An Englishman’s home is his castle until it’s flattened by a 1,000lb financial cruise missile!
Not content with taking taxpayers money to fill in their self-made financial hole, the banks have decided they need even more money. Who’s going to pay? Anyone with a mortgage.
One example of this desperate bid to claw back money from their customers recently popped its head over the parapet. The Halifax building society raised the interest rates by 0.3%. In the grand scheme of things this figure might seem tiny but when applied to a £150,000 mortgage it adds about £27 per month to repayment costs. That’s money that could be better spent keeping your family warm, clothed and fed.
Another point to consider is the recent report on that Daily Mail’s site that suggest that even a £20 rise in repayment costs could cause up to 100,000 to lose their homes. Common sense says that if you can’t afford the rates then you simply switch mortgage provider, right? If only it were that simple.
The loan rates are going but, what’s worse, banks and mortgage lenders are scrambling to make their loans as uncompetitive as possible. It would appear that many of the lenders who were once happy to take our cash are now filling their pants at the thought of being the most competitive lender in the mortgage market.
With battered finances and bad investments in Euro currencies, the banks and building societies simply don’t want an army of potential customers hammering at their door.
What’s even more depressing for many home owners is the recent drop in the value of their homes. Negative equity is enough to bring me out in a cold sweat but the stench of a mortgage that’s been given its last rights is even more repellent to the lenders. Hence the rush to minimise their lending to all but the ‘safest’ of buyers.
To be fair, it’s not all the banks fault. Estate agents routinely over estimate the value of a house in order to push up their commission. As buyers, we’ve stretched our budgets to breaking point to get the perfect home. Somewhere along the line something had to give!
So, where do you go from here? Are you mired in a financial mess? Here are a few ideas that could stop you losing your home.
Get Frugal and Make Extra Money
A little while back I talked about some ways to make extra money. It might be the sort of thing that you want to do but if your mortgage is on the knife edge then it’s time re-evaluate what you really want in life. Even a couple of hundred pounds extra per month could make a massive difference to whether you sink or swim.
Keep Moving Your Mortgage
It’s a pain but moving a fixed rate mortgage at the point that it expires is one of the best ways to find new deals. Many banks offer better rates to their existing account holders and, in many cases, offer existing mortgagees lower rates than those they advertise to new customers. Although you’ve probably been brainwashed into using a price comparison site you’re better off talking directly to your bank.
Rent to Buy
This is a fairly new idea in the mortgage market and it does exactly what it says on the tin. www.renttobuy.co.uk/ is one such website that offers buyers and sellers a place to find what they want. Typically, a rent to buy plan will involve you agreeing a fixed price on the home you want. You then rent for 2 – 3 years and build up a healthy deposit. Once your rental agreement expires you buy the house.
This method involves the selling financing the mortgage. You’ll need to come up with a deposit and agree a monthly repayment sum. The beauty of seller financing is that it cuts out the need to find massive deposits normally required by the banks and building societies. In most cases, you’ll need between 3% and 5% of the house value to put down as a deposit. A word of warning: get a solicitor to go through every piece of paperwork to ensure you’re protected. More details are on rent to buy are available from UK government.
I’ll be putting together a full rent to buy guide soon so stay tuned.