Tag Archives: getting a mortgage

How to make your dream home a reality

Britain has enjoyed a number of property booms over the past 20 years. And despite the fact that property prices have also tumbled on a number of occasions, the average house price has risen significantly. 

According to the Nationwide House Price Index, the average UK house price went up from £54,008 at the end of Q3 1996 to £206,346 at the end of Q3 2016 – a whopping 282 per cent increase.

Unfortunately, rising house prices has meant that it has become harder for first-time buyers to get a foot onto the property ladder. Using the average house price as a guide, even if a mortgage has a 95 per cent loan-to-value, buyers would still need to find a deposit of over £10,000. Add in solicitor and estate agent fees and the initial layout can seem daunting.

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How does the drop in interest rates affect you?

Yesterday, one month later than most experts had predicted, the Bank of England announced a historic change in interest rates, the first change since 2009 – and rather than the upward rise that had been widely predicted for the past few years, it fell from 0.5% to 0.25%.

 So what does this mean in practical terms?

Mortgages – For those on a tracker mortgage, as long as your lender passes on the cut to its own base mortgage rate (or if it is linked directly to the BoE base rate), your rate (and monthly payment) should go down.  In all, there are about 1.5 million trackers in the UK.

However, some banks and building societies have a ‘tracker floor’, which means there is a limit to how low the percentage can go above the Bank of England base rate. In this case, your rate (and mortgage payment) would be unlikely to change.

If you have a fixed rate mortgage, you wouldn’t be affected if the rates went down during your fixed period, but when the time comes to re-mortgage – or if you’re a new homebuyer – , the options open to you could potentially be more favourable, with some experts suggesting long-term fixes even going below 2%.

Savers – In the event of an interest rates cut, it may depend if banks chose to pass on the cut to savings accounts. Some savers may decide to switch to bonds or shares, which could have the effect of driving those prices higher.

For pension savers who are using an annuity, a rate cut could make annuity rates fall by putting pressure on the long-term. This could have a potential negative effect on employee pension schemes too.

Needing currency for holidays – While interest rate cuts can often mean a weakening of the pound, it may well be the case that the currency markets will have been factoring in a cut for some time already – hence there may be little change if it does eventually happen.  Interest rate cuts can be done sometimes to provide an economic stimulus – to encourage people to spend rather than to save – so perhaps this could help improve consumer confidence and boost the pound.

But what about when it does rise? - Mark Carney, Governor of the Bank of England, has warned against expecting interest rates to stay low forever in these uncertain times, and suggested that homeowners would do well to prepare their finances to be ready for a potential rise of up to 3% in the coming years.

Many homeowners, particularly those who’ve joined the market in the past seven years, will have never been faced with an interest rate rise, and tighter borrowing conditions in the future could make it harder to cope with a rise.

How your credit score could help –  Having a higher credit score could mean you get better deals or lower interest rates on credit, loans and mortgages. The Experian Credit Score is a guide to help you understand your Experian Credit Report, and how the way you’ve managed the credit you’ve had in the past might affect applications you’re making now.

It can also help you to monitor your progress as you get your finances in order before you apply. Getting your credit score up could open up the potential chance to get better rates.

(original post 14 July 2016, updated 5 August 2016)

Changes in home ownership through the generations

Getting on the property ladder is a lot different to how it used to be. If we compare the home ownership status of young people today to the older generation – the results show a stark difference.  Check out our Mortgage Application Guide for more information about the mortgage process.

changes in home ownership

Remortgaging: how can I improve my credit score?

Many homeowners may find that once that their deal comes to an end, their interest rate and mortgage payments may well go up. This could be a good time to check out whether you can re-mortgage and get a lower rate elsewhere.

In this case you are generally going to be taking out a mortgage which is the same size as the one you already had. Your monthly payments may be higher or lower than you currently pay, depending on the mortgage you go for. Alternatively, you may just want the stability of a fixed rate, if you’ve been on a variable rate that you think may fluctuate.

