Shared ownership is generally referred to by the Government as ‘homebuy’, but can also be called ‘part buy/ part rent’. Namely, you generally buy a percentage share of a property owned by a housing association and then pay rent on the remaining share that you do not own, hence: ‘part buy/ part rent’. It is possible to buy a small share initially, such as 25%, and gradually buy the remaining shares in the property in a process known as ‘staircasing’. Not all schemes work on this basis and there are a number of variations on the shared ownership theme, such as Open Market home buy, and other ‘shared equity’ schemes where no rent is payable.

If you are just starting to research shared ownership mortgages/ homebuy schemes, and have not yet been accepted by a housing association, then as your first port of call, you need to get yourself a shared ownership agent. They will then be able to tell you whether you qualify for a shared ownership scheme and take you through how to register for a shared ownership scheme in your area.

Once you have been accepted you have to take in consideration a few of the following – The size of deposit, if any, you are putting down – it is possible to buy 100% of a share and there are lenders out there who will consider this (but the lender will normally require your lease to have a special ‘mortgage protection clause). You also need to think about what share you are looking to buy in the property (e.g. 25%, 30%, 50%) and the rent you can afford to pay on the share you do not own (if any).

A few facts to remember when buying shared property are – Shared Ownership Mortgages make buying a home more affordable because you buy part and part rent your home, Homebuy refers to the Government’s range of Shared Ownership Schemes. And your local housing association manage shared ownership schemes in your area.

Seen as one of the lifetime milestones, often thrown in the same sentence as “marriage” and “children”. But since 1986 we are obtaining less than half as many mortgages. This can be attributed, in part, to unsuccessful applications in ever-increasingly tough economic times where lenders are cautious and therefore more scrutinous. But on the other hand; with the introduction of tighter regulations, renting can often seem like the sensible option, especially amongst first time buyers.

Indeed, the market is saturated with homeowners aged over 50, first-time buyers, and the self-employed who are finding it more and more difficult to find approval, particularly from banks. The first necessary step is to write out a budget for prospective options, take a sample area and by calling estate agents and landlords, find out the rent prices of several properties. Then, either by mortgage comparison websites, bank manager, or personal financial advisor, seek out potential mortgage deals and rates.

There are different types of mortgages and, like any other product it is worth shopping around for the best deal. This can be difficult as not all mortgage types will be right for you, and they will certainly behave differently over time. At a glance, a fixed rate mortgage is good in the short term and expensive in the long term as the interest rate does not move, regardless of market behaviour, and there tend to be large early repayment charges. A mortgage with a capped rate will prevent the interest rate from rising above the preset cap. Whilst a tracker rate is linked to a public interest rate, this can be a bit of a gamble and certainly makes for difficult budgeting.

Only by scrutinising the outset costs and projecting 12 months, 24 months, 5 years into the future might it become clear which path is best for you. It is important to take as much into consideration as possible – sensible predictions of the movement of interest rates, and property market prices. The property market is a notoriously difficult investment opportunity, do you want to buy a house to live in or to sell at profit and move on from.

All these considerations taken into account, a mortgage can still seem a daunting prospect, in particular the meeting with the bank (or other institution, but probably bank). Obtain a copy of your credit report, prepare yourself thoroughly, seek to minimise all other debts prior to making the application, relax, smile, be confident, and ask any questions you might have. How can you make yourself seem like a good investment opportunity?

Mortgage might roughly translate from French as “dead pledge”, but don’t be overfaced. When thoroughly researched and carefully planned, a mortgage, if right for you, isn’t something to be put off by.

As fears about inflation ease so does the prospect of an imminent rise in interest rates & the summer property buying season starts off with a bang as lenders compete for our business.

A t last there is some long overdue good news for borrowers as lenders have been cutting their rates in response to the receding threat of  a rise in interest rates. Lenders hoping to attract home buyers that may be looking to remortgage, as well first time buyers with large enough deposits have been reducing both fixed rate & tracker mortgages. A rate rise is not expected now ‘til August at the earliest & is likely any rises will be gradual & remain low.

Chief economist at IHS Global Insight – Howard Archer – said: “We expect the Bank of England to delay raising interest rates from 0.5% to 0.75% until August, given the major uncertainties and concerns about the underlying strength of the UK economy and its ability to withstand the fiscal squeeze that really kicked in at the start of April. Also, most monetary policy committee members are still reluctant to hike interest rates due to concerns and uncertainties over the growth outlook.”

