Original article

After the last article on Costa del Sol bank repossessions I received an enquiry about how bank repossessions work in Spain compared to the UK as he was having trouble with his repayments. So please find below the stages that you expect should you (god forbid) have to deal with in the case of non-payments.

Arrears

The first stage would be arrears, where the borrower is unable to meet payments. The mortgage provider will be in contact asking for an explanation and start charging you a variety of penalties. The lender may also attempt to renegotiate the existing agreement.

IMPORTANT NOTE: If the borrower is are having difficulty meeting repayments, contact you mortgage lender prior to arrears as they may be willing to discuss renegotiating you agreement, off-setting payments, etc… as it is not in the banks interest to repossess your property.

90 days later

90 days after the first arrear, the debt collection department will attempt to recover the defaulted debt.

Up to 30 days after default

The borrower will receive a certified document from the lender informing you of repossession proceedings through the courts.

Further 10 days later

Legal action will be started against the borrower for outstanding repayments and to auction the property to the public to reclaim all monies owed.

Up to 16 months later after legal action

The property is put on auction to be bid upon. If there is no purchaser, the property becomes the possession of the lender for 50% of the properties value.

If lender becomes the new owner, there may be additional monies owed to the lender as in most cases the mortgage will be higher than 50% of the value of the property. Plus the additional penalties for arrears, court costs, etc… there may also be an attempt to reclaim owed monies from any guarantor on the mortgage as well.

The land registry information is then updated to confirm the new owner.

6 months later.

Eviction notice. Court officers along with police and a locksmith will evict the borrower. Although if it is the borrower’s main residence and they have children, it is far next to impossible to have the borrower evicted. The debt would remain though.

Hope this gives you a better idea of how bank repossessions work in Spain. Please note I have kept the date relatively general as they are not clear cut

Regards

Andrew Belles

Costa del Sol property



Real Estate Professionals

Renting a house should be nice and simple. As a tenant there’s very little risk to you, especially if you’re only signing a lease for a few months.

Or is there? See, while it’s easy to spot a flat or house that looks like it could do with a lick of paint, there are lots of other issues to consider when you rent property.

Use this simple guide to assess your potential new home when you look round it.

Do some research before you view: Even though you are only renting, you should use the same tricks buyers do to check out a potential new home. Visit the area at different times of the day, on a weekday and at the weekend. Is the street a shortcut for angry drivers during rush hour? Do local school children gather around the shop on the corner? Is the street the main route home for local clubbers at 2am every morning? These factors don’t matter so much when you rent property, but could affect your quality of life forcing another move in a few months’ time.

Take someone with you to view the property: Never look at a potential home on your own. Because while you’re wondering if you can live with the pink bathroom, your friend will be finding the real flaws. It’s also a sensible security measure, especially if you are meeting a private landlord, rather than someone from the local property shop.

Compare the property to your lifestyle: Got a car? Got a driveway or parking space for it? Where are the nearest shops or other amenities? When you rent property it’s easy to overlook these things, yet they’re just as important as when you actually buy a house. Don’t forget to look into public transport and the extra costs of living there, such as council tax and any residents’ parking charges. And have a think about how much stuff you have and whether it will all fit in your new home. It’s also worth checking if pets are allowed when you rent property.

Is the property in good condition? Even though it’s not your responsibility to repair the fabric of the house, it will be a lot less hassle to ensure it is in good nick before you move in. Once you have signed a lease there is little incentive for the landlord to undertake significant repairs. Use their desire to rent property quickly as a lever to get major projects completed. Check the roof and gutters are sound, and look at the doors and drains carefully. What kind of condition is the garden in – and whose responsibility is it to keep it well maintained?

Can you decorate? Some landlords want to keep control over their interior, some are happy for you to slap paint anywhere you want. Check before you agree to rent property.

What horrors await? Keep an eye out for some terrors inside the property. Are there mouse traps or droppings? Check for signs of damp in every room, including flaking paint and loose wallpaper.

Check the building is safe: There should be at least one working smoke detector in the property; many owners provide fire extinguishers or blankets. The landlord must get a gas safety inspection by a CORGI registered engineer once a year. Does the electrical wiring look in good condition – or at the very least do switches it look like they have been installed within the last few decades?

