Adrian Garside

Since New Year there have been lots of interest rate changes for Fixed Rate mortgages.

Without exception, every rate change has been to put the interest rate up.

For example, Skipton have just e-mailed me – they have a 5 year fixed rate today at 3.98%.

Tomorrow it will be 4.68%

For a £100,000 mortgage – that is an extra £700pa interest, or, over 5 years an extra £3500.

Their 3 year rates are rising alot too.

If a fixed rate is what you want, act now.

photo credit: deanoakley

One of the most common searches on google, outside those for ‘adult content’ is for “Mortgage Calculator”.

I often wonder about this. What are people really searching for?

Mortgage Calculator number one will simply work out the cost of a repayment mortgage if you type in the mortgage amount, term and interest rate, which is OK if you know the details you want to investigate, and these are everywhere…actually, everywhere but here, maybe I’ll add one.

Mortgage Calculator number 2 is an Affordability Calculator. These are specific to each lender – so you input your details and it will work out how much they are happy to lend you, assuming credit and survey are both OK. You may think ‘just multiply your salary by 3 (or 4, or 5) but many lenders have a more sophisticated approach, factoring in children, couples and even earnings matter – a family of 4 with a parent earning £30k may get 3.5 x salary, a family of 4 with a parent earning £75k may get 5 time salary. Simply because they have more spare income after family expenses.

Mortgage Calculator number 3 is the one I pay a subscription for. Simple versions are available on many websites – other mortgage broker sites and comparison sites such as Moneysupermarket. To a certain extent they work, but they don’t answer questions, simply because the answers these days are so complicated, but they do give you a starting point to answer questions. Mine takes into account income multiples and other criteria, down to blips on credit records, state benefits etc.

Mine also has a very handy function – lets say we are looking for a 3 year fixed rate. Say 200 products come up to choose from, and some have lower rates with big fees and some have higher rates with low fees. Some have free surveys, some have free solicitors fees and some have little cashbacks. Which is best?

Well, you can get handy with a calculator (a normal calculator, not a mortgage calculator) and add up 36 payments (for your 3 year fixed rate)  and any fees and create a little spreadsheet. Of course, there is a risk -  it may well be out of date tomorrow, I update my software twice a day!

Or, you can find an IFA with the software that does the calculation for every product, at the press of a button. Cheapest may not be best, but the best will be amongst the cheapest and it gives you some solid facts to work from.

“Simples”, as they say…

photo credit: RambergMediaImages

After noticing last week’s downward trend in fixed rates Accord Mortgages are releasing lower fixed rate mortgages tomorrow.

Accord are a ‘mortgage broker only’ lender, and I believe they also restrict the mortgage brokers who use them. Accord are owned by Yorkshire Building Society and have a very good reputation. However, as they don’t have a High Street presence,  if you are interested in getting a  full comparison of fixed rate mortgages, make sure your mortgage broker or IFA has access to them.

I am one of the ones that can use them!

photo credit: nikcnameIt’s been an interesting week regarding fixed rate mortgages.

I’ve had an e-mail today telling me that Nationwide are cutting the rates on some of their fixed rate mortgages  – a quick glance at the products suggests that they are still some way off being cheapest, but they hav etheir niches and individual research for clients will determine if they are good enough. However, it is a good trend.

I see Abbey have released a 4 year fixed rate – this is unusual, there is a distinct trend for consumers to like 3 and 5 year fixed rates, with 4 being overlooked.

However, the rate is good – actually cheaper than some of the Nationwide’s shorter fixed rates. I’m guessing I can read into this that they expect year 5 to be the more expensive for interest rates.

And finally, on the grapevine I gather that Woolwich will be coming up with some fantastic fixed rates for existing borrowers who are on lifetime tracker rates. Now, some of my customers on lifetime trackers are on quite ridiculously low rates, so these fixed rates are going to have to be pretty eyebrow raising to get attention, but if you are a Woolwich tracker mortgage customer who would be interested in a super low fixed rate, send me an e-mail and when they are released I’ll contact you.