“We see interest rates only rising to 2% by the end of 2012,” he said.

Woolwich – part of Barclays – & Skipton both reduced their rates towards the end of April, with Skipton including some fixed-rate mortgages at 90% loan-to-value.

Kris Brewster – Skipton’s head of products – said: “We’re continuing to provide borrowers with competitive mortgages designed to help them achieve their home ownership aspirations despite continued economic and market challenges.

“These new products follow a number of innovations over the past year which have made Skipton one of the only providers offering low-deposit mortgages to first and next-time buyers.”

Ray Boulger of independent mortgage broker John Charcol said: “There’s a strong chance we will see the cheapest five-year fixed-rate deals soon go below 4%, which we haven’t seen for months. The big rise in mortgage rates amid forecasts the base rate would go up quickly is now in reverse.”

However Andy Gray – head of mortgages for Barclays – saw things differently saying: “Many mortgage borrowers breathed easy this month when the base rate didn’t go up, so now they need to take action to start protecting themselves for at least the next two years.”

The latest item of positive news for borrowers comes from HSBC who have announced that they are dropping all the fees charged on their whole range of tracker mortgages – that includes booking fees, standard valuation fees & completion fees. In addition customers will be allowed to switch to a fixed rate deal at no extra charge.

As part of the recent budget George Osborne launched ‘FirstBuy’ – an official scheme to help first time buyers on to the property ladder – so what is it all about?

Osborne says that the new scheme – costing £250m over the next 2 years – will help over 10,000 first tome buyers.

The scheme – scheduled to be up & running by – September will be open to households with an income of less than £60,000 who are able to put down a 5% deposit, though it will only apply to newly built properties within specific developments Successful applicants will be eligible for an “equity loan” worth up to 20% of the value of the property which will mean they will be able to take out a 75% loan-to-value mortgage for the remainder.

For the first five years the equity loan will be interest-free, then in the sixth year interest will be charged at 1.75%, and at RPI inflation plus 1% following that. When successful applicants come to sell their home (or after 25 years) they will have to pay back the loan. The amount due to be repaid will remain at 20%, regardless of the market value at the time of the sale.

Nicholas Leeming at property site zoopla.co.uk pointed out that, according to the Council of Mortgage Lenders, first-time buyers are currently paying an average deposit of £25,000. “This would plummet to an initial £6,250 as a result of the new scheme – a very appealing prospect.’’

He  also said that the scheme “won’t go beyond scratching the surface of the problem faced by the vast majority of first-time buyers, as it’s exclusively for new-build properties, and only around 11,000 buyers will benefit – a fraction of the overall number of potential first-timers”, he adds. “Mortgages are still required, and this scheme leaves lenders, who have had a stranglehold on the market for the last two years, in a win-win situation. Being able to lend to a select group of first-time buyers without the normal level of risk makes lending to those who don’t qualify for the scheme even less attractive.”

The equity loan will be jointly funded by the government and house builders, & is likely to be on a 50/50 basis. The government will be keen for as many developers as possible to sign up, so that properties will be available in most or all regions, though it is reported that of the £250m allocated to the scheme, £210m is earmarked for England, with the remaining £40m to be shared between Scotland Wales & Northern Ireland.

Barratt Homes is already promoting the scheme on its website, where people are invited to register their details for more information. The scheme is likely to be run by the Homes and Communities Agency in England which looks after the various HomeBuy schemes introduced by the previous government.

A sceptical Matt Griffith from the first time buyer pressure group PricedOut had this to say about the scheme: “When independent economists are predicting a 10% fall in house prices this year, having the government encouraging first-time buyers to get on to the ladder using a 5% deposit looks foolhardy at best and, at worst, pretty irresponsible.”

He added: “George Osborne is behaving like a shopkeeper trying to shift overpriced stock by offering a clever financing scheme. Consumers would be wise to be sceptical and steer clear – the big problem is that prices are still far too high. Its main purpose appears to be to help bail out the house building sector – which is suffering from buying too much expensive land at the peak of the boom.”

The most important factor when choosing to manage your personal finances effectively is time. A greater time investment will almost always result in a greater financial return.

