More Homeowners Face ReMortgage Hell as Lenders Pull 100% loans

Homeowners facing finance problems may be a step closer to repossession as mortgage lenders pull their 100% loans.Cheltenham & Gloucester Cut 100% mortgages

This means that for those who need to remortgage soon, not only are rising interest rates from sub prime lenders and falling or static house prices an issue, but they may now find that they are unable to remortgage to the full value to pay off their current mortgage with an existing lender.

If a property worth £100,000 was 100% mortgaged 2 years ago and has fallen in value even by a few percent, then this means that a new mortgage may only cover around £88,000 towards paying off the existing mortgage.

The result?

Many will be unable to remortgage, will fall into the dreaded negative equity not seen since the early 90s, and will be forced onto so-called standard interest rates with their current lender.

With some sub prime lenders this is 10% or more.

This news in from The Guardian online:

“Cheltenham & Gloucester will tell homebuyers today that they must put down a minimum deposit of 10% if they want one of its mortgages, as the clampdown on lending gathers pace. Meanwhile, Royal Bank of Scotland and NatWest are withdrawing from offering mortgages for more than 95% of a property’s value.

C&G – owned by Lloyds TSB – is one of the biggest mortgage providers to rein in its lending in response to the credit crunch. The change means that a typical first-time buyer in London will have to stump up almost £25,000 to obtain one of the company’s home loans.

RBS/NatWest has already pulled out of offering mortgages above 95% through brokers; after March 7 this will also apply to branch-based home loan applications.”

Read the full article here

Advertisements

Let’s Talk Ourselves Into a Housing Market Crash

Recessions are an interesting phenomenon.

This is because they are created by belief.

If everyone believes there is going to be a recession then they act accordingly. We spend less ‘just in case’ and we put off important decisions like moving house and taking on a bigger mortgage ‘just in case’.

The irony is that there is still the same amount of money out there, it’s just that in a recession those with the money (like banks) decide to either hold onto to it (just in case) or charge higher interest to borrow it (just in case).

major.jpg

I remember clearly the last house prices crash in the late 80s and early 90s. No sooner had the 90s arrived and the recession looked like picking up, than we got a very grey and dull John Major telling us not to grumble, tighten our belts and so on.

The result?

Another immediate recession because everyone was depressed and reluctant to move their money around (from banks lending to you and I deciding whether to pay for a holiday).

The entrance of Blair in 1997 had a remarkable effect on that recession because suddenly we had a man who was upbeat and positive.

Nothing else changed, the politicians still lied to us, scandals still happened, the poor got poorer but suddenly there was an upbeat feeling everywhere and the cheap credit era was ushered in to fuel the spectacular growth in property prices and high street spending.

Now we have Brown, another miserable Prime Minister – at least Major wasn’t grumpy as well as dull.

So what’s changed? Nothing, really.

Brown was responsible for the Government finance policies behind Blair, now he has Alistair Darling following the Brown plan – yet recession is looming and house prices set to crash.

gordo.jpg

The media also play their part. Just how many editions of Trevor McDonald’s Tonight programme can they make telling us the housing market is booming and buy to let will replace your pension? Eventually, some bright spark has to make a feature on ‘where will it all end’?

The house prices crash has been predicted by doomwatchers for the last 7 years.

Even if it does need a correction, there is too much money invested in property in the UK (not to mention too few properties for the growing population) for it to fall far. And any fall will still be way above where it was 5 years ago.

Gordon Brown said no more ‘boom and bust’. Unfortunately for him he has stayed around just too long to be able to blame anyone else for what is after all a cycle of nature.

The reality is though, if there is a crash or correction or recession it will only be because we have all talked ourselves into it, after years of talking ourselves out of the last one.

The Return of Negative Equity as House Prices Fall Again?

The Council of Mortgage Lenders has said that according to the information collected from their members that this December shows a fall in house prices in real terms, unprecedented since the early 1990s.

This is further bad news for those facing repossession.

Negative Equity Graph

Not only are the rises in inter bank lending interest rates causing problems for those on sub prime mortgages and those trying to remortgage, but the drop in house prices and fall in sales also means that for many homeowners the equity left in their homes is shrinking for the first time in many years, and heading towards the dreaded negative equity last seen in the lat 1980s.

Negative equity can occur when the amount of money mortgaged against the property is greater than the value of the property.

For those on an 85% mortgage it means that house prices need to fall 15% to allow that to happen.

But for the tens of thousands on 95% mortgages, it means that if your house was worth £200,000 and your mortgage was £190,000, it only takes a relatively tiny fall of £10,000 in the market value to put you in the negative equity bracket.

If you then face problems paying your monthly mortgage you will literally have run out of equity to remortgage.

For those on 100% mortgages acquired in the last 12 months ANY fall in prices can mean instant negative equity.

David Cameron Asks Mortgage Lenders Not to Repossess

From BBC 11/12/2007

“Many experts are predicting that the housing market will slow
Home loans became even more expensive to re-pay in October because of higher interest rates and rising house prices, the Council of Mortgage Lenders said.

The CML said that interest repayments swallowed up 20.6% of first-time buyers’ monthly incomes.

That was up from 20.4% in September and the highest level since 1991.

Meanwhile, Conservative leader David Cameron will ask banks to do more to help householders avoid repossession when their fixed rate mortgages end.

Mr Cameron wants the industry to take a more sympathetic attitudes to borrowers who get into arrears, and to plan now to deal with an expected flood of home owners who might be facing repossession.  ”

Let’s hope that the banks take some notice of Mr Cameron.

Mortgage Approvals at 3 Year Low – Repossessions Rise

From BBC News 29th November

The property market is showing signs of slowing down, analysts say.

The number of mortgage approvals has fallen to its lowest level for nearly three years, says the Bank of England.

In October there were 88,000 new mortgage approvals, down from 100,000 in September and 128,000 a year ago, the Bank said in a report.

The figures suggest that the property market is slowing down quickly, under the impact of higher interest rates.

Earlier, lender the Nationwide said house prices saw their biggest monthly fall for 12 years last month.

Mortgage approvals have been falling steadily since the start of the year.

But October’s number was the lowest since February 2005 and represents a slump of 31% from the same month last year.

The fallout from this falling approval rate is affecting not just those who need to remortgage with sub prime lenders, but also many amateur buy to let landlords seduced by years of press and TV coverage into thinking Buy to Let can be an easy way to make money.

If landlords get repossessed, then there will be more tenants evicted by lenders, and rents will rise to record levels as the source of rental accomodation dries up.

For free help with house repossession visit our full website