The 4 Surprises About Mortgage Applications That Most People Don’t Know About

If you haven’t applied for a mortgage before, you probably don’t realise that the application packet can be more than 100 pages. With this many pages, it can often be hard to skim through every little word to understand what everything means. Since you’re dealing with a lot of money, it’s important that you know about any surprise that may come out to bite you and potentially kill the deal.

A Valuation Kills the Deal

When you apply for a mortgage, the lender will want to know what the home is worth. In order to get this number, they will have to order a valuation to get a fair market value. If the value comes back lower than your offer, the buyer will either have to cough up the difference or scrap the deal.

You Get to Choose the Loan

Many future applicants often think that they have to sign up for a mortgage the bank throws their way. Thankfully, this isn’t the case. When you apply for a loan, you’re going to want to choose the mortgage that fits your budget and lifestyle. Almost all lenders now have a repayment mortgage calculator which you can use to work out your repayments. Some of the most common types of mortgage include: fixed rate, tracker, discount and offset. Make sure that you explore every option to know their advantages and disadvantages.

Tougher Financial Standards

In the past, when the economy was booming, applying for a mortgage couldn’t have been easier. As the economy started to tank, many banks started applying stricter guidelines.

Today, banks are looking for a higher credit score, a larger deposit and a credible work history that can be verified. One of the biggest reasons mortgages get declined is because the buyer either has a poor credit score or can’t come up with a large enough deposit.

Generally, as long as you have a high credit score, a 20 percent deposit and you’ve been working with a job for more than two years, you should have a great chance at getting an approval letter from the bank.

Rates Can Rise

The loan rate you see on your application today doesn’t mean you’re going to be paying that for life. Some interest rates, such as a tracker mortgage, can increase with the current market conditions. While it may be tempting to be lured to the lower interest rates in the beginning, keep in mind that this rate can raise in the future, potentially costing you thousands in interest.

When you apply for a mortgage, don’t sign any paperwork until you understand what you’re getting yourself into. It’s also important that you know the important questions to ask lenders, so that you can make the right decision. If you don’t feel comfortable with the process, consider hiring a professional to help guide you along with the process.

BBA reports increase in new mortgage borrowing for May

The British Bankers’ Association (BBA), a UK association for the banking and financial services sector, released seasonally adjusted figures on Tuesday that indicate an improvement in the UK housing market.

According to the BBA, approvals for mortgages for house purchase were 24% higher in May 2013 compared to May 2012, with the average house purchase approval increasing to £159,200. Remortgaging also increased by 17% and there was a slight net rise overall in unsecured consumer borrowing.

The BBA data comes from the UK’s main high street banking groups (MBBG), which includes Barclays, HSBC Bank, Lloyds Banking Group, Royal Bank of Scotland Group, Santander UK and Virgin Money. These banking groups account for some two-thirds of all UK mortgage lending outstanding and provide around 50% of all consumer credit.

In addition to house purchases, the BBA said card borrowing appears to be on the rise, with new spending of £7.8bn on credit cards in May this year being slightly higher than the recent monthly average. This is said to be in line with an increase in retail sales volumes. The figures suggest that card borrowing is being used as an alternative method of financing, as a contraction in borrowing levels of personal loans and overdrafts has been recorded.

Business borrowing levels are still on the decline, the BBA figures showed, with net borrowing by non-financial businesses falling by £1.7bn and financial business borrowing down by £3.3bn.

David Dooks, BBA statistics director, commented: “SMEs use of their own high levels of cash resources and large companies’ use of alternative finance means demand for bank borrowing is subdued and a reflection of challenging trading conditions.”

Home repossessions in the UK continue to fall

The rate of home repossession in the UK continued to fall in the third quarter of 2012, the Council of Mortgage Lenders (CML) reported today.

In its latest quarterly report, the CML said that 8,200 properties were taken into possession by mortgage providers between July and September, down from 8,500 in the previous three-month period and from 9,600 in the third quarter last year.

The total for this year’s third quarter represents the lowest number of properties taken into possession in a single quarter since 2007. Over the first nine months of the year repossessions were down 8% compared to a year earlier.

Lenders want to keep people in their homes and repossession is a last resort, according to CML director general Paul Smee. He added that good communication and effective arrears management by borrowers, lenders and money advisers are helping the vast majority of those with mortgage repayment problems.

