Remortgaging: Fix or tracker?

Remortgaging fell 63 per cent in May compared to the previous year, according to the latest figures from the Council of Mortgage Lending (CML), as the combination of shrinking equity and increasingly attractive standard variable rates (SVRs) persuaded many that doing nothing was the best option.

With SVRs for existing customers at several bank and building societies tied to the historically low base rate, the low rate of remortgaging shows many customers have been content to put off tying themselves into a new deal.

But while the base rate may remain stable into next year, mortgage deals will not stand still. Sarah Routledge considers the options for borrowers who are looking to lock in again.

Tracker

After the base rate fell spectacularly to its current 0.5 per cent, trackers gained a new popularity with some fortunate borrowers paying just pennies for their loan. But this led to a speedy withdrawal of new products.

According to Moneysupermarket.com, there were 522 one-year tracker products available on July 1st 2008 – by the 20th July 2009, there were just two available, a fall of 99.6 per cent.

Over the same period the number of two and three-year tracker deals fell by 74 per cent and 73 per cent respectively.

Although this lack of choice is not ideal, don't discount tracker mortgages, Louise Cuming from Moneysupermarket.com says: "For consumers looking for a new mortgage, the near entire absence of tracker products shouldn't put you off looking around for them; the trackers that are still available are generally much cheaper than the equivalent fixed rate deals.

She adds: "The decision between a tracker and a fixed rate is always somewhat of a gamble, and whilst some people like the certainty a fixed rate mortgage affords, the savings on offer from tracker mortgages are hard to ignore.

"Almost everyone agrees that the base rate must eventually rise, but no one knows quite when this will happen, and if rates remain flat for another six months or so, those opting for tracker may save hundreds of pounds."

Ray Boulger, of mortgage adviser John Charcol, says the security offered by fixed rates means they will remain popular for most people.

"However, we are recommending trackers to more clients this month, with the focus on low or no early repayment charges (ERCs) as well as the obvious requirements of a good rate and fee combination and possibly an offset facility," he adds.

"The reason the size of the ERC is important, unless the mortgage offers a droplock option, is that many clients will want to consider switching to a fix when the time is right for them."

HSBC is offering a 75 per cent loan-to-value (LTV) tracker mortgage, which is currently at 2.95 per cent, with a £799 booking fee. There are no early redemption penalties, so once the rate moves up the borrower is free to renegotiate.

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British courts jail two loan sharks as recession bites cash-strapped

A MOTHER paid almost $180,000 after taking out a loan of just $1,000 to buy a computer, a court has been told.

British mum-of-four Debra Wilson, 40, suffered two strokes and a brain haemorrhage from the stress of her repayments.

Her neighbour, Robert Reynolds, was yesterday given a 51-week prison sentence, suspended for two years, for harassment with intent to commit violence over the loan.

Mrs Wilson, from Newcastle in England's north, went to Reynolds to buy a computer as a present for her children and ended up borrowing 500 pounds ($1000) from him.

Unable to pay off the loan, she was hit with repayments that skyrocketed to $4,000 per month, forcing her to re-mortgage her home.

Reynolds collected repayments over seven years, claiming the original loan came from violent loan sharks.

Eventually Mrs Wilson was in a home without gas for heating and barely able to afford food.

"Don't, please, get involved in this. It's really not worth the long stressful road that you will be on,'' she said outside court yesterday.

The case comes amid rising concerns that the recession will lead to an explosion of loan shark activity.

British authorities fear that as credit dries up, the cash-strapped will increasingly turn to backstreet money lenders who charge exorbitant interest.

In a separate case yesterday, a ruthless British loan shark who charged vulnerable clients up to 2,437 per cent interest was jailed for five years.

John Kiely, known as Johnny Boy, used a network of enforcers to collect debts from hundreds of residents in Manchester housing estates.

In a five-year reign of terror he earned 2.9 million pounds ($5.86 million) and lived a luxury lifestyle as fearful borrowers were forced into hiding.

Kiely handed out the money from a wad of 20 pound notes from his black Range Rover, and sent around his thugs when repayments did not come back on time.

He earned so much from his loans he was able to pay cash for a $1.7 million mock-Tudor seven-bedroom mansion.

Judge Smith told 36-year old Kiely: "It's clear to me you are a ruthless individual who has displayed a high degree of criminal sophistication.''

Junior consumer affairs minister Kevin Brennan said a crackdown on loan sharks had led to more than 100 prosecutions.

"Thugs like Kiely who prey on vulnerable people cause untold misery within communities," he said.


