4 Home Loans

Offset mortgages, which are quite popular in Australia, could save Britons an additional £345 billion in mortgage payments.A new report by Intelligent Finance (IF) reveals that an offset could save the average borrower £70,000.

Australians, who prize home ownership as highly as Britons, utilize offset mortgages as one way to keep their mortgage payments under control. This perception has made an offset very popular there, according to Cammy Amaira, director of sales at Intelligent Finance.

The offset has changed considerably in the past few years, and Mr. Amaira would like to see it grow in popularity in the UK. He reports that his recent review of the figures indicates that people could save a considerable amount with an offset.

When introduced in 1997, offset mortgages were perceived as a niche product.

If, a division of Bank of Scotland, was launched in 2000.

The decision by the Bank of England to cut interest rates to 5.25 percent has led mortgage lenders to cut loan rates.Lenders made the decision in an effort to limit the economic damage of the recent tightening of credit. They say they plan to pass the savings on to borrowers, which will reduce the monthly payment on a £100,000 by £16.

David Kern, economic advisor to the British Chambers of Commerce, lauded the decision to cut the rate, explaining that the worsening global economic situation made the move necessary to limit risk.

Mr. Kern believes that slowing growth is a greater threat than inflation and suggests that a larger cut was called for. A cut to 5 percent would have come as welcome news, he says.

Chancellor Alistair Darling would like to see 25-year fixed-rate mortgages become more common in the future.At present, most fixed-rate mortgages run only five years.

Many households, especially those with lower income, will benefit from fixed-rate mortgage repayment plans that run for a long term. Mr. Darling believes that making those products available will help to stabilize the economy.

Currently in the UK, a 25-year fixed-rate mortgage is available only through Nationwide.

Alistair Darling’s comments recently gained the approval of the building society. The 25-year fixed-rate mortgage on offer that became available last March sold out in only five weeks, says the society.

Indicators suggest that the UK economy is slowing and the Bank of England lowered the interest rate one-quarter percent in response.The decision had been expected, but in the light of recent rate increases by power company E.ON, it will be welcome news to borrowers.

Few people doubted that the Monetary Policy Committee would cut the rate, according to Ray Boulger of John Charcol. The MPC had been heavily criticized for refusing to lower the rate for a second month in January. There has been considerable talk of lowering the rate to help stabilize the economy.

Mr. Boulger says that, in effect, the MPC is “running hard to stand still.”

The bank decided on a modest rate cut to counter the threat of inflation in the context of slowing economic growth.

The MPC meets every month and makes a decision on interest rates that reflects the votes of the nine members.

Borrowers could see interest rates of 4.5 percent by the end of the year, says forecasting firm Global Insights.The firm sees rates falling further to 4 percent in the first half of 2009.

The firm expects that slower than expected growth will force interest rates to 4.5 percent by the end of 2008 and to 4 percent in 2009. Nonetheless, they do not predict that the UK will experience a recession, says Howard Archer, chief of European and UK economics for Global Insight.

Growth in GDP will “equal the weakest performance since 1992,” hovering at 1.8 percent in 2008 and 2009, according to Mr. Archer.

Experts expect the interest rate to be cut at least one-quarter of a point this Thursday, when the decision will be made. It is currently at 5.5 percent.

Stringent rules designed to prevent mortgage fraud are necessary in the sale of newly constructed flats in the city’s center, according to the Council of Mortgage Lenders (CML).The property market is in a down trend, and the council fears that developers may try to offer incentive packages, including cash-back offers. Such a move will inflate property prices.

Buyers and lenders are hurt when developers offer discounts and incentives. It is difficult to determine a fair value for properties, according to a recently published CML report. These practices may encourage buyers to borrow more than their property is worth, while masking the true value of the property for lenders.

The CML also questions such practices as holiday give-aways, buying linens, and paying legal fees.

The Council of Mortgage Lenders is the trade association for the mortgage industry.

First-time home buyers will find favorable prices in Manchester, in contrast to expensive properties in London.It is possible to live in the center of town with a mortgage of £100,000, according to real estate provider Savills.

Buyers will find reasonably priced one-bedroom apartments in the city centre, something not possible in London, according to Tom Rogers, residential investment consultant for the firm. There are many properties on the market, and Mr. Rogers believes that those in Manchester are priced well.

The city’s recent pattern of growth is continuing, he says. Manchester is a lively city with plenty of action.

Over the next ten years, the city of Manchester will be spending £4.9 billion on local construction projects.

Young people are more likely to consider a debt consolidation loan to manage debt than are older people, according to a new study.People in the 20 to 29 year-old age group are the most likely to take out a loan, followed by those in the 30 to 39 year-old group.

Data collected by Halifax indicate that many people are inspired by the new year to seek a loan in January. Numbers for the month are twice what they are for some other months.

Neil Chandler, head of Halifax Unsecured Personal Loans, says the first of the year is the time that many choose to turn to products that offer lower rates of interest.

Regardless the time of year, men are more likely to seek a debt consolidation loan than are women.

People should talk with family and friends about loans, according to the Consumer Credit Counseling Service.

Tightening credit should not make it impossible to get into a new home.So says Darren Cook, head of mortgages at Moneyfacts.co.uk. First time buyers are not as bad off as some may think.

It is still possible to find a lender to help with that first-time investment in property, he says.

First-time buyers seem to be very cautious in light of the uncertainty caused by current market and credit conditions, according to Mr. Cook.

In the past two months, 11 mortgage lenders have lowered their maximum loan-to-value on offer for mortgage products.

Mr. Cook believes that lenders, too, are taking more precautions so it is more difficult to find a loan for 100 percent of the property’s value. Still, there are plenty of opportunities for first-time buyers hoping to buy a home.

New data shows the number of couples buying homes increased last year.According to mortgage broker John Charcol, 50 percent of first-time purchases were made by couples last year, compared to 45 percent in 2006.

The number of women purchasing homes on their own remained relatively static, but the number of men buying solo dropped, says Katie Tucker, technical manager Charcol.co.uk, the firm’s web site.

Ms. Tucker sees a number of advantages in purchasing as a couple. It is possible to share the cost of the mortgage and other household bills, and snuggling might just help to reduce heating bills.

She does not recommend that couples jump into home ownership, however. Rent first to make sure the decision to pair up is a good one.

More Britons are expected to seek secured loans in the first quarter of 2008, according to the Bank of England.