Can you have a nice bath? Bathrooms are often problem areas when you rent property. So check all taps work OK and you can get hot water on demand. It’s also worth road testing the toilet and checking the sinks and baths aren’t damaged or cracked.



Rent Back

For anyone with an investment property, now is not the time to be selling. After enjoying a period of growth, house prices are currently dropping amid concern of a credit crisis. However, those who can afford to hang on to their properties could see their investments serving them well in the future.

Areas of Yorkshire, Humber, London and the Midlands are the only places to have seen small property price growths but this is much reduced from last years figures. There has been a 13 per cent drop on the total amount of house sales in comparison to the previous year, across the country.

Mortgages are becoming increasingly difficult to get hold of. In fact, banks are beginning to turn away borrowers who are not already customers with them and turning down mortgage applications due to apparent lack of funds.

When you can get a mortgage, a good deal is even harder to come by with packages being withdrawn left, right and centre. This leaves many borrowers with no choice other than to take the banks standard rate mortgage, assuming they can get one, that is.

This situation has left many with no chance of getting on the property ladder and bringing about an influx of tenants and landlords. Like I said, for those with an investment property, things are looking up for you.

According to statistics, many more people are renting property than buying. This applies across the board, whether they be single professionals, couples or families. They all need your investment property.

Then, of course, you have the influx of immigrants who all need housing. Of the 200,000 immigrants arriving at our borders every year, all of them will need housing and virtually all of them will be in rented accommodation.

Thousands of homes are repossessed every day of the year and these unfortunate people will be looking for a home to rent. This is where your investment property becomes invaluable.

The UK has the highest proportion of single parents than throughout Europe and many will be looking for rented accommodation. Then we have the divorces where it is highly unlikely that both parties will be able to afford to buy another house. At least one member from each divorce will be looking for someone like you with an investment property.

Of course, it’s not all about cashing in on other peoples misery. People have always rented property and it’s only in the last fifty years or so that it has become fashionable for the average person to actually have a mortgage. Before that, you had the few landowners and property developers that would hold ownership of many investment properties and would rent these out to the masses.

Many people these days are unsure of where they want to settle. After all, the world is a much smaller and more accessible place these days. Many tenants will take time to travel, taking work experience in different areas and also taking up training and education in various parts of the country.

All these people are looking for someone like you with an investment property they can lease from you, so to give it up because finances are looking a little tight the world over would be ludicrous. These blips in the economy come and go all the time and if you can afford to ride it out, it would be wise.



Sell House Quick

Many business borrowers do not prepare adequately for the commercial mortgage business loan problems that are common in most business financing scenarios. By anticipating typical commercial loan difficulties, business owners are more likely to avoid potentially disastrous business finance consequences.

With rapidly deteriorating financing for residential investment property, overcoming business loan and commercial mortgage problems is even more important. This summary provides an introduction to four critical commercial loan factors and should assist commercial borrowers to better anticipate key business financing difficulties.

It is not unusual to find that business investment lenders and business loan brokers are not as forward-looking about business financing and investing difficulties as most borrowers would expect, and I have published another article about commercial lenders to avoid. The focus here is on four typical commercial mortgage loan and SBA business loan difficulties often overlooked by commercial lenders and borrowers.

Commercial borrowers should be prepared for commercial loan scenarios that involve unexpected business financing problems. With business financing there are several key commercial mortgage problems which should be avoided. Business loan problems are more serious and prevalent than many borrowers would imagine.

Some of these commercial mortgage business loan difficulties might be unavoidable, but in most cases these business financing and SBA loan challenges can be successfully overcome. Commercial borrowers will be poised to take proper corrective action if they are aware of common commercial loan difficulties.

Avoidable Commercial Real Estate Investment Property Financing Scenario Number One: Use of secondary business financing -

Many commercial borrowers want the flexibility to use subordinated debt (a seller second or other secondary financing) in order to acquire a commercial property or business opportunity investment with a smaller down payment. Many forms of business investing will not permit a seller second or other forms of subordinated debt. With a commercial loan via non-traditional business lenders, a commercial borrower can use subordinate business financing (including seller seconds) to reduce the amount of their down payment.

