, in total, is £101, 749 at 5.05% which is fixed for two years. This will cost them £428 a month or £5,138 a year. The Clarks old mortgage was a £100,000 loan at 7.5% this was costing them £625 a month or £7,500 a year. The remortgage is therefore saving the Clarks a total of £197 a month, which is £2,362 a year or £4,723, after the solicitors fee, over the fixed two year agreement.

After the two year fixed rate is up, the Clarks will again be subject to paying the lenders Standard Variable rate (SVR), to avoid large monthly repayments they will have to remortgage again. Let’s presume the rates are the same as now and that the Clarks choose a fixed rate deal for five years on another interest only mortgage. The Clarks will now be borrowing £103,498 at 5.10% fixed for five years, the arrangement and valuation fees are the same as before and will be added to the loans total. The Clark’s will be paying £440 a month (£5,278 per year) with there new mortgage instead of £636 a month (£7,631 per year) if they stated on the SVR. In total Mr and Mrs Clark will be saving £196 a month, £2,353 a year and £11,764, after solicitors fees, over the five year fixed rate.

You can see from the examples above that money can be saved by remortgaging, even with the large arrangement fees. This may cause arrangement fees to rise in the future or could lead to other possible admin fees stepping into the remortgage process, to reduce the benefits.

At the moment though remortgaging is worthwhile for those paying a Standard Variable Rate. Remember to plan out your finances before making a definite decision and look around to find the best deal.

With Housing being top of the political agenda, currently, Prime Minister Gordon Brown has planned to provide more long- term, fixed rate mortgage deals as an important measure to control the potential affordability problems.

It was in fact, Mr Brown, as chancellor in 2003, asked Professor David Miles to report on why there were not very many long- term, fixed- rate mortgage deals available on Britains market. Mr Brown had said that if there were more of these deals around they would help to iron out the problems with the volatile property market.

In 2004, Professor Miles did seem to agree with the idea that more long- term borrowing would be a better thing but only if it could be made cheaper.

Mr Brown does still wish to make fixed- rate deals more commonly available with house prices on the increase and the ever- increasing problem that first time buyers are faced with. Industry experts are not sure that Mr. Brown’s solution will work as expected.

Mr Brown wants to make it possible for banks and building societies to borrow more money from the financial market.  Formally known as covered bonds, the theory behind these is actually quite simple. The bonds are basically a more complex version of I.O.U’s, these are issued by companies and the government as an alternative to putting up taxes or borrowing from a bank. A covered bonds eventual repayment is secured by a mortgage. The bonds can be issued directly by the lenders (banks or building societies), by companies, or the government. The bonds back their own lending having been bought by the lender.

The Governments subtle idea to effectively increase the availability of covered bonds, that can then be used to finance long term mortgages can be offered to the public. Another idea is to allow building societies to gain more money in the financial markets to improve their ability to lend. This would also bring Britain into line with the EU measures, the way that UK companies account covered bonds on their balance sheets- making it easier to issue the bonds in the first place.

Therefore, this should allow house buyers to borrow more money from the lenders in the form of 15 to 25 year mortgage products.

It has not been obvious as to how these plans for longer term deals will, in fact solve the house price situation. The reaction from the industry experts is showing a certain amount of scepticism. The overall benefit for consumers for long- term, fixed- rate mortgages is not quite known. These deals have been unpopular in the past due to interest rates on the mortgages being substantially high.

It seems people in Britain are not to keen on the idea of tying themselves to such a long term deal.

According to the Council for Mortgage Lenders, mortgages that are fixed for five years or more account for 8- 10% of new mortgage lending. Only 25 lenders offer a 10 year deal, four lenders offer a 15 year deal, two offering a 20 year deal, three offering a 25 year deal and only one offering a 30 year fixed rate deal. This is quite a contradiction when compared to the US and EU where long- term, fixed rate deals are very common.

However, making these long- term, fixed- rate deals commonly available on the market will not necessarily mean consumers are more likely to ask for them. The consumer’s appetite for these deals is just as important as how these deals are funded. These changes are in their infancy and it is too early to say whether there will be a shift in the market to the long- term deals.

With interest rates on the rise customers have been seen to choose fixed rate deals, in the past year, as borrowers have sought to protect themselves, against possible increases.

Fixed- rate deals are currently used by 89% of first time buyers and 73% of homeowners that have moved. In total, almost half of mortgage deals are fixed rate in one shape or another, however, most being of the two- four year variety.

It seems at the moment homeowners are unlikely to commit to a long term mortgages, they normally consist of 5 years, let alone 25 years.

A recent survey completed by Halifax has shown that in the last three months up to June, house prices in London have risen by 4.9%, taking the average house price up to £3000, 000 in London.

The survey shows that this means that the capitals average house price is above the threshold for inheritance tax, currently at £3000, 000.

According to the survey house prices are rising fastest in Northern Island. There has been a rise of 8.5% in the same three months and an increase of 47% in the past year.

As well as the rise in house prices reaching the inheritance tax threshold, the recent rises has pushed the average prices above £250, 000 watermark for 3% stamp duty, for the South East.