The trend seems to be downwards at the moment for new releases of 2 year fixed rates.

Abbey are releasing a 2 year fixed rates for their existing current account holders (so, not all of us then!) but, if you are one and have been for a while, and you are moving house, you have available a 2 year fixed rate with a free valuation and £250 cashback at 3.19% with a £999 arrangement fee.

While not everyone will qualify, indeed, probably hardly anyone will, this new rate is market leading and will force the other lenders to consider repricing downwards – especially Halifax who are puzzlingly uncompetitive at the moment. However, other lenders may not need to reprice this aggressively. The qualification criteria Abbey are imposing means this could be a canny loss leader that costs them almost nothing except the price of marketing materials, but does gain them great headlines.

Nevertheless, conditions or not – it raises the stakes – a price war in the mortgage market has been what the country has been crying out for for 2 years.

We’ve also entered a world where people on ‘good’ variable rates can now consider remortgaging onto fixed for 2 or 3 years.

We all know that a large group of people can negotiate a better deal than just one.

In the mortgage world, I am not a large group, nor are the 9 of us in Scammell Associates. Large is probably 200+ advisers and only the corporates have that many employees. So, a mortgage adviser in a corporate will quite legitimately be able to say he has exclusive offers.

So, how does an individual like me get access to the special deals?

Well, that is a common problem and the solution came with Mortgage Clubs. A mortgage club will attract 1000′s of advisers to join (usually free to join as well) and can then negotiate bulk purchase special mortgage deals. There are probably over a dozen mortgage clubs. The mortgage club will skim, say 2 or 3% of our commission, but in return we get more deals to offer.

Sometimes these deals are relatively unimportant, but currently 2 of the best 3 year fixed rates are only available through mortgage clubs, and Mortgage Clubs have some great 5 year fixed rates too – one at 4.19% looks very good for larger mortgages. You won’t find these deals in the high street.

The thing about mortgage clubs is that some brokers will be able to join just the one one operated by the parent company, which is fine, one is better than none. But, one of the biggest mortgage clubs doesn’t pay commission if you use the Coventry Building Society – one of the biggest remaining mutuals and a lender I have used twice so far this month. So, clearly, while one mortgage club is better than none, it’s still not enough.

I am unrestricted so have joined several mortgage clubs and that means that I can properly shop around the exclusive deals as well as the deals available to the open market.

Halifax mortgages generally have an arrangement fee – well, almost all mortgages do, Halifax aren’t alone in that.

For July they are offering half price arrangement fees on their mortgages – so, if the arrangement fee is normally £999 it is dropped to £497, £499 down to £247 etc.

That’s got to be a bargain, right?

Well, fee’s do come into the equation – if, say, the Abbey have a 2 year fixed rate at 3.5% and so do Halifax, you’d look at the fees and see which were cheapest – usually the survey fee and the booking fee, although if it were a remortgage, you’d have to see if any were offering free legal fees.

What if Halifax had a 2 year fixed rate at 3.5% and Abbey 3.25%. Then you’d compare the fees and the monthly saving with Abbey and see which had the best overall deal.

And, when you are getting very precise, if you decide the arrangement fee will get added to the mortgage, you also need to factor in the interest cost on the larger fee over the smaller fee. Not necessarily over the term of the mortgage, I usually do 7 years which is about the average time people live in a house, unless it’s ‘the last house move’.

Anyway, out of interest (bad pun, sorry) I have just set up a pretend client on my mortgage software and run a league table of 2 year fixed rates on a fairly average £150,000 mortgage. The current leading product for Mr F Example is at 3.15% and over 2 years total costs are £18,388. Halifax are some way down the table with a 2 year fixed rate at 4.49% with a total 2 year cost of £21,087 – which would be £502 cheaper after the half price offer, but still some way off being best.