Commercial Mortgage Example Number Two: Sourcing-seasoning assets and seasoning of ownership -

Some commercial lenders will require borrowers to document the source of the down payment for a purchase (sourcing). Many business lenders require borrowers to document where down payment money is coming from, often for up to 12 months in order to provide seasoning confirmation. Ownership seasoning is determined by establishing a minimum period for ownership prior to being eligible for refinancing.

Such a problem will probably not deter all borrowers. When it does apply, business borrowers should insist on a lender without seasoning and sourcing requirements.

Business Financing Example Number Three: Commercial mortgage recall terms -

Business loan recall conditions will often allow the commercial lender to force the borrower to repay their loan before the normal loan expiration. If a commercial loan agreement does not include recall terms, such a possibility is not of immediate concern to a borrower.

Commercial lenders will routinely include recall conditions in a business loan agreement. The provisions which will prompt a recall will vary and typically include annual business lender monitoring of financial statements, tax returns and credit history. Without agreed income, tax returns and credit standards, the lender can choose to require the borrower to pay off the commercial loan within a very short period of time.

Contingency Plans for Business Finance Recalls: What to do about a commercial loan recall -

To avoid an unanticipated recall scenario, commercial borrowers would be wise to consider only commercial loans which do not have recall terms. For commercial borrowers who have recall provisions in their business financing agreement, it will be equally wise to consider refinancing their business loan or commercial mortgage before a recall occurs so that refinancing is accomplished when it is most appropriate for the borrower.

When borrowers receive a business financing recall, they must quickly obtain refinancing assistance. When reviewing commercial loan choices for refinancing, borrowers should attempt to exclude potential lenders that require recall terms.

Business Loan Example Number Four: Business financing that needs a long-term commercial loan -

Is long-term investing and financing really possible for a business loan? Some business investment lenders will only offer 5 years (or less) before commercial real estate financing will expire with a balloon payment due.

There are commercial mortgage programs which can provide long-term financing, even though many lenders will only offer shorter-term options for investment business financing. Longer-term commercial real estate financing will often be the critical difference that facilitates a successful business investment because a new business loan will not be required for many years and commercial loan payments will also be reduced.

Additional Commercial Loan Problems and Solutions -

Unfortunately commercial borrowers will frequently encounter commercial mortgage business loan problems similar to those described here. To better prepare for this, an advisable approach is to explore business financing resources that will facilitate a better understanding of complex commercial loan issues. The Commercial Real Estate Loan Guide and The Working Capital Management Guide are two examples of business finance resources that will provide possible solutions for many difficult commercial financing situations.



Rent Back Fast

If you find yourself in the position were your flat may be repossessed and are looking ways that you may be able to avoid being evicted from the property that you own then a “Sell & Rent Back Scheme” might be for you.

The fundamental principle behind the Sell & Rent Back Scheme is that the current owner of the property is able to sell his or her house quickly to avoid being evicted and have the property repossessed while at the same time not having to leave the property and be able to rent it back as a tenant, quite often it is not unusual for these schemes to include the ability to buy back the property at a later stage if your financial situation has improved.

By using this method it does see that all your debts are cleared not only the outstanding balance of the mortgage but any secured debts and mortgage arrears will be paid in full as opposed to the alternative of the property being auction any thing outstanding will be chased by the lender until it is paid back in full also of course if the property went to auction would be removed from your house and would have to find alternative accommodation.

For this reason this solution is increasing in popularity in the UK and is supplying an alternative to that of eviction amongst the UK’s growing credit crisis also referred to as “the credit crunch”

Even if you find your self in the situation were eviction is just days away by engaging in one of these schemes you will find your lenders more than willing to cooperate as they would much rather prefer this alternative were they get paid back in full than the expensive and lengthy process of eviction, repossessed, auctioning and the chasing of the remaining debt.

go now to http://www.avoidhomerepossession.co.uk/



Quick Property Sale

There may be periods in a homeowner’s life when his or her personal circumstances change dramatically and it makes economic sense to sell the house as quickly as possible, thus releasing the capital that has built up in it. The reasons are many and varied and may include:

1. The breakdown of a relationship. Whether the partners in the house are married or not, there may be financial pressures caused by the breakdown of the relationship. One of the partners may have started another relationship, in which case they may require capital release in order to finance another mortgage or rental costs. Some of the Sell and Rent Back companies will buy the house very quickly, and rent it back to the remaining partner at a competitive rate.