Therefore the sooner you start to manage your finances, the greater return and financial ease you will feel in the future. Many people fail to plan ahead, which results in struggling to juggle finances at a later point in life.

Money management should focus on four primary questions:

1.       What financial goals would you like to achieve?

2.       When can you expect to achieve them?

3.       What finances do you currently have?

4.       What level of risk would you make to achieve these targets?

Choosing somewhere to live is an essential in everybody’s lives, and therefore, buying a house will be the biggest financial purchase that people will make. The financial investment into a home will affect all your other finances.

Making big decisions on your lifestyle will affect your financial goals. If you consider a luxury holiday to be one of life’s essentials, you will have less money left over for savings and investments.

When do you want to retire? What expenses do you currently have? Deciding what your priorities are will help to determine what money you will have left.

It is worth assessing your current liabilities, as these expenditures and assets could be reduced or sold and free up money for the future.

Calculate how much spare money you have so that you can form an investment plan. Investments can vary dramatically. Some are high risk for higher reward or loss, and some are low risk for a steady growth on investment. It’s up to the individual to decide what level of risk you are prepared to make.

Once these considerations have been made and your plan is in places, it’s important to assess the decisions you’ve made and how they affect you on a day to day basis. You plan may be too restrictive, leaving you with not enough money to live on, or perhaps you could make greater short term sacrifices to benefit you in the long term.

A small amount of time spent on your current finances can be highly rewarding for your future.

The US economy saw its first growth in over a year, rising to an annual rate of 3.5% between July and September.

Experts believe that a major spending plan by the US government which featured a scrappage scheme to encourage the car sales market has been the main cause of the upturn.

Some economists believe that there could be more setbacks lurking ahead, despite the official statistics showing that the recession is over.

A spokesman at the White House announced that recent economic progression was “a welcome milestone” but it would take more time for a full recovery to be recognised.

The US economy had risen 0.9% in relation to the previous three months, whereas the UK economy remained in recession, unexpectedly dropping 0.4%.

Hugh Pym, the chief economics correspondent for the BBC, revealed that the growth rate of 3.5% was greater than the 3.3% predicted by most experts.

He continued:”The sheer scale of the stimulus in the US has made a big difference, it was much bigger in percentage terms than that in the UK.”

“That the US, the powerhouse of the world economy is growing once again, is good news for the global economy has a whole.”

The last time the US economy grew was in the second quarter of 2008, by an annual rate of 2,4%.

The National Bureau of Economic Research will reveal the full extent of the US economic climb from recession when it analyses all the factors.

Some factors were significantly responsible for helping US economy during the third quarter, according to the Commerce Department.

The spending on durable manufactured products rocketed up at an annual rate of 22.3% which was the highest quarterly figure since 2001 and was spearheaded by the ‘Cash for Clunkers’ scheme helping new car sales.

Consumer spending increased on housing products by 23.4%, the greatest quarterly surge in 23 years, and came as a result of an improving housing market.

The big increase is considered by many to be due to the government’s $8,000 tax credit provided to first-time house buyers.

Government spending increased by 7.9% as stimulus spending spread and exports saw their biggest rise since 1996, rising by 21.4%.

Brian Bethune, an economist for HIS Global Insight stated that “it’s good to have the economy growing again.”

“But we don’t think that rate of growth is sustainable because it is distorted by all the government stimulus.”

“The challenge here is to get organic growth – growth that isn’t helped by fiscal steroids.”

However, unemployment is at a rate of 9.8% and a sharp fall came in September in the car sales industry as a result of the popular car scrappage scheme coming to an end in August.

Dean Baker, co-director of the Centre of Economic Policy Research believes that “you can say that the recession is over, but it sure won’t feel like that.”

“There is a lot of downward momentum that isn’t going to go.”

Plans to split British bank Northen Rock in two which would allow for its partial sale has been granted by the European Union.

The divide would result in two separate banks forming and are already being described as the “good” and “bad” banks.

The “good” bank would offer new lending, retain some of the existing mortgages and hold its savers’ money.

The “bad” bank would be used to repay the existing government loans and hold the remaining loans.

 Decisions made by the EU to accept the move are seen by Northern Rock as “an important and positive step.”

Changes to the existing setup will be made towards the end of the year.

