Tougher regulation of price comparison sites is called for

Comparison sites are failing to provide consumers with the best deal and should be strictly regulated, Which? has said.

The Financial Services Authority warned comparison sites they must hold the correct permissions for their activities in June last year.

A Which? investigation has now established that most of the 11 most popular sites were using pre-selected answers and assumptions in their online forms for insurance products.

"This may make quotes appear cheaper, but can also lead to basic ‘one size fits all' policies that could be unsuitable for individual needs or even prove invalid in the event of a claim," the report said.

We want to see tougher regulation and monitoring of the non-advice price comparison sites to make sure they treat customers fairly and transparently as the advice portion of the market are expected to.

However what price comparison sites often neglect to make the consumer aware of is that its use prevents recourse to the Financial Ombudsman Service on the part of the consumer in the event of something going wrong.

If a financial product is purchased from a price comparison site , the consumer automatically sacrifices any right of recourse via the Financial Ombudsman Service because the purchase is deemed to have no advice process, ‘deemed an execution only transaction’, and execution only transactions have no right of recourse to the Financial Ombudsman Service.

Most employee packages fail to deliver

Too many employers are not offering income protection to their employees and their families according to research .

Nearly 3 out of 4 respondents (74%) indicated that Income Protection insurance was of greater importance to their workforce than Life Assurance cover.

Yet the majority of employers only offer life cover as standard, with Income Protection coverage a very long way behind.

Whilst income Protection has always been of value, this is now ever more important as new legislation creates further barriers to the long term sick claiming state benefits.

It's clear from the research that employers accept that Income Protection cover is the most relevant employee benefit for their workforce.

Despite this fact, less than half of companies (47%) offer this benefit currently.

Conversely, life assurance was found to be a benefit on offer via a much larger number of employers (82%), even though employees are some three times more likely to be off work with a long-term illness than die.

This is a strange mismatch, and one that employer's really should seek to address.

Even where an Income Protection policy has been put in place by an employer, it often only covers senior employees.

It is generally accepted by the industry that only 1 in 10 private sector employees are actually covered by an Income Protection policy.

There is a lack of understanding among both employers and employees in terms of what Income Protection actually involves, and the important benefits it can offer.

In our view it is a vital component of a benefits package for the 21st century, and is one of the most important benefits an employer can offer.

We believe that employers may be failing their employees by not offering it – which is why we always encourage and assist our clients in arranging it separately.

Here lies the body of the interest only mortgage

Interest-only mortgages have taken another step towards extinction with Nationwide and now Coventry Building Society demanding that new borrowers have 50pc equity in their home if they want to avoid making capital repayments.

Both, which previously lent on an interest-only basis to borrowers with 25pc equity or deposit, sited the need to "manage application levels" following similar moves from competitors. The change applies to residential customers and takes effect on March 21.

Existing Nationwide borrowers will be unaffected if they want to stay with their current deal. They can also switch to another mortgage or move home without falling foul of the new restrictions, unless they want to increase their borrowings. Anyone who wanted to borrow more would have to take out a repayment mortgage or ensure that their equity remained above 50pc of the total amount borrowed.

The change also applies to Nationwide's other building society brands, such as the Derbyshire, Cheshire and Dunfermline. However, buy-to-let lending through its The Mortgage Works arm is not affected.

Last month Santander did the same, while Lloyds Banking Group, which also includes Halifax has also toughened its criteria by specifying which assets it would accept as "repayment vehicles" to pay off the loan at the end of the term.

We certainly feel that other lenders currently offering interest-only loans at 25pc equity, such as HSBC and Woolwich, could be next to restrict this type of lending.

Last week the financial regulator also expressed concern about interest-only home loans, warning of a ‘ticking time bomb’ for those approaching retirement with interest only mortgages who are unable to repay them.

It is a shame for borrowers that Nationwide has introduced these restrictions but no real surprise. It's like a pack of cards; one lender folds and the others inevitably follow. Since Santander tightened its interest-only policy, borrowers requiring such deals have flocked to Nationwide and it is having to tighten its criteria in order to cope.

Interest-only borrowing is not necessarily reckless borrowing as long as there is a repayment strategy in place. However, we are getting closer and closer to seeing it disappear altogether, making mortgage prisoners of those who have an interest-only mortgage unless they can switch to repayment.

The changes are likely to force a rethink of how to repay the mortgage simply because of the level of equity in the home rather than the existence of a prudent repayment strategy.

7% stamp duty on £2m properties

The Chancellor George Osborne will today raise Stamp Duty on the country's highest priced properties as part of a tax raid on the wealthy.

The top-end property market is booming at present, with a huge surge in the amount of homes sold so far this year compared to 2011.

New figures have revealed sales of homes valued at £5m or more in London have jumped by 98% this year, to £723m.

 According to the Financial Times, which cited officials involved in the Budget, Osborne will today try to capture some of that market, with a new 7% Stamp Duty on sales of property worth more than £2m.

The move, which would appease those who are angry at the expected decision to cut the 50p tax rate to 45p, takes the Stamp Duty up significantly from its current level.

