Mortgages Direct

Recent upheavals in the lending market have failed to tarnish self-cert mortgage availability, much to the relief of many self-employed business owners in Britain.

For many years the self-employed have depended upon self-cert mortgages to purchase property and homes. The Economic and Social Research Council reported that of the 29 million people employed in Britain, 13% are self-employed and eligible for self-cert mortgages.

Fortunately for this group of financial pioneers, the self-cert mortgage market has remained unaffected by the tightening of lending criteria in the mortgage industry, noted Andy Pratt, a spokesperson for Alexander Hall.

Mr. Pratt added that nonconforming lenders have been hit hardest by changes in financial markets but this has not affected the subprime industry.

Self-cert mortgages are generally backed by more established lenders, which allow them to adapt to changing conditions more favourably. Mainstream lenders that have been unaffected could give borrowers with good credit records the best chances of being approved for loans, the broker representative offered.

“All those clients who would have got a self-cert mortgage before have been able to get them even with the credit crunch,” he maintains. This is good news to self-employed Britons who are often unable to qualify for more conventional mortgage loans.

The size and tier of the loan people sign up for may save money, according to Defaqto, a financial services research company. 

Lower tier loans are often for smaller sums of money and charge the highest interest rates, and usually give the shortest amount of time for repayment. Borrowers may pay more money for less, especially when lenders have two tiers ranging from £1,000 to £5,000.

David Black, a principle consultant of banking for Defaqto, offered, “Borrowers should take care when choosing the size of loan they want, as a little effort in researching the interest rates charged on different tier levels could save them a considerable amount of money.”

Larger loans often come with the convenience of longer repayment schedules and can save borrowers as much as £1,000. When borrowers are looking at loans, Defaqto advises them to “be on their toes” when dealing with larger tier rates, which may have the best competitive rates.

Defaqto commented that “credit cards reward disloyalty” since credit card users are often able to switch balances from old cards to newer ones, and for better interest rates. Taking out a loan could bring more stability to the financial plans of individuals who are accustomed to constantly switching credit cards for lower interest payments.

Over-spending naturally accompanies the holiday season, however the strain and financial burden of such events can damage long-term plans for many families, says the Department for Work and Pensions (DWP). As families struggle to pay increased bills after Christmas, the children of many households are adversely affected.

Recently the DWP revealed an initiative to take on child poverty in the UK and has gathered statistics of government measures that have taken 600,000 children out of poverty over the previous ten years. As families look forward to expensive events such as the festive season, the DWP says that insufficient planning can leave people struggling even harder to pay the consequential bills.

Susan Clark of Jobcentre Plus stated, “Struggling to pay the bills after Christmas is a situation that many people find themselves in, and it can be very stressful.”

Difficulties after the holidays are common all across the UK, with the north-east, north-west, and Wales all effected, according to the DWP. On average, over 50% of people in the UK overspend at Christmas.

One way of avoiding the anxiety and difficulties which arise from overspending is to develop a plan to control finances. As the old saying goes, “A pinch of prevention is worth a bucket load of cure.” But for those who remain challenged in accepting our elders’ advice, consolidation loans are an effective way of repaying existing debts - and releasing families from the burden of after-holiday worries.

A survey by Fool.co.uk shows nearly 1 out of 10 potential home buyers are moving their plans to purchase a house forward – with current housing prices being lower and thus, a good time to take advantage of purchasing power. Fool.co.uk is a company looking to assist people with finding the best financial solutions for their needs and guiding buyers on how to be smart about their money.

Over the next two years, the survey shows 38% of people currently planning to buy houses want to secure the deal this year and another 34% plan on purchasing their home in 2009.

David Kuo, head of personal finance at Fool.co.uk, said, “The long-overdue correction in the property market will allow many people who have been waiting to move house to finally realise their dream. Quite often people will ask how much they can borrow when they want to buy a property. But that is altogether the wrong question. Instead, they should ask themselves how much they can afford to repay.”

It is expected that sellers will outnumber buyers for the next five years, with only four home buyers to every five sellers, according to the survey. Under such conditions, home buyers could realize some great savings overall, if they shop carefully to procure the best home and financial products available to them.

Personal insolvency is expected to increase this year, noted James Falla, Director of advice service Thomas Charles, while speaking of the predicted rise in the number of people struggling with bankruptcy in 2008.

Although “everyone’s talking” about the rising number of people facing debt problems, Mr. Falla acknowledged that the actual numbers of declared bankruptcies are difficult to measure. A forecast by KPMG predicts a 30% rise in the number of personal insolvencies this year; however the type of insolvency can vary.

Consumers facing personal insolvency are not always forced into bankruptcy. Many can enter into Individual Voluntary Arrangements (IVA’s) or informal debt management plans, Mr. Falla added.

The Director also noted that the exact number of IVA’s between consumers and lenders can be measured easily, but there is no way of calculating the exact number of other debt management plans that will be arranged this year.

Debt consolidation loans are recommended as an effective answer to insolvency for many people this year, suggests the price comparison website uSwitch.com. By lowering interest payments, a debt consolidation loan can be the answer for people looking to eliminate their debts and avoid outright bankruptcy.

Tesco Pet Insurance reports that 5.2 million UK consumers have at least one dog, yet only 12% of owners take out insurance for their animal. Those without pet insurance could see themselves facing large vet bills in the future and need to be sure they are able to handle the financial commitment that accompanies pet ownership.

