Mortgage Lenders Target Borrowers With High Equity and Deposit

Although banks are reducing the cost of mortgage rates, experts say that the majority of these are aimed at lower-risk borrowers who are capable of making a large down payment.

Last Tuesday, the lowest-ever five-year fixed-rate mortgage at 2.95 percent was released by the Royal Bank of Scotland. This is lower in comparison with Santander and HSBC’s deals, which have a rate of 2.99 percent.

Similar to Santander and HSBC’s deals, RBS’ five-year fixed mortgage is only offered to borrowers who have equity or a down payment of a minimum of 40 percent. Moreover, RBS’ rate can be obtained by borrowers through payment of a fee worth £2,495.

According to Ray Boulger of mortgage broker John Charcol, even though the fee is higher compared with other deals, it will provide a good price for borrowers with mortgages of no less than £100,000.

Another competitive deal is a five-year fixed-rate mortgage at 3.39 percent offered by Nationwide Building Society. The mortgage is for borrowers who have equity or down payment of 30 percent or above, and it comes together with a £499 fee for purchases, £299 for first-time buyers, and £999 for remortgages.

Although the majority of the competition has been focused on attracting borrowers who have a large amount of down payment, there are a few lenders who also target first-time buyers.

Lloyds Banking Group said last Monday that it will offer £5bn to first-time homeowners by the end of this year. Moreover, it has lent to 25,000 first-time buyers in the first half of 2012, and targets to increase this to 50,000 by the end of this year.

In contrast, HSBS said early summer that it would lend more to first-time buyers from £3bn to £4bn.

According to Ben Thompson of Legal & General Mortgage Club, an increase in mortgage lending will encourage growth and boost competition. However, Thompson added that there is still limited assistance for borrowers with little equity.

Decrease in Mortgage Lending

For the month of June, repayments of housing loans exceeded new lending for the first time since the same period of the previous year. Consequently, there was an increase in total lending to individuals by £0.3bn, which is the smallest increase in approximately a couple of years.

However, there was a decrease in the number of new mortgages approved for home buyers to 44,192, which is the lowest in 18 months. Moreover, approved mortgages but not yet lent decrease by 10 percent on June in the previous year.

In the previous week, the same figures were also issued by the British Bankers’ Association (BBA). BBA said that the decline in mortgage approvals was brought about by the wet weather in the month of June. Some events that also had an effect in the market include the Diamond Jubilee and Euro 2012 football tournament.

According to figures from HM Revenue and Customs (HMRC), although there was a decline in the lending activity, house sales across the UK increased for the month of June. Specifically, sales for the first half of this year was 11 percent higher compared with sales in the previous year.

This inconsistency is due to the fact that over 40 percent of home sales happen with no need for buyers to take on a mortgage. Therefore, completed sales can increase despite the decrease in borrowing.

Based on the recent figures from Bank of England, banks were planning to limit their mortgage lending much more in the following months, especially to borrowers with small down payments.

Due to the ongoing recession and euro crisis, a warning that lending might keep on declining this year was given by Mark Harris, chief executive of mortgage broker SPF Private Clients.

In addition, Harris said that although rates have dropped, loans with cheap rates are only available to borrowers that are capable of paying large deposits.

Mortgage Deals: What You Should Know

Feeling discouraged with the current situation in finding a mortgage fit for your needs? You may have heard from various stories from relatives and friends about how difficult it is to shop for mortgage nowadays. Borrowers are still provided the loans that they need by lenders, and these deals often have rates that are low and budget friendly. But if you want a good deal like this one, then you have to learn how to find them.

The first step in looking for a great deal is to get organized. In this process you have to look for information, gather and look over many potential lenders. To help you with this stage, the HUD provides free good faith estimate forms that you can use to compare the offers of different companies for a loan. The CFPB also has a standardized mortgage disclosure it is working on in the present which can help you in your search for mortgage companies.

