Looking At The Main Types Of Mortgage Products Available These Days
A lot of mortgage payers are currently finding that their existing mortgage products are reaching the end of their period of benefits and are now having to shop around the markets for a new mortgage. This is being made hard because many remortgages are not suitable for all mortgage holders. So if you are desperately trying to compare mortgage rates of everything available, what are some of the main types of mortgages offersavailable on the mortgage market today?
Fixed Rate Remortgages Products – this is the most simple idea and a very popular option. For a set period of time you agree with your bank what the interest rates will be that are applied to the mortgage. Once you come to the end of this fixed rate period you may be free to move to other offers within the same lender; you may be able to move to another bank or you may have to stay with your current building society for a the remainder of an agreed term at their variable rate.
The advantage of a fixed rate mortgage is that you are sure exactly what your monthly repayments will be during the term. The disadvantages – well if rates drop more, then your payments are not going to be affected. And if rates do climb, then at the end of the fixed rate period you are going to be in for a rather unpleasant shock.
Libor Rate Mortgages – these are based around the rate at which building society are lending to each other. At the moment, maybe not a good choice with building societies struggling to lend and borrowing between themselves. But if you feel that the banking situation is getting better and don’t want to rely on the central banks setting rate cuts, then this can be a possibility.
Capped Rate Mortgages – this is a mixture of the fixed rate mortgage products and the building society’s standard variable rate. Your mortgage tracks the changes to the building society’s mortgage rates as they would if you were on the standard variable rate, but there is a cap to the maximum interest rate the bank will charge you. If interest rates climb above the capped level, you have the security of knowing that your payments aren’t following all the way. Better than that, as interest rates fall, so will your repayments. The disadvantage is that the capped rate can sometimes be slightly over the equivalent fixed rate.
Tracker Mortgages – these offers tend to move at the same rate as the central bank’s interest rate, with a small extra added on. Whenever the base rate is moved the rate you are charged will follow. This can be great in a volatile market when the lenders are not following the base rate changes closely, but watch how much you are paying over the base rate, just in case another type of mortgage is better. Also, you really are at the mercy of the base rates – each time they change your payments follow. And not all of these payment changes are going to go in your favour.
Whatever mortgage offers you are thinking of, make sure that you compare mortgage rates for a few different types of today’s mortgage interest rates and ask a broker to show you what is best and make sure that you are taking out the type of remortgage that really is best suited to your needs and financial outlook in life.
Hunting For A Remortgage Is Much More Complicated Today Than A Year Ago.
With mortgage rates currently dropping so rapidly, you might be wondering if now is the time to swap mortgages to see if you can get yourself a better deal, which over the long term will save you money. But is this as quick to do as it was a year ago? Keith Lunt looks at how involved this has now become.
Frankly, no. It is now far from easy to find yourself a remortgage product. The building societies have reacted to the current credit crunch by making it far harder to obtain a new mortgage and at the same time many of the building societies themselves are finding it harder to obtain the money they need for lending to borrowers. If they can’t get the money, they then have to further limit what they lend.
Many of the big banks have now taken away their easy going remortgagesand are instead making it much harder for potential borrowers to take out a remortgage. They are putting huge boundaries around their remortgage deals that potential customers have to be able to climb before they stand any chance of obtaining a remortgage.
Aside from the fact that a lot of the building societies have increased the basic remortgage charges, making remortgage far more expensive just to take out, many have taken away deals that would appeal to the home buyers the lenders are now worried about not being able to keep up repayments. They are securing themselves for the future by only accepting remortgage requests from those borrowers that they are convinced will always be able to pay back their mortgage. They are protecting themselves from the gamble they once used to take of risky lending in return for a high rate of return.
An example of this that is clear to see is the removal by the banks of the 125% remortgage. Now you would be struggling to find a bank willing to give you 90% of the house value as a loan. And in a lot of cases, even securing more than 75% of the property value has become extremely difficult.
So what can you do if you want to change mortgage and find a new remortgage rate to save you some cash, and take a benefit from falling mortgage rates? Well you can compare mortage interest rates yourself and see what is about, but many of the rates on offer are only available for certain types of borrowers. It is more efficient to approach a local mortgage broker and get them to check remortgage rates for you instead. This need not be a difficult search. Many websites offer this contact service, so you can still effectively do the search over the internet. And by using a free service, you are saving yourself time, and hopefully cash.
Finding A New Mortgages Does Seem Like A Good Idea, But Not To Everyone.
Mortgage offers are falling to a low and the bank’s base rate is predicted to hit an all time low. Is this the time to be looking for a remortgage?
Well, it all depends very much upon your own personal financial circumstances. If you are tied into a product with redemption penalties then looking for a new mortgage might cost you more that it would save you. But if your current mortgage is approaching the end of the penalty term, or has finished any lock in periods, then it might be worth trying to compare today’s mortage rates to check if there is a cheaper mortgage out there on the market.
There is also, sadly, another group of people for whom finding a remortgage rate might not be an easy or a cheap option. If you are unlucky enough to have bought your house within the last couple of years, then with the plummeting home prices currently seen in the market, it’s possible that at best your home is worth only what it was worth when you bought it. At worst, for those that bought at the peak of the house prices, it is possible that you have lost quite a large chunk of what you paid for the home.