The EU revealed that the good portion of the bank would be expected to grow and then be sold to third party, with the bad bank allowing its assets to dissolve then becoming liquidated.

The good bank may be sold prior to the general election next year with potential buyers being speculated already, with Virgin and National Australia Bank, owner of Clydesdale and Yorkshire Bank, among the interested parties.

EU Competition Commissioner, Neelie Kroes, believes that the move would make the bank a good long-term option, revealing that “this decision demonstrates once again that the EU’s state aid rules provide an appropriate framework to allow state support for a sustainable restructuring of banks without giving individual banks an unfair competitive advantage.”

Whilst Jonathan Todd, European Commission spokesman, said caps would need to be applied for the duration that the good bank remains owned by the public.

Some of the caps include a balance sheet reduced to a quarter of its size prior to the crisis, not being the market leader for loan interest rates, a cap set to limit its lending to one-third of Northern Rock’s 2008 levels and also a cap on retail deposits to be slightly lower than the pre-crisis level.

An investigation was engaged by the EU into Northern Rock in April 2008, two months after its nationalisation.

The results from the investigation showed that the UK government was kept at a “necessary minimum”.

By 30 June, the bank had paid back approximately half the taxpayers’ £26.9bn loan and will gain a further £8bn from the government during the end of year restructuring.

The EU stated that the restructuring would reduce its market share to below half of its pre-crisis level and “correct the excessive expansion of Northern Rock pre-crisis.”

Northern Rock released a statement, saying “this approval is an essential requirement of the planned legal and capital restructure, which is central to the business plan for Northern Rock.”

“The restructure will strengthen the capital and liquidity position of Northern Rock significantly, and offers value for money to taxpayers” and it would be “business as usual” for its customers.

The Council of Mortgage Lenders (CML) has revealed that the number of new mortgages granted for August is down by 3,000 from 56,000 in July to just 53,000.

Despite such a large fall in granted mortgages, this is still 29% higher than last year’s figure for August.

The CML believe that house sales may have reached a plateau, as most first-time buyers still have to provide large deposits.

Overall, the total value of mortgage lending for buy-to-let and remortgaging for the past year is down by 36% on last years figures.

Long Recovery

The CML’s economist, Paul Samter believes “house purchase activity has revived from its moribund state at the beginning of the year.”

“It will be a drawn-out recovery process with seasonal ups and downs, but house purchase activity is now on a firmer footing.”

According to the CML’s figures, first-time buyers need to find on average 25% deposit in order to receive a home loan.

Regardless of whether a borrower is a first-time buyer or not, two-thirds of all mortgage deals require at least a 25% initial payment.

Relaxing

The Bank of England has claimed that the number of new mortgages approved in August, but not lent, has fallen for the first time in eight months.

From 52,317 approvals, down from 52,404 in July, is a sign that levels may be beginning to level off in the coming months.

Data shows that the number and value of house purchase loans is higher than a year ago, the total value of mortgage lending has dropped by a third.

Standard variable rates are very low, giving borrowers much less incentive to remortgage their house or seek out fixed rate mortgages elsewhere. Buy-to-let mortgages are also down  on a year ago.

“At £12.3bn, gross mortgage lending - which encapsulates all mortgage lending activity, including house purchase, remortgage and buy-to-let lending – declined 36% from August 2008,” the CML reports.

House Prices

The autumn of 2007 saw the onset of the credit crunch, with house prices taking a sudden downturn. Over the past few months, house prices have been steadily rising, giving hope that the recent recovery may become more prolonged.

House prices rose by 2.8% in the 3 months leading up to September, in contrast to the 3 months prior according to the Halifax; the first quarterly increase for two years. Further support to the encouraging recover was made when the Nationwide confirmed that house prices have risen continuously for the past 5 months and have returned to the level of September 2008.

Sales have doubled between January and August and the market seems much more stable in comparison.

Experts have warned, however, that the rise in house prices is supported by the shortage in new properties being put on the market. If there is a sharp rise in houses placed on the property market, the rise in house prices may come to a sudden halt.

‘Dramatic Changes’

Council of Mortgage Lenders (CML) data shows that six mortgage lenders increased their hold on the new homes market in the UK in 2008.

The top six lenders, led by Lloyds, accounted for a total of 78% of all new loans last year compared to 72% the year previous.

