Phil asked:


Government efforts to ease the financial strain on the mortgage market were ignored by building society Nationwide, as they announced plans severely tighten its lending criteria for new customers.

Despite a £50 billion cash injection from the Bank of England to help the tension surrounding the money markets, Nationwide declared that mortgage borrowers would have to double their minimum deposit to 10 per cent for them to be considered for most of their products.

Nationwide spokeswoman, Zoë Stevens said, “The mortgage market will no transform overnight and we need to be able to manage our business in a prudent way while the Special Liquidity Scheme takes effect. These changes will allow us to maintain control of the volume of business the Society is attracting, while enabling us to continue offering our full range of mortgages to our existing members in a controlled way.”

The Special Liquidity Scheme (SLS) was a rescue package set up to try and prevent lenders from having to cut their maximum loan amounts on offer to new customers. However, Nationwide only considered mortgage applications from people if the funding was for 90 per cent or less of the property value, on all but two of their products. They also reduced their £1 million maximum loan amount by half, to £500,000 for all new customers.

Nationwide weren’t the only firm squeezing their lending criteria as Abbey introduced a rule where interest only loans would be available up to a value of 50 per cent unless the customer had a linked repayment channel such as an ISA. They also said that borrowers of more than 90 per cent loans of their property value would be required to produce one month’s bank statements in addition to the usual credit checks.

Financial experts had hoped that the Special Liquidity Scheme would cause a drop in the rate at which banks lend to one another, which would result in an easing of rates and conditions for customers.

This government move though seemed to have failed with borrowers being warned that their greatest worry now is actually being accepted for a mortgage, rather than being bale to afford one.

A spokesman for money comparison site Moneyexpert.com, Sean Gardner said, “Availability is the biggest hurdle despite all the Government efforts to get lenders lending. If you don’t have a substantial deposit or equity in your house, then your choices are now severely limited. When disposable income is already at breaking point for many, it is frankly impossible to see how those with limited savings will find a way to get a foothold on the property ladder.”

The Royal Institute of Chartered Surveyors March 2008 survey revealed that the rate at which house prices had fallen during this month had been the lowest on record. Their figures showed that 78.5 per cent more chartered surveyors had seen a fall in house prices rather than a rise. This was an increase from 65.7 per cent for February 2008.

A Royal Institution of Chartered Surveyors (Rics) spokesman, Jeremy Leaf said, “Settlement is at a very low ebb and will continue to remain depressed while the economy suffers from this unique liquidity blight. The slowdown in prices is directly attributable to a lack of available finance which has hit demand.”



Susan

Mortagerates asked:


Trends On The American Mortgage Market

Most recently, Freddie Mac, second biggest and influential funder of American mortgage loans announced that its current agreement to purchase various mortgages gradually reached its highest level after the specialized USA regulator eased most capital limitations. This significant diminution of the constraining measures is executed as a final attempt to provide further stability to the continuously worsening American real estate markets by increasing total purchasing power of both government sponsored enterprises by extra $200 billion.

A bit later Freddie Mac entered several new contracts to buy loans worth $43,5 billion, suddenly increasing compared with only $14,8 billion for the previous month. Finally total portfolio of this leading financial company as well increased to $712,5 billion. In the similar way, at common annualized rate, total home mortgage investing assets has increased up to remarkable 9,9%. Despite all these unquestionable positives, unfortunately, general delinquency rate as well rose up to 0,74 percent of the loans.

Similarly, current rates on 30-year mortgages climbed up to 6 percent for the first time in 6 weeks, because of the increasing ubiquitous anxiety of the financial markets about quickly rising inflation pressures. In this reason, it will be exceptionally reasonable for you to consider in advance that most popular 30-year fixed mortgage rates currently seem quite steady on ordinary market levels of about 6,03 percent. However, these rates still remain extremely below their common year-ago levels, when 30-year mortgage rates easily averaged 6,16 percent, 15-year mortgages - 5,87 percent and 1 year ARM - 5,43 percent. Other disturbing news on the global market basically include that most frequently searched interest rates for fixed-rate mortgages rise, while actual prices for 1-year adjustable-rate mortgages continuously decrease. As a consequnce from this general decline, the total volume of applications goes down to 3,2%, in comparison with 2007.