Due to the governments continuing failure to increase the inheritance tax and stamp duty thresholds, the typical homebuyer in London and the South East will be forced to face the oncoming tax burden, caused by the current house inflation.

With house prices accumulating in Northern Island, it has been a sudden change in the last two years. With the average house costing in region of £229, 000 it is the most expensive area in the UK outside of London and the South East. Two years ago Northern Island was the second cheapest region in the UK.

At present there are eight towns listed at the top of the list where house prices have risen, in Northern Island. The cost of a house or flat in Newtonards has ascended by 64% in the past year- to £228, 000. This has been followed by various house increases in Craigavon, Newtonabbey, Downpatrick, Carrickfergus, Belfast, Lisburn and Newry.

The survey has shown that this regional expansion was due to a strong economy, immigration and constant pursuit from second time homeowners.

Halifax have raised there house price forecast for this year from 4% to 6%, even thought the interest rights have increased rapidly.

HBOS group which Halifax is part of, made this dramatic change after House Prises rose faster then the year has expected; this is due to stronger economies and shortages of new build.  Even though Halifax have decided to change there forecast Nationwide Building Society are sticking to there guns at between 5% and 8%, this is despite the rise in the property market in the past 6 months.  Halifax have released that prices are now easing.  Martin Ellis explains an increase in mortgage rates have had a large effect on housing affordability and will increasingly bite over the next 6 months.  Nationwide Building Society agrees with this statement.  Fionnuala Earley explains that they believe that house price growth will fall from 11% to between 5% and 8%.

The main borrowing cost has been raised 5 times in the past year by The Bank of England to 5.75%.  The effects of higher rates are filtering through slowly.  In June a new record was reached by the amount of Mortgage Lending according to CML.  Despite 5 increases in the interest rates, the total lending rose by 9% to £34.2bn in May.  CML explained as this is the peak time for house buying the rise was seasonal.  CML added fewer people would move house, while more would re-mortgage, as borrowers begin to fix there mortgage rates.

Fun Walls, Sticky Notes and People Poking, an online phenomenon that has been sending everyone potty.

30m people world wide are connected to Facebook, a site where you can build up a community, all of these your friends, colleagues and family; but could all this mean your money and identity are in danger. Many users enter all of their details onto their own page which also might include a picture that can be changed. Many users would include there address, phone number, home town and also there date of birth, along with these they ask questions like interests, favourite music, films the list goes on; but people feel obliged to enter all of this information and tell secrets from their past.

This all may seen like a bit of fun and games, its just somewhere to meet friends; but what’s the real story behind someone who has added you who you have never met could they be legit or just after your money and identity. Facebook recently was used by Oxford Dons to see if the students where behaving in their post-exam parties and celebrations.

Experian’s James Jones explained that joining Facebook means putting to much information about yourself. Even though this is good fun, people don’t realise how careful they have to be because of the amount of information you need to give out. Research today shows that burglars are just as likely to take sensitive documents, for example bank statements and many bills, just like they would take stereos, Sky Boxes ect.

ID fraud expert from Callcredit, Owen Roberts, adds that users upload information that is like gold to an identity thief, this causes devastation to thousands of people every day. He goes on to explain that when people say that their going on holiday or out for the night this alerts burglars and if the user has an address on the page this would be a recipe for disaster.

According to APACS fraud from banking online has risen by 44% last year to £33.5m; fraud from internet shopping hit £155m. Banks have recently started to ask more serious questions that only the account holder would know, for example, birth place and maiden name, before letting the user into the account over the phone or via the internet.

According to Experian between 5% and 10% of fraud is committed by a friend, relative or colleagues of the victim. Many users just accept people even if they do not know who it is; but there is a 50/50 chance that this might be a fraudster.

Robert advises users to be careful who they accept as friends and make sure your passwords are all different.

Jones also advises putting the odd piece of information that you have made up as this will throw off any fraudster.

Article Author Personal-Finance_Loan.co.uk

Not only are there huge factors of emotion and stress associated with moving house there are also the burdened costs, that makes the possibility of moving home become a reality. Not to mention the extra cash you will need for the tea and biscuits for the removal men.

Neither the extensive costs nor the sanity strain of moving homes seems to be deterring the British from house- hopping. It appears to be a compulsive quest for Homeowners to continually climb the property ladder. It has been calculated in a survey by Abbey, that Britons will move house an average of 3- 4 times in their lifetime. Excluding property prices, it has been calculated that people who move home around 3- 4 times in a lifetime could be spending up to £54,400, purely based on general moving costs. This nice little some would be enough to buy you a two bedroom apartment in the Costa del Sol, and it is also calculated to be 2.3 years worth of the annual salary based on the average wage, currently.

Homeowners have also said that an average of £16,000 had been spent, when moving last, on lawyer fees, financial advisors, estate agents, removal firms and stamp duty, this cost is additional to what was spent to get their property into a saleable situation. Based on these figures it has been estimated that £28billion alone was spent in 2006 on the general incurred costs of moving house.

