August rate rise on the cards

A number of economists predict the Monetary Policy Committee will raise interest rates in August this year, to curb rising inflation.

In a poll conducted by the BBC, 14 out of 22 economists said they expect the MPC to boost interest rates from historic lows of 0.5% in August, when an inflation report is due out.

Four of the economists predicted there would be a rate hike next month, while June, July, November and February also received votes.

Increasing interest rates will help to combat inflation, which is also forecast to rise over the coming months despite CPI falling 0.4% in March to 4%.

Of the 22 economists, 12 predicted a 1% hike, six predicted 1.25%, one said 1.3% and two forecast a 0.75% rise. Only one economist - Stuart Green at HSBC - believes rates will still be at 0.5%.

The forecasts come before the country's GDP results for the first quarter, which are revealed on Wednesday.

The BBC said many most of the economists who predicted a rate hike in May changed their mind after the last set of inflation results, suggesting views could change again this week.

At the MPC's last meeting earlier this month, three members of the nine voted in favour of increasing interest rates.

MPC still split six-three on rate hike

MPC still split six-three on rate hike

Britain's biggest lender ends interest only without documentary proof of repayment vehicle

Britain’s biggest mortgage lender has announced the end of interest-only mortgages without documentary evidence of how the loan is going to be repaid.

Halifax requires borrowers to provide written proof of how the loan will be repaid before a mortgage offer is made. Until April 6, it only asked borrowers to say that they had a repayment vehicle in place before the mortgage offer.

It is the latest example of banks and building societies tightening their lending criteria amid growing fears that home owners will default on their loans due to high unemployment.

Halifax allows borrowers to repay interest-only mortgages using endowment policies, Isas, pensions, shares, savings or the sale of a second home.

It means a borrower – who says they will use the money saved in Individual Savings Accounts to repay their home loan – must provide a copy of their latest Isa statement for the last 12 months before they can receive an offer from the lender.

High-street lenders have been tightening their interest-only criteria since the downturn because they regard these loans as more risky than repayment deals. If this continues, interest-only mortgages could vanish, or become so limited in scope that they are available to only a handful of borrowers.

Interest-only loans aren't inherently bad. What about first-time buyers who don't have a repayment vehicle but are due an inheritance? Or someone with a modest income but sizeable and regular bonuses which can comfortably be used to clear the capital?

‘One size fits all’ does not work when it comes to mortgages. For some borrowers, not all, interest only is the right choice.

Lloyds TSB introduced the change earlier this year and has since scrapped the higher rate it used to charge for interest-only mortgages.Other lenders have also tightened their policies on interest-only mortgages this year, with RBS and Coventry Building Society no longer offering this type of deal to first-time buyers.

RBS said: “It is prudent for first-time buyers to build up equity in their property by reducing the capital from day one.”

A Halifax spokesman said the changes were "designed to reflect the additional risks and responsibilities associated with interest only lending.”

"The State will pay for me"...78% of those who think that will be wrong

Ill health or injury can affect anybody at any time and state support is often insufficient to cover bills, mortgage repayments and maintain individual or family lifestyles.

In January the Department for Work and Pensions (DWP) released figures for those eligible for the Employment and Support Allowance (ESA). Only 22% of those assessed were deemed suitable for welfare support.

This highlights the need for individuals to make sure they have the right cover in place to protect their income.

For more information on how to do that, please get in touch at 'mark@themortgagemonkey.co.uk' 

Mums would rather change a dirty nappy than sort out life insurance

Recent research has found that a remarkable 48% of mums don't have any life insurance cover at all.

The main excuses behind their lack of protection were not understanding it (30%), not having time to sort it out (30%) and believing it was an unnecessary cost (36%).

The Mums to rank a list of tasks in order of preference and found that most would rather change a dirty nappy than organise life insurance cover.

However, mums admitted that sorting our protection would be preferable to cleaning hair out of a plug-hole, going to the dentist and doing two weeks' worth of ironing!