2. The homeowner may have to move with his/her job, either within the UK or abroad. If this move is seen to be fairly permanent, then capital will be required to finance a new home in the new location. For those relocating or emigrating, some of the Sell and Rent Back companies will buy the house in as little as 14 (working) days.

3. If the homeowner has been in arrears with mortgage payments they could fear the prospect of having their home repossessed and see that a quick house sale would be a financially better alternative and enable them to avoid repossession.

4. Should one of the partners in a house die, the remaining partner’s income may be insufficient to cover the mortgage, then again, a quick house sale may be seen as a beneficial alternative to having the home repossessed.

5. In a falling house market, to sell your house now may be a shrewd move. If financial experts project that house prices may fall 20%, then the homeowner could take the view that selling the house quickly, without Estate Agent’s or Auctioneer’s fees, for as close to its current value as possible, will reduce the capital loss. The house could then be rented back at a competitive rate until the market is viewed to have ‘bottomed out’.

The average level of personal debt is increasing, and a quick house sale may be seen as one way of paying off all debts in one go. This is especially useful if you suffer a reduction in income which is viewed as a temporary situation. To sell the house, pay off the debts and live in rented accommodation for a while may be a sensible strategy. Indeed, with many of the Sell to Stay companies, you can sell your house quickly and rent it back at a competitive rate.

There are many routes to achieving a quick house sale.

1. Estate Agents – Estate Agents will always tell you that they can sell houses very quickly. This may be true when the market is rising and there is a lot of competition for every house, but when prices flatten, or indeed fall, houses stick and your ‘quick sale’ may be lost.

2. Auction – Auctions are the ultimate vehicle to value a property. Any property is only worth what another will pay for it, and an auction with many interested parties in the room will produce the best market price for a property with a very quick sale.

3. However, anyone who goes to an auction will be expecting a bargain – they view the items that go to auction as being ‘on-offer’ and only there because they have failed to sell elsewhere. You may not get a good price at auction.

4. Sealed Bid – Requesting sealed bids is another good way of valuing a property. However, the process suffers from the same market pressures as the previous two. From the buyer’s point of view, putting in a sealed bid when the market is rising is a worrying process, as he/she doesn’t want to bid too low for fear of losing it. This can result in some extremely over-priced bids. On the other side of the coin, in a falling market the worry is that the buyer may bid too high and end up with a home in negative equity. This results in the seller receiving a number of disappointingly low bids.

5. Sell and Rent Back – Sell and Rent Back companies will buy your house very quickly – many of them promise to buy it within 14 (working) days. They will give you 80% or more of the value of your house – but that’s it! You don’t have to pay the Estate Agent or the Auctioneer, just your legal fees. Furthermore, many of the Sell and Rent Back companies will allow you to stay in your home and rent it back at a competitive rate.

So if you need a quick house sale, you must try to strike a balance between speed and the amount of money you will receive from the different methods of selling your property.



Passive Income

A survey for the homeless charity Shelter has revealed that in 2007, more than one million people in the UK have used a credit card to pay their mortgage.

It seems that young people, including first time buyers are so eager to remain on the property ladder that they have resorted to this drastic action. More that 7.5% of people aged 18-24 have admitted paying their mortgage with their credit card.

But if you think that’s bad, it gets even worse.

It has been reported that some mortgage lenders are actually advising their customers who have repayment problems to take this course of action.

Truly Shocking!

The interest rate on most credit cards is at least 50% higher than even the worst mortgage rates available in the sub-prime sector. And the repayment schedule for your credit card debt will be spread over a much shorter period of time.

So in effect you’re swapping long-term, low-cost debt for short-term, high-cost debt.