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Finding Home Loans For People With Bad Credit

Financing bad credit home loans is not an easy task at all. Many financial institutions are tight about to whom they provide home loans because it is a long term bond unlike a short term financing agreement.
It goes without saying that majority of financial institutions work according to strict guidelines when looking for suitable candidates for home loans. But what about those who have bad credit records?
A bank is not likely to allow you a chance of getting a home loan if your credit history is bad. But that is not good enough reason to lose hope. There are many other companies who opt in for financing bad credit home loans.
Once you spot out a few companies for financing bad credit home loans, the next step would be to do a screening. Since formal institutions like banks don’t offer financing bad credit home loans, other institutions will demand for a higher interest rate. Oh well!
I assume nothing in life comes for free or without strings attached. So obviously there is a price tag attached to this service!
Once you get hold of a few companies that offer financing bad credit home loans, you will need to choose the best out of the few. You by all means perform all necessary background checks on these companies and figure out what is best.
It is never a good idea for settle for short term loans for financing bad credit home loans. If they do this, it probably means that their company is unstable.
You should read everything carefully at all times when dealing with institutions that offer financing bad credit home loans. After all, they are taking a huge risk by offering you a loan and if they are running a risk, they will most certainly make sure that they have something to fall back on in return.
Many institutions will ask you to hold another property or money as guarantee against your home loan. You may feel entrapped when this happens because you know that there s a level of uncertainty and risk involved for both parties. So it is best to settle for financing bad credit home loans from an institution with a good reputation.


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You Could Make you Financial Problems Easier to Deal With if You Obtain a Bad Credit Remortgage

Stressed out because of the tons of debts you have to deal with? Don’t fret. Bad credit remortgaging can help ease your financial burden.
A deal specifically offered to people with bad credit score, a bad credit remortgage helps gradually reduce a borrower’s debt and improve their credit standing once the loan has been fully paid off. You have two options when you avail of a bad credit remortgage. The first option is reducing your monthly payments through remortgaging your loan. That way, you extend the length or the time needed to pay off your debts. The other option is getting some cash from the equity of your home or repaying your other debts through bad credit remortgaging. These two bad credit remortgaging options allow borrowers to handle their payments with ease while giving them full control over their finances. Simply put, bad credit remortgaging allows you to get a new mortgage at better rates than your current loan. Remortgaging with poor credit history could be the answer but getting a remortgage quickly could be reckless so make sure you are making the right decision.
Why should you get a bad credit remortgage? If you’re facing a huge financial setback, you have to do something before the problem gets out of hand. A bad credit remortgage is an ideal solution for people who have several loans with high interest rates or those who are currently repaying a high-interest bad credit mortgage. Bad credit remortgaging allows you to use the loan or the amount your borrow to repay your debts and merge them into a single debt. That means you will only have to make a single payment for your debt every month. Talk about convenience and ease of managing your debts. If you are interested in information on mortgages for people with poor credit then you should consult a professional.
If you’re looking for the right bad credit remortgage deal, you can either do it on your own or seek help from a professional adviser or broker. Doing it yourself involves extensive research: you contact various lenders and ask for information on their bad credit remortgage deals. Also, you have to read carefully the terms and conditions of each bad credit mortgage lender and compare various deals so that you can choose the best one for your needs.
To save time and effort, you may opt to have a professional broker do the job for you. Just be sure that you get help from a broker who has experience in bad credit remortgage. A good broker is free of any bias and gives advice specific to your needs. The broker you’re getting must be good at evaluating your current financial situation and looking for the right deal for you. Hiring a broker can make managing your debts less stressful for you.
It’s not easy to get rid of your debts, though you can make the job less stressful by getting a bad credit remortgage. This option not only eases your financial burden, but also helps you repair your credit standing.

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Lenders accused of debt intimidation

Citizens Advice has accused lenders of intimidating borrowers by threatening to make them sell their homes even where the debt was not secured against the property.
The charity has reported a 722% increase in the number of applications for charging orders – this is where a lender applies to the court to change a previously unsecured debt into one that is secured against the debtor’s property. The creditor can then recover the debt by forcing the sale of the property.
The most recent figures from the Ministry of Justice show that nearly three quarters of charging orders applications made are accepted.
David Harker, chief executive of Citizens Advice, says: “Some creditors are using the court process as a tactic to intimidate vulnerable debtors into paying unaffordable amounts. This is not only unfair to the individuals concerned who have offered payments towards their debts but is also unfair to other creditors.”
While the government has dropped plans that would have made it easier for creditors to get charging orders, Citizens Advice warns the law is still unclear – enabling creditors to convert people’s debt with “increasing ease.” For example, there is no minimum amount for obtaining a charging order, meaning borrowers could be at risk of losing their homes over a small amount of money.
What is a charging order?
A Ministry of Justice guide states that charging orders are a way for creditors to “safeguard” their money by securing the amount of money they are owed against a property, piece of land or even stocks and shares and savings. A judge will normally only issue a charging order in cases where the debtor has failed to meet one or more of their repayments or failed to pay the full amount due at the end of the term.
When the property is sold then the ‘charge’ must be paid first before the owner receives any of the proceeds.
While a charging order does not mean the borrowers must sell the property. However, the creditor can apply to the court for an Order for Sale. If this request is approved, then you will be forced to sell your home and the money owed to the creditor will be paid out of the proceeds.
The Office of Fair Trading (OFT) is currently monitoring the use of charging orders in response to the rise in the number of applications being made by lenders – and the increase in these being granted by the courts.
While the OFT says only a small proportion of lenders who obtain charging orders then go on to make Order for Sale applications, there is nothing to say this won’t increase down the line.

