Ethos News – June 2011

Welcome to the June edition of Ethos Financial’s monthly news—the economy, the property market and personal finance in brief.

News
Price Comparison sites challenged by RegulatorCredit Card

The Financial Services Authority has written to 19 price comparison websites asking them to confirm if they are operating correctly within the Financial Services framework. It seems that some sites may have been providing advice to customers without having the correct permissions, with these sites unsure whether they are introducing, arranging or advising on business(1). Furthermore these sites may not have been checking the eligibility of a customer, which could have led many customers to buy insurance that is not suitable for their circumstances. With price comparison sites selling on price, many customers may miss the exclusions that some insurance policy may have. All insurance policies are not the same!
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Inflation still high at 4.5%Interest rate
The Consumer Price Index measure of inflation remained unchanged at a high of 4.5% for the month of May(2). This means that it is now 18 months that inflation has been above the Bank of England target of 2%. On the one hand it is the Bank’s role to control inflation, but on the other it needs to ensure that we have a sustainable recovery, with the latter taking priority it appears. High inflation does seem to be the only major possible reason for raising interest rates, with so many other factors indicating that rates should be kept low.
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Rents still rising
Rents for tenants are continuing to rise, and are expected to rise further, according to the Royal Institute of Chartered Surveyors(3). The rise is most notable in London and the South East. With more and more people looking to set up home, demand is strong, yet supply of property for sale, and mortgages to buy them, are less than in previous years. This has led to greater demand for rental properties and an increase in rents as a result.
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Comment
Is mortgage rationing a myth?

Every month we read in the press that it is so hard to get a mortgage, almost impossible some say. Statistics are cited to show that far fewer mortgages have completed since the credit crunch, and doom and gloom is conveyed to the reader who dreams of buying their first home. It’s almost self fulfilling.

Now don’t get me wrong. Far fewer mortgages have completed since the credit crunch. To a large extent this is due to a big reduction in the number of remortgages as borrowers sit happily (but also nervously?) on their tracker rates, enjoying their low monthly payments trying to avoid any thought that rates may rise.

It is also true that the number of first time buyer mortgages is down from pre credit crunch days. And it is true that the banks need to lend to make money off us, but need to be more prudent with their balance sheets than previously.

But, and this is my point, you can get a mortgage! Not just high flyers in the city, and not just those with loads of equity in their property. You need a reasonable income, a reasonable deposit, a decent credit rating, and reasonable expectations of what you can buy, and then you can get a mortgage –  other things being equal. Not too dramatic is it? Maybe to some it seems so, but this is because we are comparing it with the heady days of 100% self-certified, interest only mortgages. I beg to argue that those days were not normal and we should not compare the present situation to that.

Yes, there are lenders who are getting fussier, but there are others who will take a reasonable approach. The specialism of a mortgage broker is that he or she can find a lender whose lending criteria matches your circumstances and requirements. You maybe surprised.

NB Month by month I am doing a series on “how to get a mortgage” (see below). Follow this to see how this applies to you, or give me a call to get all the answers at once!
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Services
Mortgage rates reduced again20 pounds

Further to my comment section (above) about mortgage availability, lenders seem to be falling over themselves to reduce their rates week on week recently. With the press and industry sensing that a base rate rise is now a bit further into the future than previously thought, lenders are pricing their fixed rates accordingly. This applies to first time buyer mortgages and buy to let mortgages as well as purchase and re-mortgages. My inbox is full of emails from lenders announcing the launch of reduced fixed rate mortgages. Give me a call to see if one of these rates is suitable for you.
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It won’t happen to meBusiness Risk
Another thing to fill my inbox is statistics from insurance providers. A recent one was about the incidence of serious illnesses, ones that are critical to our health such as cancer, strokes and heart attacks. This insurer claimed that 40% of people think that they will not get a critical illness in their lifetime. Yet all of us know at least one person, if not several, who have had a critical illness. So why do we think it won’t affect us? Well, I’m not a doctor, so I won’t advise you on healthy lifestyle, etc, but I can help you on arranging financial protection in case you do get a critical illness. You can arrange to receive a lump sum on diagnosis or a monthly payment if you can’t work. Worth thinking about?
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How to get a mortgage: part 2 – proving you identity and address
Before you can get a mortgage, the lender needs to know who they are lending to. This means you will need to supply proof of your identity and your address. Your identity is most easily confirmed by your passport or photo driving licence. Your address can be confirmed through a recent utility bill (from the last 3 months) or a bank statement. Make sure that your bank has your current address, and if you are a couple, make sure that at least one bill or bank account includes your partner’s name.  If you are using a bank statement as proof, then this usually needs to be a printed statement or an official statement from your online banking showing your name and address – a print out of your transactions doesn’t count! I’m happy to explain further.
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Commendation
We needed to release some of the equity in our property but we thought our options were limited.  Ethos Financial found for us exactly what we wanted.  Our broker was extremely helpful and a pleasure to do business with.
RL, Surrey
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I hope you have enjoyed reading our June news. Do contact us on 0207 183 3703 or using our Contact Form or Get a Quote. All the best.

BUYING YOUR FIRST HOME BUYING YOUR NEXT HOME REMORTGAGING
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BUYING TO LET* BUYING ABROAD* COMMERCIAL MORTGAGES*


(1)
www.fsa.gov.uk/pages/consumerinformation/product_news/insurance/price_comparison/index.shtml
10th June 2011
(2) www.independent.co.uk/news/uk/home-news/uk-inflation-unchanged-at-45-in-may-2297209.html
14th June 2011
(3) www.bbc.co.uk/news/business-13710300 9th June 2011
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