PlayThe mortgage market is in turmoil. It’s more difficult to get new mortgages; even if you can get a new deal they’re not as cheap, and finding them has got tougher. Tonight’s Money Saving Expert Martin Lewis delves into what the options are for homeowners, and reveals his technique to find the best deals.
Watch out for payment shock
If you’re one of the 1.4m people whose mortgage deals end this year, it’s likely to get expensive. As a rule of thumb, for every one percentage point your mortgage rate rises, you’ll pay £80 a month more per £100,000 of mortgage. As many people coming off their deals will see rises of 2-2.5% that’s £200 per £100,000 of mortgage. With the cost of living rising in general at the moment, that's a huge hit.
The market’s changed
While a year ago lenders were fighting for business and mortgages were easy to obtain, things have radically changed. Now due to the credit crunch, lending criteria have been tightened enormously and it’s much tougher to get a deal.
If your mortgage is more than 90% of your house’s value it’s going to become very difficult to find a new cheap deal. If it’s between 80% and 90% then you may get a deal but it’s unlikely to be cheap. The real competition is only for those customers who are borrowing less than the golden 80% mark.
Don’t get repossessed, get help
If repossession is a realistic possibility for you, get impartial help urgently. Use Citizens Advice Bureau, the CCCS, and National Debtline. And if you’re near the court stage, at around 100 courts you can get free legal advice from Housing Duty Scheme. And remember, its usually better to sell your home yourself than have a forced sale.
Martin’s three steps to finding a new mortgage deal
• First ask your current lender what the best deal it can give you is, as a benchmark.
• Next, find a whole of market broker and see what they can offer.
• Finally, use the Financial Services Authority comparison website, as it includes most of the Direct Deals from lenders, and see if they beat your broker’s offer.
And remember when comparing it’s not just about the interest rate… over the few years arrangement fees have jumped from hundreds to thousands, you have to factor that in too.
And three top tips for mortgage hunting…
• Start early, up to six months before deals end
This way you’ve got time, and its possible to book in deals ahead, that way if things get worse you’ve secured a good rate; if they get better, you needn’t use it, at worst you’ll just lose the booking fee.
• Keep an eye on your Credit Rating
That means be very careful with all debts not to make late payments or miss payment. Plus, if possible don’t apply for other financial products before trying to get a new mortgage.
• The lower your borrowing related to house value, the better deal you’ll get
So if you’ve any way to improve it, such as using savings to pay off a portion of your mortgage, do so.
Further Information and Links
Martin Lewis’s step-by-step guide to finding the best mortgage
http://www.moneysavingexpert.com/mortgages/best-mortgages-cashback
The FSA’s mortgage comparison site
(Compares mortgages)
www.fsa.gov.uk/tables/bespoke/Mortgages
Consumer Credit Counselling Service
http://www.cccs.co.uk/
National Debtline
http://www.nationaldebtline.co.uk/
Citizens Advice Bureau
http://www.citizensadvice.org.uk/
Housing Duty Scheme
http://www.communitylegaladvice.org.uk/en/directory/directorysearch.jsp
Find a local mortgage broker….
http://www.findapro.co.uk/
http://www.unbiased.co.uk/personal-finance/mortgages/
Charcol Direct
(Mortgage Broker)
http://www.charcol.co.uk/
London & Country
(Mortgage Broker)
www.lcplc.co.uk