The CML says that the credit crunch, which began back in 2007, had dried up the supply of mortgage finance.

Last year overall, lending fell by 28% and specialist lenders were driven out completely.

The CML explains: “The lending community itself has undergone… dramatic changes.

“With so many lenders either merging or ceasing lending, this year’s largest lenders’ table has changed more than in other years.”

What Factors Are Involved?

After Northern Rocks’ insolvency back in 2007, they dropped out of the top-ten mortgage lenders – a key factor changing the world of mortgage lending. Northern Rock lent only 1.1% of new mortgage funds in 2008.

However, the CML believes another factor is that specialist lenders (those that didn’t depend on savers’ money to finance to finance their lending) had fallen from an already small 7% share of lending, to just 2%.

The CML commented that: “In effect, many specialist lenders ceased new lending in 2008.”

Mortgage broker for John Charcol, Ray Boulger, says that borrowers are now receiving the worst of all worlds: “If you have fewer lenders you have less competition.

“Those lenders still in the market have only limited amounts to lend, so they aren’t competing hard with each other if borrowers have less than 25% deposit.”

Mergers Saving The Day

Lloyds was the biggest mortgage lender in 2008, followed by Santander, Nationwide, Barclays, RBS and HSBC.

The drying up of the wholesale banking market has also affected banks and building societies badly.

Housing prices fell, which then undermined the value of past loans, and the recession also led to many borrowers defaulting on their mortgage.

This all led to lots of take-overs and mergers, with the more financially unstable companies having to be rescued by larger operators. For example, Lloyds TSB took over HBOS, thus combining the first and third largest lenders in Britain.

Santander, a Spanish bank, took over Alliance & Leicester, after previously taking over Abbey. And Nationwide building society took over Cheshire and Derbyshire building societies. Other building societies have also merged in order to survive the recession.

“We may not have seen the end of the current wave of consolidation. So, next year’s table is likely to look different again, with more new names and even larger market share in the hands of the larger firms,” warns the CML.

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Deliberate Undervaluing

Estate agents are warning that property sales and remortgage deals are collapsing due to some mortgage lenders and surveyors deliberately undervaluing homes.

Homes are currently thought to be undervalued by an average of 10% according to the National Association of Estate Agents (NAEA), due to surveyors being overcautious.

The Royal Institution of Chartered Surveyors denies this, saying that the housing market is constantly changing and had lots of ‘imperfections’.

If the valuation a lender places on a property is lower than the agreed price, the lender may choose to offer a smaller mortgage, leaving the buyer without enough money to cover the asking price and causing the deal to collapse.

Lenders can also check property value when it is being re-mortgaged in order to make sure they aren’t lending more than it’s worth.

Same Valuer, Two Different Values

Peter Bolton King of the NAEA said: “They are perhaps worrying about the market and almost deliberately knocking off 10% almost regardless of what the property sold for.

“The other reason which I found more worrying, is that we are hearing anecdotally that lenders are giving specific instructions to their valuers as to how they should approach these valuations.”

Sellers are also feeling the effect of undervaluing as they may have to drop their prices. People seeking mortgages are also left with little or no flexibility.

One homeowner says that she had problems remortgaging her home: “The bank sent their own valuer who valued it at £80,000, but I knew it was worth far more so I paid £300 to get it revalued.

“The valuer came and said it was worth £100,000 but it was the same person that made the first evaluation.”

Unpredictable And Unreliable Time

Managing Director of independent broker Mortgage Talk, Andrew Frankish, said: “With the mortgages that are not completing, we believe up to half of them are affected by the valuation.

“What we mean by that is the valuation is coming back at lower than they predicted, which pushed them into a higher loan to value, which means the products are too expensive or the banks are reluctant to lend in that money at all.

“This is even worse than remortgages where around three-quarters of remortgages are affected.”

The Council of Mortgage Lenders says it works with professionals who are duty bound to give accurate valuations, but those who value homes also deny they are deliberately undervaluing them.

Royal Institute of Chartered Surveyors, Barry Halls said: “We are dealing with a market where there are lots of imperfections and there will be a range of valuations that the valuer will look at before they arrive at their opinion of value.

“That opinion of value could well be different from another opinion of value and could fluctuate over a period of time as well.”

What Do You Think?

We would love to know your thoughts and opinions. Leave your comments here.