Even if you use a credit card that provides 0% interest on purchases, the debt will still have to be repaid at some point in the future.

Okay, it might buy you a little time when you don’t have to pay interest, but when the interest free period comes to an end, you’ll have to find another 0% deal, which might be almost impossible in the current economic climate. Credit card providers are clamping down on easy credit, special 0% interest rate deals are scarce and many lenders have implemented balance transfer fees.

And if you miss your credit card payment date just once, any special deals may be canceled and you’ll have to start paying a hefty rate of interest, in addition to your continuing mortgage repayments.

So wherever you live, if you’re having problems making your monthly mortgage payments, don’t follow such reckless and irresponsible advice. Once you cross this danagerous financial barrier, the countdown to repossession starts ticking.

If you find yourself struggling to repay your mortgage, there are several options worth exploring.

The first step it to talk to your lender and see if they can suggest any sensible solutions to help you overcome the problem. Don’t let these reports about irresponsible lenders put you off contacting your mortgage provider. They may be able to offer you a solution that doesn’t involve making your situation worse.

If your financial problems are only likely to be temporary, you may be able to arrange a payment holiday so that you don’t have to make mortgage repayments for two or three months.

However, in many cases, this option will only be available if you’ve previously made overpayments. It also mean that the overall size of your mortgage debt will rise slightly.

Alternatively, you could shift the monthly payment date so that your mortgage payment is deducted from your bank account just after your salary has been paid in.

On the other hand, if your repayment problems are likely to exist for the foreseeable future, it’s important to consider other ways to reduce the size of your monthly repayments.

You could extend the term of your mortgage, repaying it over 27 or 28 years instead of 25, or you could switch from a repayment mortgage to an interest only mortgage until your financial problems pass.

However, both of these are major financial decisions that should only be taken after appropriate financial advice from a professionally qualified advisor.

As a last resort you could consider stepping off the property ladder temporarily. At the time of writing, the property markets in many countries are generally thought to be overvalued and this would allow you to find a more affordable home once the property markets return to sensible levels.

Whatever happens, don’t default on any of your mortgage repayments as it will dent your credit rating and could lead to an increase in the rate of interest that you have to pay on your debts.

Just make sure that you find a safer solution than whipping out your credit card!



Sell and Rent Back

You have found your ideal retirement property – safe, secure, convenient and neighbourly. All you now need is to sell your old home – easy!

It should be but the process is rarely trouble free and never quick. A recent MORI survey said that transaction times in the UK now averaged over 6 months, among the slowest in Europe.

The problem revolves around the fact that, with some 80% of people owning their own home, most need to secure a sale on their present house before they can purchase a new one. As a result, even when you find your dream retirement home and a buyer for your present property there is invariably a chain of transactions which all need to be pulled together simultaneously.

However, for many situations, time is of the essence and deadlines have to be met. This can be for a variety of reasons, eg you may have found your “dream retirement home” but need to secure it quickly or, a builder may be offering huge incentives for a quick completion while you are constrained by the market to a later and uncertain timescale.

Selling to house buying companies is the only foolproof method of avoiding the stresses, delays and uncertainties of selling your present home in the open market. Most importantly it secures the property you want at the time you want it as they can synchronise our purchase of the current home with your new purchase. If the old home is worth more than your new one you may even manage to buy without the burden of a mortgage.

How can house buyers help?

In short, house buyers can buy your existing house, quickly and for cash, enabling you to secure your retirement property.

Some of their schemes have proven especially appropriate for people buying in the retirement sector as the combination of convenience, speed and the certainty of achieving the move they want in a cost effective way without continuing liability suits their needs precisely.

What are the benefits of using a house buying company?



You can guarantee the purchase of your new retirement property

We can complete the sale process quickly and to suit your timescales

You avoid estate agency fees

You avoid the stress and uncertainty of selling on the open market

You avoid having the stress and security issues of multiple viewings

Your next house, its cost and your moving timescale is guaranteed, enabling you to relax





Repossession

It’s been a very dull summer this year, not only in the form of the weather but also in the housing market. Indeed, there are very definite signs throughout the UK that the property market is beginning to stall. Many homeowners put their property on the market in May or June hoping to achieve the double whammy of selling quickly and avoiding the production of a Home Information Pack (HIP). But many of those properties are still waiting to attract a buyer and estate agents are now struggling to sell properties in weeks that previously sold within hours.