Mortgage arrears remained stable in the third quarter. As of the end of September, the total number of mortgages with arrears of 2.5% or more of the outstanding balance rose slightly to 159,100, up from 158,700 in the previous quarter, but remained below the 165,300 in arrears in the same period last year.

According to the CML, borrowers in the UK have 11.2 million mortgages, with loans worth over GBP1.2 trillion.

The Council of Mortgage Lenders represent banks, building societies and other lenders who together account for around 95% of all residential mortgage lending in the UK.

Separate statistics released today by the Ministry of Justice give an indication that the number of homes being repossessed will fall further over the coming months. There were 14,168 court actions for repossession issued from July to September 2012, which continues the downward trend seen since 2008.

The Ministry of Justice said that this fall in the number of claims coincides with lower interest rates and a more proactive approach from lenders in managing consumers in financial difficulties, as well as various interventions, such as the introduction of the Mortgage Pre-Action Protocol.

The Bank of England confirmed today that its Monetary Policy Committee (MPC) has decided to keep interest rates at the record low of 0.5%.

US financial services firm MetLife sells mortgage unit to JP Morgan

US insurer MetLife Inc (NYSE:MET) said it had inked an accord to sell the mortgage servicing portfolio of its banking unit MetLife Bank NA to JPMorganChase Bank NA, part of financial major JPMorgan Chase & Company (NYSE:JPM).

MetLife did not reveal the terms of the deal, which has yet to receive regulatory clearance. The portfolio under the scope of the transaction stands at some USD70bn (EUR54.6bn).

On 24 October, in a regulatory filing, the insurer said it was pondering an offload of its mortgage servicing portfolio. MetLife decided last year that a banking holding company structure was no longer appropriate, in view of its strategic focus on insurance and employee benefits, and has since sealed deals to offload certain operations of the bank and discontinued writing residential mortgages. The firm’s entire retail banking operations, including mortgages, accounted for less than 2% of its overall operating earnings in 2011.

JPMorgan’s purchase of the portfolio is in line with its plan to beef up and expand its servicing business. As a result of the acquisition, the buyer will boosts its USD1.1trn servicing operations by over 5% and it will also be able to provide solutions to a further 350,000 clients.

MetLife hired K&L Gates LLP, Milestone Advisors LLC and Deutsche Bank Securities Inc as advisors on the deal.

UK home repossession levels stable in first quarter, CML reports

Home repossessions in the UK in the first quarter of 2012 amounted to 9,600, the same as in the first quarter of 2011, the Council of Mortgage Lenders (CML) reported today.

This puts a stop to the recent trend of year-on-year increases in repossessions, although the CML noted that such stability could be disrupted by continuing pressures on household finances, changes to welfare benefits and rising mortgage rates.

Repossessions in this year’s first quarter were higher than the 8,700 registered in the fourth quarter of 2011, but this is said to reflect normal seasonal patterns.

Previously the CML has forecast that repossessions in 2012 will number around 45,000 but the organisation now believes that this figure may be revised down when its updated housing market forecasts are published later in the year.

Seeking to reassure people who are having trouble meeting their mortgage payments, Paul Smee, CML director general, said that repossession is a last resort for lenders and the number of repossessions remains relatively low. “Anyone worried about their mortgage should be assured that lenders will try to help them get back on track, as long as this is a realistic prospect,” he added.

A separate report released today by the CML on the buy-to-let sector reveals that the number of buy-to-let mortgages in arrears fell slightly in the first quarter of 2012, and the arrears rate on buy-to-let mortgages continues to be lower than in the owner-occupied sector.

Conversely, the buy-to-let repossession rate is higher than in the owner-occupier sector, where the focus is on trying to keep home-owners in their homes. The repossession rate on buy-to-let properties has remained virtually unchanged for more than a year, standing at 0.12% in the first quarter of this year, compared with 0.08% in the owner-occupied sector.

Barclays cuts fixed rate mortgages by up to 0.41 percentage points

In its eighth rate reduction in a row Barclays yesterday made cuts of up to 0.41 percentage points to 60 per cent of its Woolwich fixed rate mortgage range.

The Great Escape fixed for two years at 75 per cent loan to value (LTV) sees the largest fall from 3.79 per cent to 3.38 per cent.