It can take a few months to process a mortgage application, so it’s best not to wait until your current deal ends before you start looking around. Watch our new #AskExperian video to find out what some of the options are.

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Home Ownership: the generation game

At a time when younger people are finding it harder than ever to buy their first home, it’s not exactly a surprise to find out that many of them are relying on family support to make buying a property a reality.

Experian research has found that over a quarter (27%) of Britons aged 55+ have provided support to their children or others to help them buy their own property – regardless of how financially comfortable they are, and a significant proportion (15%) of those people say they are ‘not at all’ financially comfortable.

It’s a far cry from how things once were. 60% of 55s and over who have ever owned their own home paid £20,000 (that figure, in 1986, would be around £54,000 in today’s money) or less for their first home, compared to recent figures showing the UK average cost of smaller homes today as £182,926[1].

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Applying for a mortgage – top tips

Applying for a mortgage is rarely a straightforward process. Your mortgage is likely to be the biggest financial commitment you’re ever going to make – with lots of decisions to make, forms to fill in and waits for lenders to respond.

In April 2014, the process was made even tougher with the introduction of new rules on mortgage affordability.  The Mortgage Market Review (MMR) was introduced to make mortgage lending more responsible and stable.

Lenders are keen to know whether you’ll you be able to afford your monthly repayments should interest rates go up or if your circumstances change.

So they’re likely to pay close attention to your income, monthly outgoings and savings as well as the information in your credit report and application form.

Experian’s mortgage application guide lays out the steps to take when preparing to make a mortgage application.

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How can I get a mortgage? Our step-by-step guide

Getting a mortgageApplying for a mortgage is likely to be one of the biggest financial decisions you ever make. Taking the time to prepare and really understanding what a lender is looking for – before you make your application – could not only affect you getting approved, but could also save you a lot of money in the long term.

This guide will give you some simple steps to follow to ensure you are in the best possible position to have the mortgage you can afford approved – and at the best rate.

The mortgage lending process
Usually a lender (the bank or building society) will consider the following when deciding whether to approve your mortgage application:

  • The information in your application form, including your salary and employment status
  • The information in your credit report
  • Their own policy rules
  • The amount you want to borrow and size of your deposit
  • Your monthly outgoings and spending habits
  • Any additional information they may hold on you.

PART 1: UP TO ONE YEAR BEFORE MAKING YOUR APPLICATION

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How can my kids get on the property ladder?

First time home buyers don’t have it easy these days. The Mortgage Advice Bureau says that the average age of a first-time buyer is now 37, which would make a standard 25-year mortgage take them to 62. 

So what’s the scenario for young people today? Watch our video to find out what some of the options are out there, and some tips for how improving their credit score can set them on the road to getting on the property ladder.

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Calling first time buyers and home improvers!

This coming weekend Experian’s experts are on the road at two home shows in different parts of the country, and we’re looking forward to meeting you.

First Time Buyer Home Show, Croydon, Sat 16 April  #FTBHomeShow
On Saturday 16th April we’ll be at the First Time Buyer Home Show (free entry!) at Fairfield Halls in Croydon, from 10am to 4pm, helping to show how improving and maintaining your credit report can put you in the best position to get a first mortgage.

At 3.30pm Jill O’Connor from Experian will be giving a seminar on how your credit report is made up, what you need to look out for and how you can go about improving your financial situation.

Experian research in December 2014* found that more than a quarter of people in the UK looking to buy their first home before 2016 – around 1.81 million people  – had missed credit repayments, defaulted accounts and CCJs currently listed on their credit report. Continue reading

Getting on the property ladder: how it has changed

Getting on the property ladder has changed over the last five decades, and it’s not nearly as easy to get a mortgage as it used to be.

The way we use money has changed a lot over the years. Watch the video to see how money has changed through the generations with three families we spoke with.

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