Angela

Chris Borthwick asked:


House prices have fallen, mortgage costs for lenders have increased so fixed rate prices are increasing and will the economy start to recover soon?. All these factors will affect how the mortgage market will perform and if you are trying to decide when to buy your first home you will be thinking about how things will likely go in the near future. The best advice is to ask the professionals that would be going to an established mortgage broker who will understand trends and will be watching the market closely. They can give you their view of how the current market is as well as be able to answer any questions that you may have about the market. There are some brokers that have decided to charge a fee for their services; more have joined this bandwagon especially since the credit crunch however you can find a mortgage broker that will offer you a great service without the need to pay them an upfront fee. If you can afford a mortgage it may be the best time to go for a mortgage as house prices are unlikely to fall much further and it is predicted mortgage costs are going to rise for lenders so mortgage rates are only going to go up so any lower price is going to be offset by higher costs. Mortgage brokers have many benefits, not only can they assess your personal circumstances and suggest the best options for you, finding a whole of market broker means they will search every deal available for you so you know you will be getting the best mortgage available to suit you. Local brokers will have the added benefit of knowing a bit more about the market for the area, house values and will have contacts with local branches of financial institutions to give that added relationship that can help when you apply for the mortgage. Even if you are unsure if now is the time for you to buy your first home or your unsure what lenders will offer you then using a broker mortgage for applications will not only save you lots of leg work but can be done without paying a penny so if you don’t find what you are after then there is no obligation to proceed.



Douglas

Berk Akman asked:


Since the new Turkish mortgage law passed on March 2007, the mortgage and real estate markets have continued their growing trends that are mainly driven by lower interest rates; however, this growth is probably just the tip of the iceberg.

The Turkish mortgage law that passed on March 2007 has two important properties that are expected to boom the mortgage and real estate markets in Turkey:

1) New mortgage products :

With the inclusion of the adjustable rate mortgage products, banks are able to transfer some of the economy related risks in their balance sheets to borrowers. In adjustable rate mortgage products, the interest rate is a sum of a fixed margin that is determined by the lender and a benchmark index that is set by Central Bank of Turkey. In May 2007, central bank decided that Consumer Price Index should be the benchmark index for the variable interest rate calculation. In summer of 2007, some banks started to offer various adjustable rate mortgages and these loans, as expected have lower APRs. However, as Central bank’s current records show there is almost no interest in these variable interest loans right now. This lack of interest is probably due to several factors such as: i) the lack of trust in Turkish economy and the fear of a substantial increase in the interest rates even though the economy has been performing fine in the last 5 years without any major crisis; ii) the recent mortgage crisis in the USA, and particularly, the rise in mortgage default rates in the USA and the fact that most of the increases in the defaults were in the sub prime market and adjustable rate mortgages; and, iii) the lack of understanding of the benefits and risks of these new products. We believe that these three reasons are temporary and in the near future, as people are educated about the risks and benefits of these new products and mortgage brokers fill the necessary knowledge gap, the interest in the products will increase.

2) Securitization of Loans :

About six months after the new mortgage law passed, Capital Markets Board of Turkey completed secondary legislations on mortgage covered bonds and mortgage backed securities. With this addition to the law, banks are now able to bundle the loans into securities and take them off their balance sheets. Covered mortgage bonds and mortgage backed securities are debt instruments secured by a covered pool of mortgage loans (or public-sector debt) to which investors have a preferential claim in case of default. These instruments are among the most liquid fixed income securities after the government bonds in Europe. While it is not expected to see the first securitization until early 2008, reduced risk for the banks will cause a significant and sustainable growth in the mortgage market in the coming years.

