Money Saving Advice

Indexed mortgages linked to inflation would help more first-time buyers onto the property ladder, according to a report from Morgan Stanley. The report, Financial Innovation and European Housing and Mortgage Markets, said that soaring house prices and the inability of income to keep up, against a backdrop of increasing personal insolvencies and bankruptcies have left the UK mortgage market in dire need of innovative products.

Index-linked mortgages would be linked to inflation rather than the base rate, or having a fixed rate.

Chief economist at Morgan Stanley, David Miles, said: “They would be very similar to the index-linked bonds the UK Government uses to issue debt loans. Instead of a fixed rate, or being linked to base rate, you pay a certain amount in excess of inflation.” Knowing that their mortgage repayments were connected to the inflation rate would help consumers better predict what their repayments would be. Miles said: “This is not a new concept, but in an environment where house prices have risen so much, this kind of loan has more benefits than ever before.”

Although repayments would increase with inflation over time, they would start at a lower rate than most current standard mortgages, thus making the process easier for first-time buyers.

Morgan Stanley has seen the popularity of 90% loan-to-value products with short-term introductory fixed rates decrease as they have not been totally suited to potential homeowners. The report also suggested that lenders should look further at shared-ownership arrangements independent of a government subsidy. Yorkshire Building Society is one of the four lenders in the Open Market HomeBuy scheme and a spokeswoman said that they had always considered the possibility of starting a shared-ownership scheme of their own, and were using the Government scheme as a pilot.

There is also a trend towards 100% mortgages as buyers are finding it increasingly difficult to save any kind of a deposit.

Posted by Peter Kenny at 05:01 AM | Permalink | Comments (0) | TrackBacks (0)

The latest FSA review of the sub-prime market criticised lenders and intermediaries, exposing weaknesses in lending practices and in the methods used to assess a customer’s ability to afford a mortgage. It wasn’t all bad news: the research found no particular evidence of bad credit remortgages being wrongly sold to prime customers, despite accusations of this in the past. There were criticisms, of course, and the inability to assess a customer’s affordability was a definite concern. Some points were raised against intermediaries and brokers and their inability to demonstrate why they took a particular course of action. There is some evidence of poor record keeping.

There were, according to the report less than half of the files on customers with self-certified incomes which explained why customers had to certify their own incomes. In fact, of course, self-certification of income might have been the right thing to do, but without evidence, the FSA can only be suspicious of the motives. The question is whether well-kept records might have painted a very different picture for the FSA to view.

There is little doubt that the sub-prime sector has made great strides in recent years to come into the mainstream form murky back-street dealings. Borrowers with debt problems are no longer forced into the ravenous maws of loans sharks. Sub-prime customers are now better served than at any time in the past. If one or two providers slip up in their processes from time to time, then the FSA is there to keep them in check.

Borrowers with poor credit histories now have access to a large range of competitive products from lenders who are strictly regulated (as the latest report amply demonstrates) by one of the toughest regulators in the world.

It is easy to make sub-prime a target for criticism, especially when it is a dirty word in the US after the goings-on over the Atlantic, but in the UK things should be kept in perspective.

Posted by Peter Kenny at 05:02 AM | Permalink | Comments (0) | TrackBacks (0)

Downtown Disney is one of the many different Disney attractions you can choose to visit during your yearly family Florida vacation. Although Downtown Disney has been known as an attraction for adults, there is a lot for families to enjoy as well.

Cirque De Soliel is one of the most popular family attractions that can be found in Downtown Disney. Although it is an expensive show it is a once in a lifetime opportunity and Disney provides it for you as one of their main attractions. For other types of entertainment you can take the family to the indoor interactive theme park, the many different artistry shops and magic shows.

For adults, you can visit the famous Pleasure Island and enjoy the nightlife, Disney style. Pleasure Island combines fabulous shops, restaurants, dance clubs and music all into one great attraction for adults to enjoy.

