Sunday, February 8, 2009

 

Banks Charge Extra For New Mortgages

Britain's mortgage lenders are still to increasing their interest rates for new customers and failing to pass on the cuts in market lending rates, which have been improving for several weeks.

Last week, the Bank of England felled its main interest rate by a third bringing it down to 3 per cent the lowest in more than 50 years.New data showed that inflation is falling more quickly than anticipated so further cuts in interest are expected, maybe as soon as next month.According to the Office for National Statistics inflation, based on the consumer prices index, slumped to an annual rate of 4.5 per cent in October, compared to 5.2 per cent the month before.Economists had been predicting a smaller drop but a slowdown in the rise of food prices, coupled with the effect of falling petrol prices both contributed to bringing the rate down more rapidly than expected.

Although existing homeowners with tracker mortgages are about to see a substantial cut in their monthly payments following this month's 1.5 percentage point drop in the Bank of England interest rate, consumers searching for new tracker deals will probably be paying a higher margin above the Bank rate than they would have done just a couple of weeks ago.The rate at which banks borrow funds to lend to mortgage borrowers and the rate at which banks lend to each other (known as Libor) has also decreased and is now down to just over 4 per cent, from around 5.7 per cent at the end of last month


Yet despite the gap between Libor and the Bank rate narrowing, lenders are continuing to increase their profit on new mortgage products.

Halifax launched a new range of trackers which vary between 1.99 and 2.39 percentage points higher than the Bank rate.

Similarly, Alliance & Leicester, Abbey and Lloyds also released new trackers all costing at least 1.79 percentage points above the Bank rate.
David Hollingworth, of independent broker London & Country mortgages said: "The margins are very wide much wider than they were a month ago." He also claimed that for many consumers, the biggest problem at the moment is that the majority of products are only available to those with a low loan to value [LTV].
Nearly all of the new trackers on the market are only available to borrowers who have more than 25 per cent equity in their property.

For customers who have a mortgage which accounts for 80 per cent or more of their current property value, it is now near impossible to get a tracker mortgage deal.And for homeowners with a 90 per cent loan to value, there is only a tiny selection of products on offer and the interest rates on most of these are more than double the Bank rate.

Mr Hollingworth said more and more of borrowers may have to return to their bank's standard variable rate (SVR).This, however, may not be as unattractive as it once was because lots of banks have reduced their SVRs by 1.5 percentage points after the Chancellor pressurized them to pass the full Bank rate cut on to borrowers.

The banks decision to raise the margin on their trackers was defended by Sue Anderson, of the Council of Mortgage Lenders: "It reflects the mix of business levels that lenders now have," she said."A lot of lenders fully cut their SVRs by 1.5 percentage points, even though their own funding cost would not have been cut by that amount."



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Sunday, August 17, 2008

 

How You Can Make Money In A Down Market

The residential real estate market has reached an all time low when it comes to homes that are for sale, foreclosures and the lack of qualified buyers. Attempts to jump start the market again by lowering the interest rates have not proven to be successful. Is this the end of the real estate investment boom Absolutely not As a matter of fact, this is the beginning of even a bigger boom. You can make money in todays market just as you could when the market was burgeoning. As a matter of fact, it is easier as there is less competition.

While many amateur real estate investors gave up when the residential market crashed, those who really knew the game realized that this spelled opportunity for them to make even more money. Foreclosures are at an all time high - so what does that mean to the investor It means that there are more foreclosures on the market than there are buyers. When equated with the laws of supply and demand, it can only mean that the prices of the foreclosures are dropping even lower than ever.

Banks today do not want a foreclosure on their books. They cant get rid of them. Years ago, you only saw foreclosures in bighted areas. Today, you will see foreclosures in just about every neighborhood. Many people bit off more than they could chew when the market was booming. Many people borrowed against the equity of their home and realized that they were paying more than what the house was worth. Many people signed up for adjustable rate mortgages that they could not afford. And many people simply lost their jobs due to a recession that many refuse to acknowledge that we are in.

Because of the abundance in foreclosures, banks do not want these properties on their books as they know they are bound to lose even more money. For this reason, a savvy investor can make a deal with a bank to buy a home that is headed for foreclosure before it enters the court system and costs the bank tens of thousands of dollars in legal fees.

One way to do this is through the short sale. In this type of investment, the investor works with the owner of the property who is just trying to get out of the deal without it costing him any more money, and with the bank to purchase a piece of property before it costs the bank money in the foreclosure. Because banks know that it will not only cost them tens of thousands of dollars in legal fees, but time that they house sits it takes at least 6 months for a foreclosure to go through the court system and then the bank has to try to sell the house, they are wiling to sell the house for a lot less than the market value and what is currently owed on the property. This makes the bank happy as they have gotten rid of the house without foreclosing and the former owner happy as they can walk away from the deal without any backlash.

The short sale is one way you can make money in todays down market. To learn more, take a real estate investment course. There are plenty of opportunities out there for savvy investors.


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