Substantial cuts of up to 0.36 percentage points will also take place for the second time this month at 80 and 85 per cent LTV on two and three year fixed rates. At 80 per cent LTV the two year fixed will reduce from 3.59 per cent to 3.38 per cent for customers who qualify for a Barclays Loyalty mortgage and 3.48 per cent for all other customers. At three years it will reduce from 4.13 per cent to 3.89 per cent. The 85 per cent LTV fixed for three years will fall from 4.49 per cent to 4.13 per cent. Cuts will also take place on the five year deals at these LTVs, meaning the cheapest five year we have available is 4.39 per cent (80 per cent LTV).

Other rate reductions include a two year fixed rate at 75 per cent (LTV), cut from 2.89 per cent to 2.79 per cent for customers who qualify for a Barclays Loyalty mortgage and 2.87 per cent for all other customers

Andy Gray, head of mortgages for Barclays, said “The mortgage market continues to be fiercely competitive which has been driven by falling swap rates. This is good news for borrowers as they have the opportunity to fix at a lower rate than they may currently be paying, to save them money now and protect them against future interest rate rises. We have also for the second time this month, made substantial cuts on higher LTVs, slashing around 0.80 percentage points off three and five deals. These changes give borrowers who have a smaller deposit access to even lower rates, making home ownership even more affordable, and helping those with existing mortgages to save money.

“Remortgaging has built momentum this year across the market and our latest Great Escape package is the best deal we’ve offered at 75 per cent LTV since we launched these in the Autumn of 2010. Thousands of borrowers with mortgages at this LTV can now fix well below their SVR rate without having to pay any switching costs, making substantial savings to their monthly mortgage payments.”

All our mortgage deals allow borrowers to remortgage using our ‘Switch and Save’ service which provides free legal work and a valuation or £200 cashback. For borrowers opting for Great Escape this allows them to switch their mortgage with no application fee, free legal work, free valuation and £300 cashback to cover the cost of their existing lender’s mortgage exit fees.

For further information on Woolwich mortgages from Barclays please visit www.barclays.co.uk/mortgages.

‘Loans’ dominate consumer online searches

Five of the ten most queried search terms used by UK consumers to find personal finance products online in January, were loan-related. This is according to the latest quarterly research, ‘Retail Banking- January 2011, by independent search marketing specialist and technology firm Greenlight.

According to the report, there were 2.7 million retail finance-related searches conducted online. This was a 700,000 increase when compared with October 2010.

Most queried terms

Mortgages were the most popular subsector and accounted for 35% of searches (951,000), up 71% on October totals. The term ‘Mortgage calculator’ was the most queried, making up 13% (368,000) of all retail finance-related searches, almost double October levels.

33% of all searches were for loans. Whilst fewer in volume when compared to those for mortgages, the terms ‘Loans’, ‘Payday loans’, Loan calculator’, ‘Student loans’ and ‘Personal loans’ accounted for five of the ten most searched for terms used by UK consumers to source personal finance products, online.

Totalling 49,500, the keyword ‘ISA’ accounted for 10% of all searches related to bank accounts in January. This was an 83% rise on October’s 27,000.

‘Credit cards’, was the most popular search term used to find credit and debit card offerings online. It was queried135,000 times (a 74,500 increase on October levels), accounting for 38% of the 352,000 searches related to this sub-sector.

Most visible sites

Greenlight determined the 60 most visible websites in natural and paid search in this sector.

MoneySupermarket was the most visible website in natural search, achieving 68% visibility. Halifax followed and replaced MoneySavingExpert in second place. It attained a 38% share of voice, an 11% increase on the previous quarter.

MoneySupermarket was also the most visible advertiser in paid search. It achieved a 51% share of voice – 7% less than the previous quarter. Santander, whose visibility increased by 19%, made gains and replaced FirstDirect to take second place, with 33% share of voice.

Most social and interactive

Social media sites are becoming a very important source for companies to gain consumers.

LloydsTSB replaced MoneySupermarket as the most followed brand in Greenlight’s social media league table. Since October, it has seen a huge increase in the number of Facebook fans (by more than 59,000).

uSwitch was the most interactive brand, cumulatively posting 280 posts and tweets.

With nearly 11% of marketing budgets expected to be devoted to social media in 2011 (source: eMarketer), Greenlight advises firms to connect and build relationships with those speaking to them as engagement is key to building social media optimisation.

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