However, although bad for sellers, this news has now finally given a glimmer of hope for those wishing to get on the property ladder. “We’ve entered a buyer’s market,” says Lucian Cook, the director of residential research at Savills estate agents. He believes that sellers need to be more realistic about what their properties will sell for and how long it will take.

Supporting that belief, housing market analysts Hometrack point to the significant change in the length of time that properties are taking to sell compared to three months ago. That particular gap in Greater London has shifted from two to three weeks, while the wait in Wales is now three times longer at over nine and a half weeks. According to Hometrack director Richard Donnell, “the froth is coming off the market” and there is a definite downturn in the market in the East Midlands, the north-east and Wales.

However, as with every trend there is the exception that proves the rule, and in this case it is property for sale in Chelsea, London’s most expensive borough. Unlike the rest of the UK, property in Chelsea is still being snapped up by eager buyers, fuelling a 32% rise in house prices in the borough of Kensington and Chelsea over the last year. So despite what might be happening in the rest of the UK, if you’re looking for property to buy in Chelsea, expect to pay at least the seller’s asking price for quite some time to come. Kensington and Chelsea may be immune to the workings of the UK property market at the moment but it may just be lagging behind the general trend.

That trend identifies the beginning of June as the time when interest rate rises finally started to bite, resulting in homes being marketed at prices less than the previous two months, up to 10% lower in the £500,000 to £1.5 million range. Sellers are now expecting to negotiate lower prices than advertised and take longer to get a firm offer.

So is all this bad news for anyone wishing to sell property in the UK? Many experts point out that this is not a crash, but the start of a predicted minor ‘adjustment’. They expect a recovery in the second half of next year, but whether or not that will happen remains to be seen.



Sell and Rent Back

The UK Mortgage Market (May 2008)

 

In recent months, much has occurred in the mortgage market and with such a lot of press/media coverage, this summary may be helpful to people who wish to understand and ‘take stock’ of the current situation.

 

What is happening?

 

The UK Mortgage Market is presently operating in a manner that it is unlike any other within the past 30 years.

 

From a position of over-supply this time last year – with intense competition among lenders – both new and traditional – on criteria and on price – we’ve moved to a state of under-supply, tightening criteria, widening lender margins and, consequently, higher prices to the consumer.

 

Many lenders have even left the market – some large, some small. Others have withdrawn from new lending and are ‘sitting on their hands’. Even those with strong balance sheets funded by deposits and savings accounts are restricting their new lending in order not to damage their operations or overrun their funding budgets.

 

The most obvious consequences of this situation are a shortage of mortgage products, mortgage products being withdrawn at very short notice, mortgage products being re-priced upwards and generally more rigid lending criteria.

 

Why is this happening?

 

There are three key reasons for this happening:

 

Firstly, a lack of liquidity in the money markets – that is money that would have been available for banks to lend to each other. In the past (the distant past!) banks would have used their deposits – money in savings accounts – to fund mortgage and other lending. More recently, however, mortgage lending has increasingly been funded by money markets – borrowing from other banks – or from the sale of ‘packages’ of mortgages (Mortgage Backed Securities or MBS).

 

Unfortunately, because of the incidence of very high mortgage arrears within MBS packages and, particularly, those used to fund the American ‘sub-prime’ mortgage market, banks have had to write off huge sums – billions of dollars or Euro. It is estimated that 20% of lending for a number of years in the USA has been to the ‘sub prime’ market (the UK ‘sub prime’ market has been better controlled and has accounted for only some 7-8% of overall lending).

 

 

 

Major banks are now in a scramble to have less money market funding for mortgages and other loans and more funding for such lending by deposits – just like the ‘old’ days! And, if a bank has surplus cash e.g. from a mortgage that is being redeemed, it is not going to lend it to another bank that may have financial problems hidden away in its balance sheet. The interest rate at which banks lend to each (LIBOR) is much higher than the Bank of England base rate (3 month LIBOR is, at the time of writing, 5.8% compared to the BOE rate of 5%) and, generally over the last few years, 3 month LIBOR has been running at only 0.15% to 0.25% above the BOE rate.

