So far in 2011, there has been a gentle shift amongst some lenders towards offering products based on a 10% deposit or less and currently 3 providers now offer products with a zero deposit from the client. Getting a 95% to 100% mortgage though is by no means easy, however, as not only will lenders apply stringent lending criteria but most of them require some form of guarantor or collateral charge over another asset, typically a parents own property or savings. This ensures that in the result of the applicants defaulting on their own mortgage, the lender can potentially mitigate any loss they incur by requesting the parents are responsible for any loss incurred by the lender.

Therefore as an example, if the first time buyer bought a property for £150,000 and put a 5% deposit down, they would be left with a mortgage for £142,500. Let’s assume property prices then drop 10% and the client(s) lose their job or suffer a drop in income resulting in the property being repossessed. If the lender is only able to sell the property for £135,000 that means they are still owed £7,500 (the difference between the mortgage and the sale price). If the clients are then unable to clear the mortgage debt owed, the lender can then seek to reclaim these funds from the parents. Many parents may understandably feel uncomfortable in using their own assets as collateral to help their children but this is one innovative way to help a weak mortgage market where first time buyers remain scarce.

There also continue to be Government assisted options available to support first time buyers and an interesting new scheme for 2011 is the First Buy Scheme run by the Government and the house builder Taylor Wimpey. This is only applicable for first time buyers wishing to buy a new build property but it allows clients with only a 5% deposit to then take 20% of the purchase price as a loan from the Government / Taylor Wimpey and no interest is due on the20% loan for the initial 5 years. This in turn then allows the applicants to get a mortgage product from a lender based on having a 25% deposit on a far more affordable rate of interest compared to a mortgage product based on only a 5% deposit.

With our economy remaining pretty flat in terms of economic growth and reasonably high inflation impacting on the cost of living, it seems reasonable to expect that house prices will struggle to make any headway over the next few years. This coupled with the government’s stance that banks and building societies must hold a certain amount in capital for every £1 they lend over 75% of a property’s value means it’s highly unlikely that there will be a huge appetite for lenders to start competing aggressively at the lower deposit end of the mortgage market. For those offering products based on a small deposit, the interest rates do tend to be quite high so affordability will become an issue especially in the future should the Bank of England start to raise interest rates. Also, by putting a small deposit down when property prices are subdued and have the potential to move lower still, there is also the added risk of being caught in negative equity.

As a result, there are many factors to consider when embarking on the property ladder. To get a full understanding of how the current first time buyer products might work for you or your family contact us today.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

I find that consumers tend to only consider critical illness plans when reviewing their other financial needs such as a mortgage and therefore it’s not something they will have initially budgeted for. Secondly, many customers (and advisers) will make the mistake of only considering protecting the entire mortgage or nothing at all. This is where price can indeed become an issue as protecting a whole mortgage may indeed be beyond the budget of some. However, there is nothing wrong in simply considering an appropriate level of cover within a desired budget to help with the strain caused by you or someone within the family suffering a critical illness. For instance choosing a level of cover that will help with covering the cost of living and potential medical expenses for a set period of time could make an enormous difference.

Historically, many people dismiss such plans as they believe they will never pay out as insurance providers will look for excuses to renege on the contract. Nothing could be further from the truth. According to data recently released from Zurich most providers in 2010 paid out on just over 90% of all critical illness claims made. The 2 main factors stopping this from being almost 100% was customers attempting to claim for an illness not covered under the contract and secondly for withholding crucial information on the original application form otherwise known as non disclosure. An example would be a smoker seeking cheaper cover by stating they were a non smoker on the original application form. As an advisor I would have a duty to request that all questions are answered as truthfully as possible to prevent non disclosure and to clearly point out what exactly is covered under critical illness contracts. This in turn should give customers greater confidence that understand what exactly the policy is covering and that in the event of a legitimate claim, it will be upheld.

Critical illness contracts are also becoming more competitive. Over the last few years the number of illnesses covered has increased significantly according to statistics released by the research company Defaqto. The average number of illnesses covered in January 2005 was 27 which as of May 2011 had increased to 36. In addition, many providers have widened the definitions of many of the illnesses covered which in turn might increase the probability of a policy paying out. Many policies also come with children’s critical illness cover offering a certain % of cover based on the main policyholders plan. In additional several contracts now offer severity based cover whereby a certain sum or % of the main plan will be paid out in the event of less severe critical illnesses. As an example, BUPA will pay out 12.5% of the main policy to a maximum of £12,500 in the event of mastectomy or low grade prostate cancer whereas many plans would simply not cover them at all.

Getting advice when researching into these plans is paramount and here at AGA mortgages we can guide you through the process to help find a good suitable contract that is comprehensive whilst meeting your specific needs and within a desired budget.

*Survey conducted by Scottish Widows in May 2011

Although economists anticipated this decision, inflation is still rising above the Bank of England`s two per cent target rate. Therefore with inflation continuing to rise alongside people`s household bills, experts predict that interest rates will start to rise in the 1st half of 2012.

Personally I feel that any rise in interest rates in 2012 would be quite modest (market expectations recently were predicting a base rate of 0.75% come June 2012 according to Barclays) but understandably many consumers on a tight budget are nervous at the prospect at the cost of borrowing increasing.

With an interest rate rise predicted in the near future, anybody with a mortgage may be considering changing to a fixed rate deal in light of the outlook. Fixed rate mortgages are fixed at an interest rate for a set period of time and do not change even if the Bank of England rate rises.

Typically fixed rates are between two and five years and then the mortgage reverts to the variable rate for that lender. The main positive of a fixed rate mortgage is that you are protected against any potential interest rate rises for a set period. If interest rates continue to rise then you are well placed to be able to put together a financial plan for when the set period ends to meet payment.

One disadvantage of a fixed rate mortgage is at present these products are priced higher than mortgage products that are not fixed so should interest rate rises be delayed further than 2012 it might work out cheaper to have not opted for a fixed rate.

Many fixed rate mortgages also incur large setup costs of typically around a thousand pounds for the best rates so this cost would not to be weighed against the benefits which a good independent mortgage broker such as myself could do for you.

When considering a fixed rate mortgage somewhere like www.moneysupermarket.com is a good reference point although in order to establish what type of mortgages might be suitable for you personally and to establish if you fit a particular bank or building societies lending criteria, please call me on 01279 721706 or 07796 271801 or email info@agamortgages.co.uk

Your home may be repossessed if you do not keep up repayments on your mortgage.