Expectations for the future

a)The secondary mortgage market will probably trigger a decrease in the interest rates as banks will be able to transfer their risks off their balance sheets and the ratings of the deals in the secondary mortgage market could be higher than Turkey’s sub-investment grade sovereign rating (this has been the case in similar cases).

b)With the secondary mortgage market’s effects, the banks’ competition growth will fuel an already booming housing market. Especially, when the monthly interest rates get closer to 1 percent per month, the volumes will be substantial, as they were earlier. Expected growth in the mortgage market is expected to mimic those in Spain and South Korea as these countries have followed similar paths as Turkey. Sizes of the mortgage market in Spain and South Korea GDP are 50 and 25 percent of the GDP respectively. So it is not inconceivable to expect that Turkey’s mortgage market may grow up to 30% to %40 percent of the GDP from its current share of less than 10%. Note that since Turkey has a very strong ownership culture, the ratio can be even higher.

c)Turkey’s new long term mortgage laws will increase the investment in Turkey. The new instruments that will be introduced with the securitized mortgages will increase the stability and depth of the financial system probably creating a natural cushion for any unexpected events and decreasing the volatility and avoiding the episodes of financial crises that were observed in 2001 and 1994.

d) Enhanced foreign investment in the property market will cause a boom in the property market. Also in addition to real estate market, as mortgages will need associated insurance, it is expected that insurance sector will be a big beneficiary of the new mortgage law.

e) The central bank will have more dominant place in the economy similar to the developed countries.

f)New law will help strengthen Turkey’s EU bid. The Turkish mortgage law will bring Turkey into line with the standards and practices expected from worldwide property purchasers and investors.

In addition to the tangible effects listed above, we expect that there will be very important intangible effects too. For example, in a country like Turkey where ‘future planning’ is measured with months (mostly because of the economic, financial and political crises), just the fact that people are now able to get a loan up to 30 years is an encouraging incident that will probably change the way people plan, invest, spend and save in the future. Since being able to plan for the future is one of the most important requirements of economic development, the additional foresight produced by the new mortgage law may be one of the biggest impacts of the new mortgage law in the long run.



Aaron

Nick Riviera asked:


The property market in London is rather different compared with the rest of the country. There is super-prime London where homes go for two, three, four million or even more.

The average price of a home in Kensington and Chelsea now stands at £1,079,414, which is 14.6% higher than last year. Many people buying in super-prime London probably don’t need a mortgage in London, as they are foreign buyers from the likes of Russia and the Middle East.

At the other end of the scale in London are boroughs like Barking and Dagenham where the average price of a property is £196,886 – way lower than the top end of the scale, but still just above the national average. In this borough the annual price increase to November 2007 was 11.4%.

Bexley is the next lowest region for average house prices at £228,372, with a rise of only 7.3% in the past year.

There are, of course, a number of companies who deal in mortgages in London. Some have a specific role to do so; some deal in mortgages all around the country.

It is very difficult for first-time buyers to get on the housing ladder in London, as even the lowest average priced region outstrips the average for the country. The credit crisis that has hit the whole world is making it harder to get mortgages around the whole country, and it is even harder in London where prices are higher. The best way for would-be first-time buyers to get a mortgage is to talk to independent mortgage brokers or advisors who have access to the whole mortgage market and can match mortgages in London to people’s individual circumstances. A mortgage broker is really essential in the current mortgage climate. There have been a rising number of repossessions in Britain in 2007. Mortgage brokers have the skills required to ensure that borrowers get the right deal for them – not for the mortgage company. In the current difficult financial world it is crucial to get independent mortgage advice.

London house buyers in particular need the best possible independent mortgage advice with the high relative prices in the capital.

You need to look for a mortgage broker who will be on your side, and look for the best deal for you. You need someone to help you cut through the confusion and the blinding headline rates to give you straightforward advice.

You will also have to consider what type of mortgage you will get and your mortgage broker will be able to help. Should it be fixed, tracker, discount or offset? There are many choices, and there are a wide range of fees associated with different mortgages. It would be very difficult for a mortgage seeker to understand the whole of the market. However, mortgage brokers and advisors deal with these products all the time, and will be able to find the best deal for the individual.

Finding mortgages in London is not the easiest task in the world. Using a mortgage broker can make the task much more bearable.



Kathleen

michael sterios asked:


Once upon a time self-employed workers found it nearly impossible to get a mortgage unless they had an enormous deposit and a large income from their business activities that spanned many years. Those times may be about to return as lenders are pulling their self-certification mortgage products from the market as if they are tainted beef.

Many years ago lenders had strict criterion regarding who they would lend money to and the circumstances under which home loans would be approved. Life was simpler then as the great majority of the workforce had steady employment, a salary or wage, and monthly payslips.