 

In short, there is not much cash around to fund new mortgage lending!

 

The second key problem is, simply, confidence. Lenders fear that, as a result of all of the other problems in the market, house prices will fall and that mortgage loan performance – arrears – will worsen considerably. The consequence of this is the tightening up of lending criteria e.g. the disappearance of 100% mortgages – many lenders are now insisting that potential borrowers have a significant deposit. No lender wants to be the last one left in the market with wide-open lending criteria.

 

The third issue is that of the lenders’ mortgage processing capacity. Lenders’ administration systems can run into serious problems if too much volume is taken on too quickly and many have taken the decision to ‘cool it’ by adjusting criteria or price (or both). In some cases, lenders are no longer ‘open’ for new business.

 

Of course, the situation could become a self-fulfilling prophecy – house prices will fall because buyers cannot obtain mortgages to buy property. This possibility is certainly a serious concern.

 

When will things ‘return to normal’?

 

The short answer is that nobody knows! Indeed, it is quite possible that we won’t see a return to the sort of market that we had in 2006 and 2007 for many years. Arguably, the market then wasn’t normal either – there were plenty of aggressive new lenders with big aspirations who made the market compete on risky terms with little or no profit margin. Following their departure from the market, the remaining strong lenders are rebuilding a more appropriate approach to risk – taking lending criteria back to where we were several years ago.

 

The hope in the market is that, perhaps, a year or so after the ‘credit crunch’ started and when all of the banks have gone through a whole new reporting cycle, all of the bad news will be exposed and the write-downs and losses will be history – albeit it, recent history. To date, we are some nine months into the ‘credit crunch’ and, if the history of previous financial crises is a guide, we are more than halfway through the current squeeze.

 

 

 

 

If the confidence issue can be handled, we may see lenders becoming competitive again and with a return to larger lending appetites and willingness to grow.

 

Essentially, everything points to a slow and steady recovery; there will still be tough times ahead with the numbers of arrears/repossessions ticking upwards.

 

The Bank of England has made £50 billion available to banks via a ‘Special Liquidity Scheme’ and this is a deliberate move to free-up liquidity and confidence in the market; this has to be considered positive news.

 

Are there any reasons to be cheerful?

 

There are some positives in the current situation – fundamentally – the fact that the UK is not USA!

 

In the UK, employment is at record high levels (unlike the early 1990’s) providing a high demand for housing. At the same time, there are not enough new homes being built in the UK. The economic law of supply and demand means that the housing market is strongly underpinned and is unlikely to suffer a ‘crash’.

 

Overall new lending is clearly down but demand remains strong, in particular for ‘buy to let (the rental market is boosted at such times) and for re-mortgaging (rate switching, debt consolidation and capital-raising). The lending for house purchases is quiet and will remain so until confidence returns to the market.

 

In addition, interest rates are on the decline and some economists have predicted the possibility of BOE rate becoming as low as 3.5% to 4.0% next year.

 

Whether falls in BOE rate will be followed by falls in mortgage rates is far from certain – with sufficient cuts, the cost of borrowing should become cheaper and, perhaps, encourage more people back into the mortgage and housing market.

 

Mortgage brokers remain the most favoured route for consumers to obtain mortgages from lenders and the proportion of mortgages arranged by brokers has increased over several years as ‘shopping around’ has become more common. Customers need advice more than ever and independent brokers have a key role to play in this regard – in order to obtain the best possible deals for their clients and to protect their client-banks from other brokers or lenders hunting for good quality business.

 

 

Nigel Osgood on 01628 636360 ext. 257 nigel@afpmortgages.co.uk

 

www.afpmortgages.co.uk – Winners – ‘TOP UK MORTGAGE IFA 2007’ – The annual awards ceremony sponsored by Legal & General and Mortgage Solutions Magazine

 

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



Sell House Quick