Whether you are looking for live entertainment, theatres, shopping or restaurants, Downtown Disney is the place to be. Disney strays from their original theme parks and has created an attraction for children and adults alike to enjoy with so many different activities to take part in. It is free admission to Downtown Disney, but attractions like Pleasure Island and the indoor interactive theme park require their own separate admissions.

Take the opportunity and time within your next Florida vacation to visit Downtown Disney and take in all that it has to offer.

Posted by Peter Kenny at 07:02 PM | Permalink | Comments (0) | TrackBacks (0)

Cheap mortgages seem to be a thing of the past – at least in the current cycle. First we saw cheap rate fixed mortgages disappear to be replaced by fixed rates that were much more expensive. Now competitive trackers are fizzling out too. There are no longer any trackers at half a point or greater below the Bank of England’s base rate. Trackers follow the base rate at a set amount below for a fixed period, and could be cheaper than a fixed rate, but the gap between the fixed and variable rates has all but disappeared in recent weeks as banks and building societies react to the latest rate rise in July.

Experts still reckon there’s value in trackers. Some anticipate the base rate to peak at 6%, and that may not even be reached as the minutes from July’s Monetary Policy Committee (MPC) meeting indicated a recognition that the full impact of recent raises has yet to be felt by most consumers.

The tracker from Birmingham & Midshires was withdrawn last week. It was 0.51% below base rate and had a fee of £1,499. The building society still has a tracker at 0.76% below base rate, but that comes with a fee of 2% of the loan amount. A loan of £250,000 would therefore attract a fee of £5,000. Halifax also withdrew its tracker of 0.51% below base rate with a fee of £1,499.

It seems that lenders have already factored in the next rate rise – even though it may never come.

Trackers may still be the way to go so long as you can afford a further rate rise. This would work especially well if you think that the base rate may come down in 2008.

Nationwide’s latest tracker is at 0.37% below base rate for two years at a fee of £1,499. Cheltenham & Gloucester has a tracker at 0.17% below base rate for the whole mortgage term with no arrangement fee and no penalty charges, but it is only available for up to 60% loan-to-value.

Security of a set monthly payment only comes with a fixed rate mortgage. The arrangement fee is important. As a general rule, the bigger the loan, the more important the rate is, and the less important the fee is.

Posted by Peter Kenny at 06:58 PM | Permalink | Comments (0) | TrackBacks (0)

The United States has seen major problems in the sub-prime market, with Bear Stearns become the biggest player to be hit by the crisis. The Wall Street banking giant shocked investors last week by acknowledging that the US sub-prime mortgage problems had left two of its main hedge funds virtually valueless. They have lost billions of dollars and are almost worthless. One of the funds was said to have “effectively no value left” and the other had “very little value left”. Previously the two funds had a combined value of $20bn (nearly £10bn). Bear Stearns bet its money on the American mortgage market, but came a cropper, as high-risk borrowers with poor credit histories began to default, leaving both funds devastated by the effects.

The meltdown has given 'serious reasons to worry', but may turn out to be a blessing in disguise if the consequences are radical re-think on credit risk, according to ratings agency Moody's Investors Service.

Earlier this year HSBC took a charge of $10m (£4.8m) on its exposure to the market. Beyond that Australian hedge fund Basis Capital Fund Management recently hired private-equity group Blackstone to help limit it problems resulting from mortgage securities.

However, Moody's believe that the subprime problems will not cause a risk to the system, but will act more as an opportunity for a 'reality check'.

Borrowing costs for non-investment grade companies have soared as a result and more than 20 US firms have cancelled bond sales because of lack of interest.

The subprime problems sparked a sell-off which has uncovered many investors ready to acquire assets at lower prices, given the 'ample liquidity'. Moody’s conclude that there is no general threat to the integrity of the financial system, but reappraisal of risk is welcome. Investor 'nervousness' will probably last until the size and location of losses is known, but that is not likely to be soon and “headline risk will probably test markets' nerves.”

Posted by Peter Kenny at 06:57 PM | Permalink | Comments (0) | TrackBacks (0)