Good and bad news on the mortgage front

July 17, 2008 | posted by Pam Atherton in Banking, Mortgages | comments (0)

Many mortgage advisers are failing to do their job properly,according to an undercover investigation by Which? Money researchers, with only four out of 50 advisers found to be giving acceptable advice.

80 per cent of them failed to provide one or more pieces of key information and 35 failed to do proper checks on the applicant’s ability to repay the mortgage.

Two out of three of advisers tried to sell the mortgage applicant insurance at the same time, often for an unsuitable product, and many failed to tailor their advice to the individual’s needs.

Which? Money editor, Martyn Hocking, said: “With mortgage costs soaring and the spectre of negative equity returning to the property market, it’s important that people get help to find the right deal.

There are still more than 3,000 mortgage deals out there, and the difference in cost can be thousands of pounds a year, so it’s vital people do their homework and chose the right adviser with care.”

The good news is that Nationwide is to cut the cost of mortgages for new borrowers from tomorrow, with rates falling by up to 0.46 per cent on some of its fixed rate and tracker home loans. 

Mortgage rates have fluctuated during the credit crunch due to the cost of wholesale borrowing for lenders. Swap rates, the rates at which banks lend to each other and which influence mortgage rates, have been stubbornly high until recent weeks, when they started to fall.

Nationwide is cutting the rates on its two year fixed rate deal (75 per cent loan to value with a £599 fee), from 6.48 per cent to 6.18 per cent. For 90 per cent LTV mortgages, the rate drops from 6.88 per cent to 6.58 per cent.

On its Lifetime Tracker mortgage, Nationwide has reduced its rates to 5.98 per cent (on up to 75 per cent LTV) and 6.38 per cent (for 75-90 per cent LTV).

Ray Boulger of mortgage broker, John Charcol, commented: “Swap rates peaked in mid-June at 6.5 per cent, but are now 5.82 per cent. Nationwide has also aligned its purchase and remortgage rates making it possible for existing customers to enjoy the same deals as new customers.”

Nationwide attracted a great deal of criticism a few years ago for limiting its best deals to new customers only.

But the mortgage market is expected to remain difficult and volatile in the coming months as the credit crunch continues to take its toll and the outlook for interest rates remains unclear.

Take a look at Defaqto’s uniuqe mortgage calculator to see how much you can afford to borrow:

http://www.defaqto.com/consumer/mortgages.aspx

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Banks take another bashing from the OFT

July 16, 2008 | posted by Pam Atherton in Banking, Savings | comments (0)

Retail banks are in trouble again with the Office of Fair Trading  -   this time over current accounts, with the watchdog accusing them of  levying opaque charges, totalling £8bn a year.

 OFT chief executive, John Fingleton, accused the banks of   “charging more and more for things we can’t see” on the BBC’s Radio 4 Today programme this morning and that personal bank account holders were paying an average of £152 a year for the privilege.

He accused the banks of charging the most financially stretched individuals the most, with 1.4m customers paying over £500m in charges - or an average of £357 a year.

Today’s OFT report shows that of the £8bn revenue banks receive from current accounts,  £2.6bn derives from overdraft charges and £4.1bn from the difference between the interest banks earn on customers’ in-credit balances and the lower rate of  interest they pay to customers.

Mr Fingleton said that three out of four customers have no idea how much interest they are earning on their accounts and that the complexity of the charges made it difficult for customers to compare accounts.

“Few customers know how much they will be charged either before or after costs are incurred. To switch accounts, people need to know the average monthly balance on their account which only the bank can tell them. The complexity and lack of transparency mean people have little incentive to switch,” he said.

But the British Bankers’ Association hit back saying that free in-credit banking was almost unique to the UK and that those customers who don’t go overdrawn can get exceptionally good deals.

A case in point is the Lloyds TSB Classic and Classic Plus accounts which are currently paying 6 per cent on in-credit balances up to £2,500, despite base rate being at 5 per cent.

That said, many banks pay as little as 0.1 per cent on current accounts, particularly where the customer pays in small amounts or less than £500 a month.

Elsewhere, the legal fight between consumers and the banks over the fairness of overdraft charges looks set to be a drawn out battle lasting several years.

David Black, Defaqto banking consultant, comments: “I expect we will see a cap on overdraft charges and eventually the banks will recoup this revenue by ending free in-credit banking.”

In the meantime, you can compare account features in detail by using the Defaqto current account Compare Tool:

http://www.defaqto.com/consumer/current-accounts/compare-current-accounts.aspx

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First Direct resumes mortgage business

May 20, 2008 | posted by Pam Atherton in Banking, Mortgages, UK economy | comments (0)

First Direct has resumed offering mortgages to new customers, following its withdrawal from the market last month, due to it being overwhelmed with new business.

The bank, which is part of HSBC, was receiving five times its normal level of applications when it decided to stop offering mortgages to new customers in order to shift the backlog.

Business soared because it is able to offer better rates than its competitors due to its non reliance on the money markets for funding. Rival lenders, meanwhile, who are more dependent on wholesale funding were pulling deals and increasing rates.

But the bad news is that First Direct has increased rates for new customers on its two year fixed rate deal from 4.95 per cent in April to 5.76 per cent.

First Direct chief executive, Chris Pilling, said: “We’ve honoured the fixed rates available when people first contacted us about their mortgage.”

Elsewhere, Katie Tucker of mortgage broker, John Charcol, said: “Fixed rates have been the most competitive for the last two weeks but funding costs have shot up which means that any good rates available now will be gone in a few days, so make your application immediately if you’ve had a quote.

“All mortgage rates are going up. Whilst trackers were competitive, bank rate is now only expected to fall once or twice again this year because inflation is rising worryingly high. The Bank of England has  said that it can’t drop bank rates as much as originally expected because of the need to contain inflation.”

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