No doubt you will see alot of adverts from Halifax over the next month, but remember, Halifax are there to sell Halifax products, they won’t tell you what Abbey/Nationwide or any of the others are offering. And vice versa.

An Independent Financial Adviser works for you, to get you the best deal.

photo credit: HowardLakeA secured loan is like a normal bank loan, except it’s secured to the house.

At a first glance, that means to are paying bank loan rates, but if the debt is secured to the house, it’s a mortgage…so why choose this option with such high rates?

Let’s take a step back. So, you have a house, you have a mortgage already and you want to raise some cash – for any purpose, could be the deposit on your new yacht, pay off a big bill or whatever.

Your existing mortgage – could be on one of the extraordinary trackers that some people are lucky enough to have.

So, lets say your existing lender says no when you ask for the extra cash – there could be a number of reasons for this, lenders are tighter on income multiples these days, they may not like the purpose of the borrowings, or the house may not be worth enough to fit their rules.

So, your options become:

Remortgage to another lender. But, by doing this you either incur penalties, or lose the brilliant tracker.

So, then, we look at a secured loan, yes, even though it’s at, say, 12%.

Here’s an example.

You have an existing £250,000 mortgage charged at 1% interest. You want to borrow £30,000. Would you prefer to completely remortgage to 4% interest for the whole mortgage, or keep £200,000 at 1% and have £30,000 at 12%

- the annual interest on the remortgage method is: £280,000 at 4% is £11,200.
- the annual interest on the secured loan method is: £250,000 at 1% + £30,000 at 12% = £2500 + £3600 = £5100.

So, although borrowing £30,000 at 12% is a bit galling, it is still a viable choice as in this example it saves you £6100pa!!

Secured loans are often worth considering and, by many in my profession, often ignored, because they appear to be a poor deal.

To my mind, it’s all about money, and making sure you give as little of it away as possible.

There’s a question on one of the trade websites – I think it was ‘Mortgage Introducer’ asking if IFA’s provide a better service than standard mortgage brokers.

Well, I was a mortgage broker, and now I’m an IFA.

Service – hasn’t changed – I still do my best – I offer the same advice, albeit with a better range of products – I still take it personally when a lender messes up, I’m even worse if I do!

Product range – I think this is the difference, and it’s not all to do with the mortgages. I’m a member of alot of mortgage clubs so have a decent range of exclusive deals available to me – some brokers may not have access to so many. Also, some brokers only have access to some products in theory – I know one company that tells their brokers that they can use any lender they like. But they have an approved panel and the broker gets no commission for going off panel. Guess how many times they need to go off panel.

But, for all the related insurances it makes a huge difference. For instance, the other day I quoted Buildings and Contents Insurance for somebody. There was going to be a charge if they used a product away from the lender, so we needed the premium from the lender first – £59pm. I could get it for £43pm elsewhere.

£16pm saving.

And you can see similar savings on all types of insurance between a cheap provider and an expensive one. And, I don’t recommend policies where the cover is compromised. Quite the reverse.

I’m amazed to read this morning that over christmas 7 lenders increased their mortgage rates – presumably over the past 3 weeks there have been some good days to hide bad news.

Today’s evil lender is the Manfield Building Society increasing from 5.24% to 5.59%.

This rate was already very high – you kind of understood when Nationwide released a ‘second tier’ standard rate a while back – their old standard rate was 2.5%, for all new customers it is 3.99. But 3.99 is still OK and Nationwide need to make a profit or else they’ll disappear.

So, the other 6 of the evil 7 are Ipswich Building Society, Skipton, Accord Mortgages, Scottish Building Society, Cambridge Building Society and Marsden Building Society

Anyway, you really want to know what to do I guess.

Well, if your mortgage is somewhere in the high 3% range or above, it will be worth considering changing mortgage, although it will depend on your personal circumstances as to whether you should change or not.

I’d recommend you speak to an Independent Financial Adviser, preferably one who is an expert on mortgages.