Mortgage Rates Could Go Up Even Without An Increase in the Base Rate

The recent contagion in the US sub prime mortgage market has led some commentators to think the BOE will probably hold base rates at 5.75% to help the credit markets out. Normally this would mean that mortgage rates will not rise further.
However, there is a nasty side effect to the credit crunch which means that if you have a mortgage with Northern Rock or another lender which is heavily reliant on the wholesale markets to raise funds, its still likely that you could see an increase in your mortgage rate even in the absence of any base rate change.
To a greater or lesser extent all mortgage lenders are suffering as liquidity levels in the credit markets have been squeezed. Rising wholesale funding costs mean that lenders will have to tighten up their own lending criteria, particularly those lenders dependent on wholesale funding. The credit crisis means that the cost of funding is increasing and as most lenders can’t cut margins any more, so the pricing of mortgage products - i.e. the rate they charge you - could be affected.
According to the FT, Mortgage PLC, a subsidiary of Merrill Lynch, has increased rates by around 0.75 percentage points, while Kensington is about to increase rates too. Other centralised lenders with no access to retail (savers) funds have also closed for new mortgage business. Accrding to the FT, DB Mortgages, Infinity Mortgages and Unity Mortgages all withdrew their subprime mortgage ranges last week.
The problems are less likely to affect those lenders who use funds on their balance sheet rather than securitise their loans and sell them into the wholesale market.
So, shop around. If you are a good risk, there should still be some good deals around.
To find out more about buy to met mortgages ask me. I’m David Lawrenson from property investment consultancy Letting Focus. I’m the author of “Successful Property Letting – How to Make Money in Buy to Let” the UK’s top selling buy to let book.
I’m a speaker, I contribute to newspapers and a host of property websites, write a property investment blog and media commentator on the residential property market
You can read more of my property expert insights and details of my networking, advice, property and buy to let seminar programme and property consulting at my website www.lettingfocus.com.
My next London seminar is on 10th September and I am also speaking at the property investors show in London on 22nd September. I will also be a panellist at a debate in the afternoon at the show. Details here: http://www.propertyinvestor.co.uk/london/seminar.asp
What’s unique about lettingfocus.com is that we are unbiased and independent, because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad.
Copyright: David Lawrenson 2007. This blog is updated at least twice a week

What’s the difference between a Mortgage Valuation, a Home Buyer Survey and Valuation (HSV) and a Full Structural Survey?

First off, the Mortgage Valuation Report is just a check carried out on the valuation of the property.
It’s done for the mortgage lender (not you) in order to see whether the property is worth the amount that you want to borrow by way of a mortgage loan.
Normally, the report is sent straight through to the lender and the first you will see of it may be when you receive the mortgage offer.
Of course, if the valuation reveals that property is not worth enough for the lender to make the loan, then no mortgage offer will be forthcoming and you will have to go back and re-negotiate the price with the vendor or take out a lower loan and put in more equity yourself.
The Valuation Report may take as little as 30 minutes to do for a smaller property and information is normally quite minimal. Some agents have even said to me that they thought some surveyors did not even go into the property – i.e. that they just did a “drive by” - but these claims are rare and hard to prove.
However, a Whistleblower TV documentary in 2006 did show one agent making up “comparables” to show surveyors – in other words making up imaginary properties in order to try to pressure a surveyor to agree to a high price for their vendor client.
Costs for a Valuation Report will depend on the value of the property. About £250 to £300 will be typical for a £200,000 property right up to about £800 for a £1million property.
Fees do vary across lenders so it’s worth asking when you call for a mortgage quote.
The Home Buyer Survey and Valuation is a sort of middle ground between a basic Valuation Report and a full structural survey and will cost from around £300 upwards, and will take about two and a half hours for a three or four bedroom house.
As well as giving you valuation information, this more detailed option will give you information on condition of the property and although not as detailed as a full structural survey it will look at any matters that need attention such as whether you need further tests for things like damp or for woodworm infestation.
Then there is the more detailed option -the Full Structural Survey - which will cost from £650 upwards depending on the size of the property.
Surveyors have to tell you what they have found and the full structural survey report is detailed and will tell you exactly what is wrong and what you should do to put them right.
It will also set out approximate costs for any essential repairs and the report may divide the repairs into “urgent”, “significant” and “observational” matters.
Most people would recommend going for a HSV if you are buying a larger home and you want more reassurance.
The Full Structural Survey would be better for older properties and listed buildings and for buildings that may have been altered significantly.
Usually, for valuation reports (and occasionally for the middling home buyer survey) the lender will just appoint a local surveyor from its panel using a quite automated process.
Try to get the mortgage lender to accept a survey or valuation you have arranged direct with a surveyor. One good trick is to say you have had one done already. Doing this will save you the ludicrous approx 40% that the lender will load on top for their “admin”
Before you appoint a surveyor, check that they are a member of the Royal Institution of Chartered Surveyors (RICS) -see contact details below.
For a Full Structural Survey you should convey before hand if there are any areas you particularly want him to look at.
However, you will not usually be able to make any special requests for the basic Valuation Report.
To find out more about surveys or any other aspect of buy to let and property investment ask me.
I’m David Lawrenson from property consultancy Letting Focus. I’m the author of “Successful Property Letting – How to Make Money in Buy to Let” the UK’s top selling buy to let book.
I’m a speaker, I contribute to newspapers and a host of property websites, write a property investment blog and am a media commentator on the residential property market.
You can read more of my buy to let expert insights and details of my networking, advice, property seminar programme and property consulting at my website www.lettingfocus.com.
My next London seminar is on 10th September and I am also speaking at the property investors show in London on 22nd September. I will also be a panellist at a debate in the afternoon at the show. Details here:
http://www.propertyinvestor.co.uk/london/seminar.asp
What’s unique about lettingfocus.com is that we are unbiased and independent, because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad.
Copyright: David Lawrenson 2007. This blog is updated at least twice a week
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