However, as time went by the workforce slowly evolved into a mix of employed and self-employed workers, business owners, investors, and freelancers. Although a large portion of the workforce remained employed, a significant portion of those workers began to receive bonuses and commissions instead of a salary. This created uncertainty regarding their monthly incomes. Additionally, many other workers became self-employed and others became proprietors of small businesses which provided their daily bread.

Finding a standard employee with a steady, provable and predictable salary was no longer easy. This meant that traditional mortgage products were no longer applicable to a large portion of the workforce so lenders were forced to invent a new type of home loan to ensure they could keep on lending.

Enter the self-certification mortgage. A product originally designed for self-employed workers who did not receive a pay slip from their boss each month. Instead these workers contracted out their services to business that would pay them by the hour, or they ran their own small businesses and billed their clients when their work was done. Many self-employed individuals who worked in this manner had high levels of income so it seemed ludicrous that they should be excluded from the mortgage market.

Self-certification mortgage products were therefore launched onto the mortgage market with the best intentions - to satisfy the needs of self-employed individuals who lenders believed could service the loans. Unfortunately, due to lax lending rules, self-certs were also approved to people with low incomes who simply lied on their application forms about how much they earned. In addition to this, many lenders reduced their required deposit levels, meaning that people with little or no savings could also apply for a self-certification mortgage.

Because of this, great sums of money were loaned to people who should not have been approved for a mortgage. Mortgage brokers and borrowers alike took advantage of the lethal combination of low deposit requirements and not having to prove earnings to the lenders. Self-certification mortgage products are now being squarely blamed for much of the damage that has occurred via the global credit crunch. As a result lenders have pulled hundred of self-cert products from the market and are refusing to lend to anyone on a first-time-buyer basis.

For existing home owners looking to remortgage, lenders have reverted to the stricter criteria that were attached to self-certification mortgages in the first place. These include low loan-to-value ratios and proof that applicants are truly self-employed. Perhaps the lenders had it right in the beginning.



Oscar

Steven Clarke asked:


Hometrack, one of the housing industry’s leading sources of market-related intelligence, predicts that: “2008 may just provide the pause for breath the mortgage and housing market really needs.” Gary Styles, the Strategy Risk and Economics Director at Hometrack predicts that “lenders will take stock in 2008 and review and analyse their lending practices and policies to see if they match the long and short term outlook for the market and indeed review their own objectives.”

Hometrack forecasts aggressive competition within the mortgage market that will offer cheap mortgages for borrowers. These cheap mortgages are likely to be targeted at borrowers in the ‘low-risk’ category.

However, since the formation of the Financial Services Association in 2004, those in the ’sub prime’ market need not feel excluded. Perceived wisdom works on the assumption that those with poor or negative credit scores are only eligible for almost-unaffordable mortgages with extortionate interest rates. It also assumes that mortgage brokers will charge them higher fees for the same services offered to clients with positive credit scores. In 2006, the FSA dictated stringent guidelines to make the fees charged by mortgage brokers more transparent, thereby exposing the less scrupulous companies.

Currently, the majority of reputable mortgage brokers do not charge their ’sub-prime’ clients any more for their services than they do their other clients. This has opened the door for many with poor credit scores to take advantage of this important service and source affordable or cheap mortgages.

Some mortgage brokers now dedicate part of their service entirely to those with a poor credit history. Companies, such as The Mortgage Broker Ltd, offer free advice and quotes from the whole of the market, ensuring that every available avenue is pursued in the search for a reasonable mortgage; most people do not realise that mortgage companies are not necessarily the only lenders to approach. Specialist advisors can often provide alternative sources for borrowing or suggest other courses of action to undertake, such as re-mortgaging. There is also the option for ’sub-prime’ clients to switch to a normal repayment mortgage once they have fully rehabilitated their financial situation.

Lenders assess whether an applicant is credit worthy in a number of ways. The first, and most obvious, is the application form itself, which gives details of salary, family size, reason for the loan and whether the applicant is a homeowner.