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Lenders repossess homes for credit card debt

Debt charities have attacked high street banks for repossessing homes to recover debts of just a few thousand pounds.
Thousands of borrowers struggling to repay credit cards or personal loans are at risk of losing their homes because lenders are increasingly keen to secure debts against a borrower’s property, Citizens Advice warned today. The charity has reported a huge increase in the number of charging orders made against homeowners struggling with unsecured debt.
David Harker of Citizens Advice said: “Some creditors are using the court process as a tactic to intimidate vulnerable debtors into paying unaffordable amounts. The law leaves debtors far too exposed to unfair treatment and the risk of losing their homes.”
A charging order secures a debt against a property, and allows creditors to apply for an “order for sale” to recover the debt by forcing a sale of the property. It means borrowers could lose their homes over potentially very small sums of money.
Since 2000 there has been a 722 per cent increase in the number of charging order applications, according to the Ministry of Justice. Around 74 per cent of the 132,000 applications made in 2007 were agreed by the courts.
The law currently states that creditors can only apply for a charging order if the borrower has a county court judgment (CCJ) and has been ordered to settle the entire debt and has not paid, or the borrower has been ordered to pay in installments and has missed a payment.
However, Mr. Harker said: “We are now seeing cases that suggest charging orders are being granted even when these circumstances do not apply. Both creditors and judges are working round existing legal safeguards for debtors.”
Lenders frequently initiate court action even if a borrower has arranged a debt repayment plan with a charity such as Citizens Advice, whereby a borrower arranges to make smaller, more affordable monthly repayments. Around 600,000 borrowers are now in debt repayment plans, according to Credit Action, the charity.
Chris Jary of Action for Debt, a debt advisor, said: “Charging orders are now very common and in some cases this will lead to an order of sale. A client from Bradford recently had an order for sale on his house to recover an unsecured loan debt of £12,000. Some orders for sale have been made for debts as little as £4,000.
“It seems particularly iniquitous given that nowhere on the paperwork of a personal loan or credit card does it normally say your house will be repossessed if you do not keep up repayments.”
Many orders for sale are also made by debt purchase companies, who buy default credit accounts from banks and finance companies. Mr Harker said: “These companies are looking to maximise returns and may not be restrained by the same reputational concerns as some high street lenders.”
The Government has already announced a number of schemes to help homeowners struggling with mortgage payments to avoid repossession, including the Homeowner Mortgage Support Scheme, which allows households to defer interest payments for up to two years. However, no extra protection has been offered for homeowners struggling with unsecured debt.
“A number of changes are needed to enforcement legislation to ensure that charging orders and orders for sale become a last resort,” said Mr Harker.

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Charging Orders - the latest threat to indebted homeowners

The Citizens Advice Bureau (CAB) claims that lenders are increasingly threatening customers in England and Wales with charging orders, in attempts to intimidate debtors into making unaffordable repayments.
A charging order is a means of securing an unsecured loan against equity in the debtor’s property.
In a new report entitled “Out of order” the charity says evidence from CAB caseloads shows that creditors are also increasingly asking courts to enforce charging orders by granting an order for sale, which allows a lender to recover the debt by forcing the sale of the debtor’s home.
According to the CAB, the law around charging orders is currently unclear and “some creditors are testing the legislation around their use and obtaining charging orders with increasing ease”.
In addition, the report points out that “there is currently no minimum financial threshold for obtaining a charging order, leaving people at risk of losing their homes over potentially very small sums of money”.
The Office of Fair Trading is undertaking a review of charging orders but the CAB is now calling on the Ministry of Justice to look at the law.
CAB chief executive David Harker says: “It is vital that people who are doing their best to repay their debts should be protected from further debt collection or enforcement action and from enforcement related costs that are disproportionate to the size of the debt.”
He adds: “The current law on charging orders urgently needs reviewing and appropriate protection put in place.”

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