The next step is to check your credit. It is a rule of thumb that one must know his credit information. You can get a copy of your credit report from the three major reporting institutions through this site: AnnualCreditReport.com. Knowing where your credit stands is vital in negotiating the rate and the loan you are going to get. Furthermore, you need to be firm on what you want. You have to know how much you can afford in a month; you have to determine if you would settle for a 30-year or 15-year rate.

Another step is to look for different alternatives. This may be a confusing experience because when you start applying to many lenders, they will give you different statements on your loan. You have to make sure you really understand the terms of your loan. You also have to keep in mind that full application and a credit background check will often not result to an accurate rate estimate from the lenders.

Shopping for mortgage can be a real hassle and often times you might get frustrated, but you have to keep in mind that if you are to succeed in this endeavor, you are more likely to get the dream home or the business you always wanted.

Rates on Mortgage Loans Decline Again

The interest rates on US fixed mortgage loans decreased once again to its lowest ever. As a result, potential buyers have more motivation to face the housing market.

According to Freddie Mac, a mortgage buyer, the average interest rate on the 30-year mortgage loan declined to 3.56 percent, which is down from 3.62 percent in the previous week and the lowest ever since the 1950s, when long-term mortgages started.

Moreover, the average interest rate on the 15-year mortgage decreased to 2.86 percent, which was down from 2.89 percent in the previous week.

One of the reasons for the moderate housing recovery this 2012 is the inexpensive mortgages. In fact, home sales increased for the month May compared to the same period in the previous year.

The low interest rates for mortgages could offer assistance to the economy as well, if a larger number of people refinance. People who refinance at lower rates will be charged with a lower interest on their loans, thereby having more money to consume and save. A lot of homeowners allocate their savings on renovation, furniture, appliances and other developments, which causes the economy to grow further.

However, the rate of home sales is still under strong levels because there are still a lot of people who find it hard to be eligible for a mortgage loan or do not have enough money to pay a large amount for deposit as demanded by banks.

In addition, the weak job market could also discourage some people from buying homes. According to a report from the government in the previous week, only 80,000 jobs were added by US employers during the month of June, causing the unemployment rate of 8.2 percent to remain the same. This slow job creation leads to less spending of consumers.

There has been a decline in the mortgage rates since they tend to trace the yield on the 10-year Treasury note. Because of the weaker US economy and uncertainty concerning how the Europe debt crisis can be solved, investors buy Treasury securities, which are deemed as harmless investments. When there is a greater demand for Treasury securities, there is a corresponding decrease in the yield.

Why is it Hard to Refinance a Mortgage?

Years ago, when the loaning business was not in the crisis it is in today, one thing is always for certain. When the interest rates would drop, the homeowners would refinance their mortgages to be able to take advantage of the lower rates. This would help them save about a hundred bucks in their monthly bills.

However, things do not work that simple anymore. Mortgages rates have been at their lowest now. The average mortgage loan is a 30 year loan at 3.56% rate this is almost 1 percent lower than it used to be last year.As the rates have decreased, the number of refinancing applicants has also fallen for the third time this week.

According to CNBC, the unusual trend is not new, and it may mirror the new reality of housing in the coming years. But there is definitely something you should worry about further about a mortgage than just its rate. If the value of a property has fallen, then it can lead to being declined for a refinanced loan. The government has stretched out the authority of Fannie Mae and Fannie Mac so that they could refinance loans in the Home Affordable Refinance Program. This will allow them to make refinancing transactions to happen by getting rid of constraints on the unequal position of the current market.

Banks are still being cautious with their transactions in mortgages. The Bank of America, JPMorgan Chase, Citigroup and the Wells Fargo are currently revolving around the $25 billion settlement money they have with the state authorities and federal officials. They are trying to avoid being stuck on the same situation in the foreclosure-abuse they had last year. The most civil thing to do is for them to demand higher loans.

So, if you have the opportunity to refinance your loan, do not hesitate to take the opportunity to talk to your lender about it. For it may be able to help you in reducing your liabilities in the mortgage loan in the future.