Secondly, if the applicant has used the lender’s services before, they will take into account their knowledge of any dealings they may have had with each other. Thirdly, they will use files from credit reference agencies: Equifax, Experian or Callcredit. These agencies carry financial data detailing the payments and transactions made by every individual in the UK. Those who have failed to meet repayments, incurred CCJs or have been declared bankrupt will be allocated an adverse score that reflects the potential risk that they offer to lenders.

However, using a mortgage broker who can access mortgage deals from the whole of the market can open up a realm of possibilities for those with bad credit, especially as the brokers can often negotiate mortgage-terms that would seem previously impossible. ‘Whole of Market’ brokers also have no loyalty to particular lenders, so applicants of any credit score can be sure that the advice they offer will be impartial and with the client’s best interests at heart.



Joann

Madeline asked:


 

The mortgage crisis seems to be headline news on a daily basis now. What seems to be driving the free fall? There are two key factors in play. First is the number of loans that are adjusting upwards. Many people took out adjustable rate mortgages with low “teaser rates” that are adjusting to market rates. Even though interest rates are low, the regular rate is still higher than the teaser rate that is causing “payment shock” for many homeowners. The second reason is that home values in many markets continue to decline. These markets are flooded with foreclosures and people looking to get out of a home they can no longer afford. This growing supply of homes far outweighs the current demand that is causing prices and values to fall.

What is a homeowner to do? Pay down your principal balance before your payment jumps up! Paying down your balance on an adjustable rate mortgage will lower the amount of your new mortgage payment when your rate adjusts – often times lowering your payment amount even when rates move up. Paying down your balance also helps to maintain equity in your home.

No one knows for sure how long this poor mortgage market will last, but it will not last forever. When markets finally adjust to normal growth rates, those who have paid down the principal will benefit most by having more available equity to use on moving up to a bigger home or leverage for significant expenses like college or home improvements.



Andre

Kevin Patrick asked:


The Truth About the Mortgage Market

By Kevin Patrick, CEO

First Coast Trust

Jacksonville, FL – Subprime mortgages have now been credited for bankrupting well over 135 lenders and seriously damaging operations at many major mortgage firms. They’ve reportedly wiped out 5 hedge funds, tens of thousands of jobs, and have led to millions of foreclosures with millions more on the way. And, as if that weren’t enough, subprime mortgages are also blamed for massive volatility in the stock, bond, credit, futures, and real estate markets here in the US and around the globe. Some say losses in the mortgage securities market alone could reach hundreds of billions of dollars this year.

This means that, for any Americans looking to buy, sell, or refinance a home, they are confronting a very different market from the one that existed just 6-12 months ago.

How did this happen?

The recent real estate boom was fueled by a period of record home appreciation and historically low interest rates. Banks, in order to compete, loosened guidelines and began offering more funding to more borrowers through riskier, non-conforming or “exotic” mortgages.

These ideal lending conditions persisted for several years, supported by high demand, historical real estate data, home prices, and massive trading volume/profits on mortgage-backed securities and other financial instruments on Wall Street.

Then, in 2006, a slowdown in real estate led to a deterioration of home values, an increase in inventories, and ultimately to today’s tightening of credit guidelines, leaving many investors unable to sell or refinance out of their existing positions. Many Americans who had tapped into their equity were suddenly tapped-out and overextended as home values fell. Foreclosures followed in record numbers and a re-valuation of mortgage bonds and other financial instruments created the credit/liquidity domino effect we’re now experiencing.

Unfortunately, it’s going to get a lot worse before it gets better. According to the latest estimates, over 2 million subprime and Alt-A adjustable rate mortgage (ARM) holders will face payment increases of up to 30%-100% when their loans reset in the next 2 to 18 months. These loans make up less than 40% of the total mortgage market, but the negative effects, as we have seen, of increased foreclosure activity can have a ripple effect throughout the industry and around the globe.

What does this mean to you and your mortgage?

Sellers: If you’re planning on selling your home, be prepared for an even smaller pool of qualified buyers. While some experts predict a settling of this credit crisis over the coming year, tightened credit guidelines and diminishing mortgage products could knock out as many as 15%-30% of potential qualified buyers. Now is not the time to sit and wait for the best possible price. Have a serious talk with your real estate agent. Having experienced buying/selling transactions in your area, he or she can help you price your home accordingly. He or she can also help ensure that your buyers are pre-approved and stay pre-approved throughout the entire transaction.

