Standard & Poor's sounded the alarm on some of Northern Rock's mortgage assets, warning of a possible hike in bad debts as consumers struggle to make repayments.It says that arrears in the Rock's Granite vehicle - which contains £29.4bn of mortgages that have been 'securitised' and sold on in the debt markets - have climbed to 4.67% from just 0.44% at the start of the credit crunch in September 2007.
The credit rating agency has placed 101 different classes of loan notes in the Granite portfolio on watch for a possible ratings downgrade.
It is concerned about the high loan-tovalue ratios and the fact that this may have attracted borrowers who were less able to afford the repayments.
S&P says 'we believe that a significant proportion of the underlying [mortgage] pool may come under increasing payment pressure, ultimately leading to increased realised losses'.
It is also worried that borrowers will have limited options to remortgage when their fixed-rate offers come to an end because all lenders have been tightening criteria on loans.
Northern Rock's first-half results showed its total mortgage book was £62.3bn including Granite at the end of June.
At that time, 3.92% of its customers were more than three months in arrears, above the 2.39% industry average.
Source
Wednesday, October 28, 2009
Thursday, October 15, 2009
Fee-free deals to help first-time buyers
First-time buyers are finally being given the chance to get decent mortgage deals without paying sky-high application fees - a privilege that until recently has been reserved for well-heeled remortgage customers with plenty of equity in their homes.Application fees have risen steadily since the start of the credit crunch.
Typical costs from High Street lenders are now £995 - though some online or phone banks such as First Direct, and regional lenders such as Nottingham Building Society, have deals with application fees of £1,498 and £1,495 respectively.
It's not even that easy to ease the pain of high fees by adding the application cost to the loan.
Many lenders no longer allow this for new buyers and will ask them to pay the fee up front. (Mind you, this is probably a good thing as paying interest on a fee for the life of a mortgage almost triples its original cost).
But at last a handful of big-name lenders are offering fee-free deals to first-time buyers and existing owners who want to move up the housing ladder.
The interest rates on offer are higher than on the mainstream fee-carrying alternatives, but not so much higher to make them an automatic bad choice.
In general, experts say that anyone who needs a mortgage of less than £100,000 is likely to be better off on a low or no-fee deal even if the interest rate is slightly higher.
The larger a mortgage gets, the more important it is to find a very low interest rate, even if this means paying a high fee.
Those bucking the trend include Alliance & Leicester, Britannia and Northern Rock and are all worth looking at if you want a no-fee option.
A&L, for example, has a best-buy four-year fix set at 5.09% with a £995 fee. Its fee-free alternative is set at a relatively modest 0.5% higher at 5.59%.
Britannia has fee-free fixes for both five and ten years, at 5.59 and 5.69% respectively. They are both set no more than 0.5% above the rates it offers for people paying £999 application fees.
Northern Rock's premium for a no-fee deal also comes in at under 0.5% on most loan-to-value scenarios.
The lenders' generosity does have its limits, of course. Big deposits are required for most of the fee-free options - 30% for Alliance & Leicester, for example.
The other thing to bear in mind is that, at the moment, most of the fee-free deals are offered only on fixed-rate mortgages.
However, HSBC is one of the few banks to extend the option to trackers. They are offering firsttime buyers with 25% deposits a fee-free tracker at 3.29% over the Bank of England base rate for the life of the loan. If you pay £799 you get base plus 2.45%.
With all trackers it is important to remember that today's low payments will shoot up if interest rates rise. That's why trackers are rarely recommended for first-time buyers who normally need payment security as they face up to the full costs of being a homeowner.
Source
Typical costs from High Street lenders are now £995 - though some online or phone banks such as First Direct, and regional lenders such as Nottingham Building Society, have deals with application fees of £1,498 and £1,495 respectively.
It's not even that easy to ease the pain of high fees by adding the application cost to the loan.
Many lenders no longer allow this for new buyers and will ask them to pay the fee up front. (Mind you, this is probably a good thing as paying interest on a fee for the life of a mortgage almost triples its original cost).
But at last a handful of big-name lenders are offering fee-free deals to first-time buyers and existing owners who want to move up the housing ladder.
The interest rates on offer are higher than on the mainstream fee-carrying alternatives, but not so much higher to make them an automatic bad choice.
In general, experts say that anyone who needs a mortgage of less than £100,000 is likely to be better off on a low or no-fee deal even if the interest rate is slightly higher.
The larger a mortgage gets, the more important it is to find a very low interest rate, even if this means paying a high fee.
Those bucking the trend include Alliance & Leicester, Britannia and Northern Rock and are all worth looking at if you want a no-fee option.
A&L, for example, has a best-buy four-year fix set at 5.09% with a £995 fee. Its fee-free alternative is set at a relatively modest 0.5% higher at 5.59%.
Britannia has fee-free fixes for both five and ten years, at 5.59 and 5.69% respectively. They are both set no more than 0.5% above the rates it offers for people paying £999 application fees.
Northern Rock's premium for a no-fee deal also comes in at under 0.5% on most loan-to-value scenarios.
The lenders' generosity does have its limits, of course. Big deposits are required for most of the fee-free options - 30% for Alliance & Leicester, for example.
The other thing to bear in mind is that, at the moment, most of the fee-free deals are offered only on fixed-rate mortgages.
However, HSBC is one of the few banks to extend the option to trackers. They are offering firsttime buyers with 25% deposits a fee-free tracker at 3.29% over the Bank of England base rate for the life of the loan. If you pay £799 you get base plus 2.45%.
With all trackers it is important to remember that today's low payments will shoot up if interest rates rise. That's why trackers are rarely recommended for first-time buyers who normally need payment security as they face up to the full costs of being a homeowner.
Source
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