Home Truths

As interest rates continue to dominate the financial headlines, and these have an impact on mortgages and house prices, I thought I'd blog a few facts and figures that have caught my eye over the last few months.

Best Mortgage

Generally the best mortgage terms are available to borrowers who represent the lowest risk - or just as often, the highest profitability - to the lender. That said, the mortgage market is quite competitive, so shopping around can result in achieving better terms. This can take quite a time though, and also a reasonable amount of knowledge to ensure you see through the tricks of the trade that lenders often use (eg the headline rate being nowhere near the actual rate you end up paying, or the lender calculating and adding interest daily yet only deducting your payments annually).

I've done a big count up and I reckon I have found 32 different types of mortgage (not rates - there are thousands of those - 32 different styles of mortgage loan). Which is best for you?

That is why I think a good independent mortgage broker can be worth their weight in gold when considering the amount of money involved in a mortgage - especially when their fees are compared to stamp duty, legal fees, mortgage rate procurement fees etc). I often recommend John Blackwood of Virtue Financial (www.virtuefinancial.co.uk)

First Time Buyers

According to the Halifax 1st time buyer review, In April 2010, 14,300 loans were made to FTB - this actually up 8% from the same time the year before. The average FTB loan to value was 75% - however the council of mortgage lenders estimates that some 80% of FTB got help from their parents in funding the deposit.

When all around us financial institutions are crumbling it is good to see 'The Bank of Mum & Dad' still operating ;-)

Mortgage Fees

Which? magazine reviewed data from moneyfacts and calculated the average fee charged by a lender simply for arranging a mortgage was £939. Compare this to my avarage fee of £870 for a full financial report and plan covering not just mortgages but your entire financial situation (www.iangreen.com/financialreport.php) and I think I look great value for money and mortgage lenders look like they are charging over the odds ;-)

How much!

Assuming a 5% interest rate and mortgage calculated annually, A £100,000, 25 year repayment mortgage will still have £54,800 left to pay at the end of 15 years.

How Much?

At the end of 1980 the average house in the UK cost £23,497 (London £30,538)

At the end of 1990 it was £54,919 (London £77,884)

By 2000, £81,628 (London £147,704)

and by the end of Q2 2010 - £168,719 (London £290,249)

- above figures sourced from Nationwide

Will you take cash?

If you had paid ready cash for a property, then rented it out (assuming industry standard figures for void periods), as a nationwide average, you could have expected a gross return of around 9.6% over 5 years to March 2010 - in Central London it would have been nearer 9% and in Scotland, nearer 10%

Thinking of moving?

Assuming a house price of £168,719 (see above) you could be paying:

1% stamp duty land tax, 2% agent's fees, £60 for an energy certificate, 0.25% conveyancing, £200 land registry, £939 for the loan and £25 for the money transfer.

So you'll need to find north of £6,700 down the back of the sofa before going ahead :-)

However, if the house cost £500,001 and you jumped up the price bands, it would be costing more than £31,800