Buyers: Get pre-approved by your mortgage professional. While there are a lot of great deals out there, getting credit is becoming tougher and tougher, and it’s taking longer and longer to complete a transaction. Remember, what you qualify for today could change tomorrow in a volatile market. For those looking to refinance, keep this in mind. There is no time to delay! Communicate with your lender. Don’t do anything that could negatively affect your credit, and make sure you get all your documentation in on time.

ARMs Borrowers: If your ARM is scheduled to reset in the next 2-18 months, you need to schedule an appointment with a mortgage professional right away. Whether your ARM is subprime, Alt-A, or even if you have a pre-payment penalty, don’t let a default or foreclosure situation sneak up on you. Did you know that your monthly payments can increase anywhere from 30% to 100% once your loan resets? At the very least, give yourself the peace of mind of knowing what your adjusted payment will be.

Borrowers with less-than-perfect credit: Each week it seems lenders are shedding more and more mortgage products. Many lenders have stopped offering No-Doc loans and are reducing all forms of Stated-Income loans. While it might be challenging, borrowers with credit issues need to see a loan expert. Often they have credit repair resources and other strategies to help you reach your financial goals.

Finally, there’s an important concept to embrace: all markets, while cyclical in nature, are self-correcting, be it credit, real estate, stocks, or bonds. For the last 6 or 7 years, real estate was booming and riding high. The correction we’re experiencing now – while it seems harsh and could get much worse – is, in a sense, “natural” and directly related to the extremely loose guidelines and perhaps overzealous lending and leveraging during the boom cycle.



Elsie

Bill Rice asked:


Looking for smart marketing strategies for a down mortgage market? The best ideas may be closer and cheaper than you think. Stop throwing money at declining sales production and investigate these 3 killer strategies you can start using today.

However, here is a word of caution. When looking to shave cost from your marketing budget avoid short-cuts and gimmicks, they will ultimately cost you more and yield little. In contrast, the key to developing an economy marketing plan is to look for pockets of inefficiency in traditional marketing. Here are a few gems most neglect:

Create and Own the Local Mortgage Web

Web technology is getting easier and easier to use. The emergence of simple and free blogging services can put even the most technology challenged business person on the Web and effectively marketing. Here are some examples:

* Blogger

* WordPress

* TypePad

Set-up one of these simple websites and start talking about your local mortgage and real estate market. The result, soon you will be at the top of Google search results for your local community–controlling the local mortgage and real estate business. Add to this free professional mortgage news, information, and rates using a variety of mortgage calculators and widgets and your website will have the credibility and authority of much bigger websites.

These larger mortgage websites are forced to focus on national volume and neglect the little local markets. Yet, these are exactly the people you want to serve.

Marketing inefficiency number 1.

Buy Aged Mortgage Leads

On to the next pocket of mortgage marketing inefficiency–aged mortgage leads. Big mortgage companies buy thousands of leads a day, but mortgage lead providers often over compensate demand. This leaves hundreds of customer inquiries a day unplaced and customers unserved.

These mortgage leads quickly drop in value as they age, but the customer is still looking for help. The opportunity for your mortgage business is that as these customer request age their lead price drops dramatically. However, their interest in getting a mortgage is still very much intact.

Developing an efficient way to buy and work these aged mortgage leads is a surefire way to close more loans each month for a fraction of the cost of buying real-time Internet leads. The extra benefit of course is helping a customer that would have otherwise been abandoned–talk about a loyal and trust-based relationship.

Marketing inefficiency number 2.

Don’t Forget Your Past Clients

Here is my favorite marketing inefficiency to harvest in hard times–your own customer database. So often we forget that our own customers have changing and evolving needs. The economy has been in radical change over the last several months. I will guarantee that many of your clients have a completely different financial picture.

Call them, email them, ask them if their current mortgage financing is still appropriate. More importantly ask them if their mortgage financing can protect them from a long economic decline.

Marketing inefficient number 3.

Times May Be Hard, But Continue Marketing

Times are certainly hard, but don’t forget marketing is how you touch prospective clients in need. So, don’t stop doing it. Just reposition your marketing to hit pockets of value, saving money without hurting sales.



Randall