Allan Burns, a company representative for Tesco, said that the price for treating uninsured dogs can be “hefty”, and the high incidence of lack of preparation saddened him.

Many pet owners, up to 38% in fact, feel they cannot afford veterinary care for their animal, as reported by Mintel, a market research and intelligence group. 

Tesco is working to reduce the number of pets going without proper care with a 20% discount given to customers purchasing their pet insurance online and a 10% discount awarded for insurance bought over the phone. 

For pet owners who have already been affected by the financial difficulties of pet injury, a debt consolidation loan may be the solution for those unexpected vet fees that can place an additional financial burden on any household, according to Moneyfacts.

For years, Britons have enjoyed access to easy credit and less restrictive lending practices. However, studies made by uSwitch and backed by the Financial Services Authority (FSA) indicate that consumers are facing drastic changes. 

The report by uSwitch showed that 26% of consumers questioned would rather plan a holiday or take up a new hobby, while only 13% would take steps to put their finances in order. In the past, this lack of attention to the average household’s rising was unavoidable as consumers were confident in their ability to pay interest on credit, however that is rapidly changing.

As lenders tighten their lending practices, uSwitch reported that 25% of consumers ranging from 16 to 44 year-olds dread seeing their bills after the New Year. Over half of the consumers surveyed could not remember how much they had spent during the holiday season; a reflection that is not indicative of many consumers taking the credit bust as seriously as the number of financially injured individuals reveal.  

With 38% of all credit card applications now being rejected and 9.5 million people reaching their limit on at least one form of credit in the past 6 months, consumers are quickly being left with little money or financial leverage in their pockets. Making matters worse, research shows that interest repayments in Britain are increasing - having gone up by a total of £12.7 billion to a record high of £93 billion. The increase leaves 25% of adults unable to manage their debts. 

Higher mortgages repayments, credit card interest and expenses have raised the annual interest of a typical household, including mortgages, up by £517 in the past 12 months to £3,744.

Mike Naylor of uSwitch said consumers have been able to access easy and cheap credit for a long time, but those with big debts urgently need to take steps to protect themselves. Mr. Naylor concluded that the recent interest rate reduction came too late for those with the most severe debt.

The days of living on borrowed money and lines of credit are coming to an end. The number of new credit card applications now being rejected is up by 30%, cutting the overall chances of approval by half.

Individuals who depend upon consolidating old loans and moving debt to lower interest credit cards will soon find it harder to continue such habits as lenders begin to restrict their practices even further. 

In 2007, the number of people falling into bankruptcy was just below 110,000, but after the festive spending of the holiday season accountants at KPMG are expecting that number to climb to 130,000.

KPMG reports that a majority of these people will declare bankruptcy or arrange for Individual Voluntary Arrangements (IVA’s). When consumers agree to an IVA, they are able to repay their creditors in lower repayments over longer periods of time with some of the debt often forgiven – allowing borrows to restart building their credit.

Mark Sands of KPMG said it has been very easy in the past to borrow money and extra credit has been a lifeline for people already in debt, with consolidation loans, second mortgages, and new credit cards having come to their aid. However, Mr. Sands warned that these lifelines will not be there for many people much longer. 

Mr. Sands concluded that high interest rates and homeowners facing increasing mortgage payments are partly responsible for the rise in debt. Homeowners facing the expiration of their fixed-rate mortgages can only expect their repayments to increase in the future, as demonstrated by a £150,000 mortgage repayment growing by £400 a month to £1,390. As repayments double, consumers find themselves unable to escape the credit squeeze.

Brokers, such as John Charchol’s Ray Boulger, note that homeowners can expect to pay £105 more on their mortgage interest because of the Bank of England’s hesitation to cut the base rate by 0.25% recently. As a result, mortgage borrowers all over Britain will see higher payments until the decrease is made.

The delay comes at a time when the cut would have been most needed and justified. Mr. Boulger was among those most expecting the change and added that other “negative economic statistics” supported the impending rate cut.

Mr. Boulger pointed to industry wide price changes and the effects of inflation, such as npower’s 17% price increase, that could poorly effect Britons if the interest cut is not made soon. Although the consumer price index inflation is higher than it has been in the past, it is still only slightly above the central 2% target, Mr. Boulger added.

Despite the slowing effect the global economy is having on inflation in Britain, Mr. Boulger warned, “If the monetary policy committee delays the next cut too long Bank rate may have to fall further than would have been the case with an earlier cut.”

According to MoneySupermarket.com, secured loans could see a rise in popularity this year among homeowners seeking a lower interest rate in the future.

During 2007 people selling their homes in Northern Ireland enjoyed a boom in price growth. However the Royal Institute of Chartered Surveyors (RICS) has noted that both sales and prices are now dropping in steady beat with the global economy.

Tom McClelland, housing spokesperson for RICS Northern Ireland, said, “The market changed considerably during the course of 2007 and the new reality is a market where agents have to work harder to achieve sales and sellers have to be more realistic about asking prices.”

With sales expected to pick up during next year, those selling their houses will experience changes in both competition and price ranges that are significantly different from those in the recent past. They will no longer see the fast price growth they experienced last year in the UK where sales increased to 24.2%, or £150 a day.

Mr. McClelland added that first time buyers “could benefit from the change in the market” as there is “less competition for properties in the sector of the market within the first time buyer’s price range.”

When housing bubbles such as the one seen in 2007 burst, it is often the best time for well positioned purchasers to take advantage of the downturn, and thus will also begin assisting the eventual recovery of the economy.