The problem here is that you could find that your current deal borrowing is too high for the banks to be happy to lend to you. For example, if they were happy to lend you 90% of the value when you bought the house and it has now dropped in value by 10%, although the amount borrowed would be the same, the amount as a percentage of the home value has shot up to 100%. Many building societies are now dubious about such high lendings, in a lot of cases penalising those who are borrowing more than 75%. So although your borrowing might have seemed OK to the lenders when you took out your current mortgage, now they might not touch you with the proverbial barge pole.
And it’s not just those that have suffered house price drops that are in this difficult position. Until recently some building societies would actually lend up to 125% of the house’s market value. If you were in this position when you took out the mortgage, unless your house value has risen by almost 40% or more, you would still be looking to borrow more than 90%. This would leave a lot of banks unlikely to be willing to help you.
If you are stuck with an expensive deal and want to move to a cheaper one, then the mortgage market can be a mine field. Make sure that you contact a mortgage advisor and let them compare remortgage rates for you, to see if they can find some good mortgages for you.
Keith Lunt writes on behalf of the comparemortgagerates.co.uk website, where you can find useful information about mortgage rates and contact a local broker who may be able to assist you in finding a new remortgage product.
The First Stages To Claiming Excessive Bank Charges. Background To Reclaiming Unfair Bank Charges
The first step to reclaiming bank fees is very simple – write to the bank and ask for your money back! Yes, really!!! The letter, using a standard letter format (your address etc at the top) should give a reference of your bank account and include the date it was written.
Then, tell them that you are requesting a refund of all charges applied to your account in the past 6 years. Remind them that Under the Unfair Terms in Consumer Contracts Regulations 1999 fees must reflect administration costs and cannot be punitive. Then list the charges you have incurred and the amounts involved in each, pointing out that you do not believe the amounts to reflect the true cost to the bank.
Next, state the total amount that you have been charged and request that they give that back to you.
Finally, ask them to return the money in full within 14 days, otherwise you will commence a claim against them for the whole amount, plus interest and costs. If you are at all unsure, plenty of websites show sample letters and include calculators to determine what you can claim.
You have given the bank 2 weeks to respond, so if it doesn’t write a reminder and phone them. They might try to delay by offering a reply at a future date. In this case, write & phone warning them that you are allowing them an additional 14 days before starting court proceedings.
Another trick the banks may use is to tell customers that they are mistaken and cannot claim refunds or that the charges are not unlawful. In this case, you are probably still at the point of a second letter and then start court action.
If they reply offering the whole amount then you have won. If they offer a partial payment then you have to take a decision as to whether it’s enough or whether you want to continue. If the amount of fees involved are small or the proportion they are offering to refund is high, then the effort of continuing a claim might make acceptance a better option. But if they are offering a very low offer, there might be good rewards in claiming for the full amount. Only you can decide.
If you haven’t got the result you want through letters, then it’s time to try bluffing your bank with court action. If your claim is for less than £5,000, then you can go through the small claims court, even using the online system! If your greater than £5,000, then see if you can reduce the claim, either by not reclaiming all charges (for example if the claim is £5,001) or if the fees relate to more than one account, make multiple smaller reclaims.
At this point you then need to check how much a claim is going to cost you to start (you can reclaim for costs if you win / the bank does not defend the case). Then you can start the proceedings. But that is beyond the scope of this small writeup!
How Much Are You Likely To Try Reclaiming In Excessive Bank Fees? Background To Reclaiming Your Bank Charges
In short, you can reclaim bank charges you have incurred within the previous 6 years. This includes excessive charges for being overdrawn, letters informing you about bounced cheques and failed direct debits and similar. If the action probably only cost the bank a little amount and they have charged you a lot more, then there’s a chance of a claim. If these fees have caused you to be hit by further fees or interest, then you will also have a case there.
As well as these, you can reclaim for interest on the amount you are claiming – the interest you would have earned on the money had it been in your account.
But how do you find how much the bank has charged you?
First, if you have stored your bank statements for the past 6 years then you just need to look through them. If you haven’t kept them all, if you are registered for online banking (or can register) then you may be able to determine the unfair fees from there.
Finally, if all of these are not possible then you have to go to your bank. Asking for copies of back statements can prove quite costly (and these fees DO NOT count as unfair!!!). But if you know exact dates of charges, then this might be a choice. But the usual way is to write to the bank, quoting the Data Protection Act 1998, requesting them to tell you for all charges on the account:
• what the offence was
• the date of the offence / fee
• the amount of the charge
The bank has, by law, only 40 working days to reply. But it is allowed to charge you a fee not more than £10, so it is worth while including in this letter the full £10 fee made payable to the bank.
If your bank tries to give you a copy of your statements they can try to charge you for that. To prevent this, be sure that you tell the bank you are using the Data Protection Act 1998 to get a list of all fees.
Expenses
You can also reclaim expenses incurred in making your reclaim, although this can be best left in case the claim gets as far as the court stage and then used as a bargaining tool to prevent that. Simply put, if the bank is told that you will accept repayment now, or repayment plus costs if they don’t accept that, then there’s a financial incentive to them to accept.
Reasonable fees include court fees and a case has also included costs of preparing the case. To claim for this, document a record of how much time you spend preparing your case then include a charge at £9.25 per hour (the legal entitlement).
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