The highest Stamp Duty rate is 5% on sales above £1m. Combined with a crackdown on Stamp Duty avoidance the plan could raise hundreds of millions of pounds a year.

Elsewhere today, corporation tax is expected to fall by 2p , while the government is also tipped to raise the minimum allowance to help give a boost to the least wealthy.

Half of mortgage borrowers have not reviewed their mortgage in over three years

Just under half of borrowers, 49%, have not reviewed their mortgage since base was cut to 0.5% three years ago, according to recent research.

Despite base rate being a record-low since March 2009, 42% of fixed rate borrowers are still paying a rate of 5% or higher, with the average rate for fixed rate borrowers being 4.63%.

The average rate paid by tracker mortgage holders stands at 3.17%.

Around 56% of borrowers do not have any idea of what rate they pay on their mortgage.

If the recent decision by Halifax, RBS, Bank of Ireland, Clydesdale and Yorkshire Building Society to increase their SVR is an indication of the direction of the market then we will see more increases to the rates that consumers are paying on their mortgages – making it more important than ever for people to shop around for a better deal.

If you havent reviewed your mortgage in some time and would like some impartial advice on this, please feel free to get in touch.

Thanks for your attention.

Mark (mark@themortgagemonkey.co.uk)

NewBuy

The government has formally launched NewBuy, its mortgage indemnity scheme that will offer borrowers 95% loan to value mortgages with taxpayers and builders as co-guarantors.

The scheme is only available on newly-built flats and houses up to a maximum value of £500,000 in England only.

Properties must also not be linked with any other scheme such as shared equity or shared ownership.

Three lenders, Barclays, NatWest and Nationwide, have launched NewBuy products with Santander also saying it will participate in the scheme.

Under the scheme the builder pays 3.5% of the sale price into an account held by the lending bank for seven years.

The government will provide additional guarantees of 5.5% which will only be called upon in the event of a major property crash.

Prime Minister, David Cameron said: “Strong families and stable communities are built from good homes. That’s why I want us to build more homes and I want more people to have the chance to own their home.”

Housing minister, Grant Shapps added: “This government inherited a housing market in disarray, with millions of hard working people blocked from taking their first step on the housing ladder - their desire to buy a home no longer a dream, but a distant fantasy. We want to help everyone achieve their aspirations and feel the pride of home ownership. So I'm delighted that from today the NewBuy Guarantee will give thousands of prospective buyers the chance to buy a home with a fraction of the deposit normally required.”

NewBuy is currently backed by the Council of Mortgage Lenders and the Home Builders’ Federation and seven construction firms.

Paul Smee, director general of the CML, said: “We are delighted that three lenders are today launching mortgages under NewBuy, and that more are set to follow. These mortgages will help creditworthy borrowers who simply haven't yet managed to build up a large enough deposit to gain access to finance to buy a newly built home.

“NewBuy is good news for home-buyers, and potentially good news for jobs and the wider economy too.”

Women called to action

Women across the generations are significantly undervaluing the level of protection that they need compared to men, taking out "worryingly low levels" of life cover to protect their families, one life provider has warned.

Its figures showed that men typically protect themselves with around 50% more life cover than women, with the gender gap becoming significantly wider the older people become.

While men aged in their 30s take out 26% more life cover than women, this gap widens to 94% for those in their 60s.

Women are warned to act now to cover themselves, with the cost of protection for women set to rise substantially in December when the EU gender directive comes into the force.

HM Treasury has estimated that life insurance premiums will increase by 10% to 15% a year once the directive is enforced.

However, some insurance providers have predicted that life insurance rates could rise by as much as 20% for women.

It’s a worrying situation, especially so when you consider factors like the increase in single parent families and increasing numbers of women working mean more families are now dependent on a woman’s salary as the main earner in the household.

We urge women to make 2012 the year in which they act to protect their families’ financial security.

If you want to take action, feel free to get in touch.

As always thanks for your attention.

Mark (mark@themortgagemonkey.co.uk)

Calling all Halifax Mortgage Customers

Nearly 850,000 customers will see their mortgage rate rise from 3.5% to 3.99% on 1 May 2012 when Halifax hikes its Standard Variable Rate.

This is now the second rate rise announcement by Halifax inside the last seven days as in addition, it has already been reported that thousands of other Halifax mortgage customers would also see their mortgage payments rise as well as it also said that it is raising the cap on its Standard Variable Rate (SVR) .

Halifax, part of Lloyds Banking Group, has written to forty thousand customers indicating that it is raising the cap on its SVR to 3.75pc above Bank of England Base Rate or 4.25pc.

The cap applies only to customers who have an Early Repayment Charge on their mortgage.

However these borrowers are now being given three months to change their mortgage to another lender or repay it without charge.

The bank previously said that rise should not be read as an indication that the SVR was about to rise, but this now appears not to be so.

Halifax said the change acknowledged that the cost of funding a mortgage in today’s market remained significantly higher than the longer term average.

The increased rate reflected the fact that raising money through retail savings and in the wholesale markets was currently very expensive by historical standards.

If you are an existing Halifax customer and would like to consider alternatives from the open market , please feel free to get in touch as I would be delighted to help.