There is no secret that moving house is an expensive business, it is undoubtedly the reason why a quarter of the population are loathed to do so. It is astonishing when all the sums are added together from a lifetimes worth of moving homes. Homeowners clearly need all the help they can get, when it is expected that they are likely to spend over two years of the average salary rate.

It advisable for house buyers to look out for the hidden costs when engaging in the decision to move home, it is likely that you may become so caught up in the excitement of moving home that you fail to notice some of the small but relevant costs that arise. It is essential for buyers to ensure they choose the best deal they can find so that they can get the best value. A mortgage is, in most cases, the biggest financial commitment in a person’s life. Therefore, if people are willing to bargain over the fixtures and fittings of there home it will also be a sensible idea that other options are explored to get the best deal when moving home.

It is a good idea to start looking at Early Repayment charges (ERC’s) as they play a part to most mortgages, there are different ERC’s which vary in favourable terms. For example, some mortgages only have ERC’s during the initial competitive rate whilst others can trap borrowers making them pay the ERC’s and the standard Variable rate.

There is no reason why borrowers should have to pay overhanging ERC’s with today’s competitive market giving a wide rang of deals for borrowers to choose. Embarking on a mortgage with ERC’s in the initial terms can make sense but would it not be better still to have no ERC’s at any time? However, you may be likely to pay a little more interest for the benefit, this can be the right decision for those looking for flexibility of freedom.

Exit fees tend to cost around £195- 295, they often come under a number of names including sealing fees, administration charges or deeds- release fees. The charge, however is rising as lenders try to compensate lost revenue from competing rate pricing. It may not seem to be a big sum in the total plan of things but these figures add up, and there has been a rise in the past three years, it is a clear example of the lenders making money out of the consumers. If nothing else it is advisable borrowers should at least aware of what fees are on their deal.

If a higher deposit cannot be provided by the borrower it is important to be aware of higher lending charges (HLC’s). HLC’s are applied by lenders on loans which normally exceed 90% loan value, the borrowers who may not be able to provide a large deposit are viewed as higher risk borrowers and that is why HLC’s can be applied. With today’s market being so competitive it is no longer necessary for first time buyers to pay HLC’s as there are some excellent products, even for those wanting to borrow as much as 100%.

Surveys and solicitors are both crucial in the house buying process, some buyers tend to forget this and find that they receive an inadmissible bill along with a great deal of surprise, which are both very unwelcome at the time. It is important for borrowers to incorporate at least £500 for a typical solicitor’s bill and as much as £900 for a full structural survey.

Another factor that is often erased in borrower’s minds is the re- direction of post. As shocking as it may seem, around a quarter of Britons forget to re- direct their post, putting themselves in danger of identity fraud. It is therefore, not at all surprising that around a half of all identity fraud and theft cases happen at past addresses, in the UK. As already discussed, moving home is stressful and it is therefore absolutely important to re- direct your post. Otherwise you could have a fraudster identifying who you are and your credit information, making you suffer months of misery where you will constantly be turned down for credit and will not even be able to buy something as simple as a new TV.

To solve any issues that may arise with identity theft/ fraud it is important for people moving home to keep on top of their paper work, shred documents that are no longer needed. Contact all financial companies and give a new contact address, make sure that old catalogues that have been used are informed of an address change. The best idea with your post, is to contact the Royal Mail and instruct them to re-direct your post for a year, this will give you chance to inform anyone that has not been told about the change of address and allow for cancellation to be made on things that are no longer in use. Register the new address on the Electoral Roll straight away, also consider registering with the Mailing Preference Services, this will remove your name and address from direct marketing lists that you may have previously been on.

In a bid to solve a potential affordability crisis, it has been suggested by the government that there should be an increase of long- term fixed rate homeowner loans, available on the market today.

Some money analyst’s feel that this is a broad solution to tackle the uncertain affordability problem, and it certainly could prove to be a difficult decision for lenders. There are only 141 products out there on the market that offer a fixed rate of ten years or more, most of which being restricted to ten- year- terms for current borrowers. This area of the market is still in its prime and is showing growth, however there is only a 6% section of fixed rate products available on the market.

While some long term packages can provide contentment for borrowers, there may be a potential consequence if rates fall as customers may be left paying a higher level of interest.

Recent hikes have been made by The Bank of England Monetary policy committee which has increased the interest rate to 5.75%, this has been the second increase in three months and the third this year.

Funding your wedding day can be tedious matter, in today’s society people will often choose homeowner loans to cover the necessary costs, others find it better to save for the wedding themselves, even this can prove to be a challenging task.

One Wedding Planning service has advised people choosing to get married, that they should look around the market before deciding on a homeowner loan, this way they should be able to find the best deal on homeowner loan rates to cover their personal costs for the special day.

Having money readily available from the start is really essential if you are to keep within your budget. It is important for people deciding to pay for their wedding themselves, to work out how much money is needed at the start so that you are able to avoid getting into debt.

A number of homeowner loan providers do offer specific tailored loans for weddings, it is helpful, once you know your budget, to break the different fundamentals down so that you are able to understand which areas are important to you. In the long run this can help make your wedding day special and you will not be worrying about your personal finances.