Mums were asked if there were any other reasons they had decided not to take life insurance cover and revealed the following excuses:

Failing to find the right provider

A lack of trust in the insurance providers

Finding it hard to find a policy because of pre-existing medical conditions

Having death in service benefit cover at work

‘My husband has it so I don't need to'

It's a real worry that so few mums have life insurance cover. Whether they go out to work or are full time parents it's important that they have protection in place for themselves and not just their partners.

Sorting out life insurance cover doesn't have to take a long time or be complicated, but it is important to have in the event the worst should happen. Everyday tasks like washing, ironing, cleaning and doing the school run could all have to be paid for privately, and families should think about the value that stay-at-home parents provide and how they would cope financially with only one income.

While death in service benefits at work and the breadwinner having protection are good to have in place, neither of these things will provide the same level of protection if the worst should happen.

Families should make sure they fully take into account the value that both parents contribute and recognise that by ensuring they have sufficient life insurance in place.

22% of people are unaware of the effect of a Base Rate rise

Research has found that 22% of homeowners, amounting to 3.5m people, are unaware of how an increase in base rate would affect their monthly mortgage payments.

Despite increasing speculation that the base rate will soon rise, the survey showed that 16% of borrowers on their lender's standard variable rate and 13% of those on a tracker rate do not know what an increase would do to their mortgage costs.

A further 16% on standard variable rate and 18% on tracker rates said their payments would increase, but do not think it will necessarily be as much as the base rate increase.

In addition, 20% of borrowers on fixed rate deals were unsure of how a base rate rise would affect them, with 28% thinking that their mortgage payments would go up at some point after the base rate moves.

The research further found that 5% on fixed rates thought they would see an automatic increase.

Predictions of when the base rate will increase are drawing ever closer, but when it happens it will still come as a surprise to many homeowners.

The base rate increase is inevitable and when this happens homeowners need to ensure they are prepared for what it will mean for their personal finances. Those on tracker rates, Standard Variable Rates and even fixed rates are in the dark about how their personal finances will be affected by this change, meaning it's impossible for them to budget for the future.

It's vital for homeowners to regularly review their mortgage arrangements to ensure that they are on the best deal for them.

IMF calls for LTV caps | News | Mortgage Strategy

IMF calls for LTV caps | News | Mortgage Strategy

Mortgage application fees rise 15% in the last 18 months

The application fees charged by lenders for their mortgage products have risen by just over 15% in the last 18 months.

Data reveals the average application fee ( the fee that is paid by the applicant for a given interest rate) has increased by around £100 between September 2009 and March 2011.

Over the period, fixed product application fees rose by £97 on average, an increase of 14%, while fees for tracker deals increased by £118, a hike of 15%.

In recent years many lenders have been increasing application and booking fees in order to offer lower headline rates while maintaining margins.

The analysis shows booking fees ( the fee that is paid by an applicant at the point of application to secure a given interest rate) have risen marginally over the last 18 months, by £9 for fixed products and £7 for tracker products.

The different pricing structures used by lenders can be very confusing for consumers.

So it’s vital that prospective mortgage customers look beyond the headline rate otherwise they may end up paying back more than they bargained for. People often forget to look at the total cost and simply focus on the interest rate and what their monthly repayments will be when comparing mortgages. They fail to factor in the impact of the fee.

Borrowers need to shop around to make sure they get the right mortgage to suit their needs.

This is where employing the services of a mortgage intermediary (broker) can help.

Computer says - this is why

Lenders will be forced to disclose their reasons for refusing a customer a mortgage under proposed plans announced by the European Commission today.

In its Directive it says where an application has been rejected the lender must inform the consumer immediately and without charge as to the reasons for the refusal.

It says: “Where the application is rejected on the basis of an automated decision or a decision based on method such as automated credit scoring, the creditor must inform the consumer immediately and without charge and that the creditor explains the logic involved in the automated decision to the consumer.”

It says the consumer should have the opportunity to request for the decision to be reviewed manually.

The EC says when the applicant has been turned because the lender has consulted a database or credit agency the consumer must be told the name of the database and be given the right to rectify any information held on the database.