Despite the fact that some banks have been busy raising the rates on their set mortgages, the Bank Of England seems quite sure that there will be no official rise in this area for some time to come.

The Bank Of England has released a statement putting banks and those seeking mortgages on notice that they have no intention of raising the base rate from its historic 0.5 low any time in the foreseeable future.

This has not surprised many financial experts and many have greeted it as welcome news.

Many experts feel that England is in for a fairly drawn out recovery period from this recession, and see no reason to raise the interest rates at this stage; in fact, a lot of people have expressed the opinion that this could be counterproductive.

This will come as very welcome news for some buy to let landlords who have only recently started to benefit from those low interest rates.

Granted, buy to let loans are very difficult to get at the moment with the hoops that have to be jumped through to qualify, but if you are in a position to buy, the buy to let the interest rates are now very favorable and there is certainly money to be made.

Let’s hope some landlords now start to profit from the interest rate’s record low; it has been a long time coming for this sector.

It seems to be the week for landmark court cases. It was great to see justice prevail in the case of Paul and Amanda Jackson who have beaten a company called Repossessions Stopped in court this week.

The couple entered into an agreement with the sale-and-rent-back company after falling behind in their mortgage in 2005. The agreement was that they would sell the company their home, which they had occupied for twenty years,  and in return the company would allow them to live there indefinitely. The problem is in 2007, less than two years after the arrangement was set up the family were served an eviction notice. The story is that the company had defaulted on the mortgage payments after taking them over from the couple.

The judge showed good sense in my opinion when he ruled that the family were entitled to stay in their home for life, either taking out a new mortgage themselves or renting the property from the mortgage lender who had reposed it.

A spokes person for Shelter ,the charity that bought the action on behalf of the family, had this to say 

“This is a huge and important victory for not only the Jackson family but everyone who is tempted by sale-and-rent-back schemes.
 
I would urge anyone having mortgage difficulties to seek independent advice from Shelter, a Citizens Advice Bureau or other debt counselling organisations before contacting these kind of companies.”

Very sound advice and well worth following

Despite the fact that there has been some great indicators that the house prices in the UK may have bottomed out, or at least be very close to doing so, some people are still far from convinced.

In a quite complicated argument this week about the fact that housing still had a way to fall, James Ferguson of the website MoneyWeek outlined why he believes that house prices could fall another 40%.

His very detailed argument is based, partially, on the fact that he believes affordability of houses in this country are still far too high. This figure is worked out by measuring initial home loan payments as a percentage of take home pay. According to James these figures show the housing downturn could be anywhere up to five years from bottoming out.

As a result he recommends that anyone wanting to make maximum profit from property in this country should wait a few years before deciding which one to purchase.

Mr Ferguson is clearly a very intelligent man, and he may well be right but personally I hope that not too many people listen to him because in the tricky way of economics, that is one definite way to make sure his predictions come true.

According to specialist lender CHL Mortgages, things are almost looking rosy in the area of mortgage arrears for both ordinary residents and buy to let packages.

Their figures show that arrears have dropped by 15% from its highest point in February. The most cheerful news is the fact that the indicator the mortgage lender uses to predict the likelihood of future arrears, unpaid direct debits etc., has also fallen substantially.

CHL Mortgages are not talking too much about changes in economic improvement in general, but for the improvement in their arrears situation, however. They are very firmly claiming that their policies have resulted in the  upturn in the situation.

Bob Young, Managing Director at CHL Mortgages, said “In a market short of positives, we believe that these falling arrears levels can be seen as a sign of our competency in the collections department and the strength of our underwriting in what have been particularly difficult market conditions.”

This is probably fair enough as they go to great lengths to explain all the changes they put in place to try to make things run more smoothly in terms of people meeting the conditions of their agreements but, as we all know, you cannot get blood from a stone not matter how great your policies. So, the rest of us can be hopeful that as well as reflecting best practice, this improvement also points to things looking up in terms of people’s personal finances.

The writing really does seem to be on the wall for the tracker mortgage. Most of us have really enjoyed the period of plummeting interest rates and repayments. I even admit to being a little gleeful at times, but all good things must come to an end. And it seems most borrowers are recognizing that this particular joy is very close to having run its course.

Figures from Legal & General show 87% of residential borrowers went for certainty when picking their home loan, up from 71% in the first three months of this year. The reason for this is likely to be the fact that people now view an interest rate hike early next year as inevitable.

In terms of which fixed deal people are choosing, two year terms seem to be the most popular and that probably reflects people’s uncertainty about the economic times. Three year fixes are also showing a huge amount of appeal.

It has to be said that people thinking of fixing a mortgage need to get moving on it because the banks are moving like lightening to hike up their fix rate terms. Nationwide increased their rates again this week, making it the second time in under two weeks. You can rest assured the banks have not enjoyed this period of low interest rates and will be keen to get them back up where they believe they belong.

Now is the time to fix if it is something you are thinking about.

Most experts agree that the Bank Of England is likely to raise interest rates in the next year or so in order to control inflation when we head into economic recovery. According to an article in The Times this week some banks are jumping the gun and putting up rates on fixed term deals in anticipation.

This means that people who are currently enjoying a record low interest rate on tracker loans may need to bite the bullet very soon and fix their rate, if they want to avoid getting trapped by the rate hike.

It is a judgement call for most people as fixing terms now when the rate is so low will mean an immediate jump in monthly repayments for those that have been tracking base. However, waiting could mean a substantially greater jump in the near future.

Louise Cuming, head of mortgages at moneysupermarket.com, said: “Borrowers looking to fix should lock in quickly, before the next tranche of mortgage products come through showing drastically increased rates.”

It is probably sound advice but it is always a bit of a wrench to voluntarily offer to pay more on your mortgage, even if you can see the long term benefits.

There was an interesting article on the This Is Money website this week that looked at the problem of repossessions from the tenant’s point of view.

As the article pointed out, buy to let properties are three times more likely to be repossessed than a normal residential property and when they are, it is the existing tenant who is left high and dry.

It is important to note that tenants are protected if they are still within their tenancy agreement and are abiding by the terms. Some lenders try to evict the tenants when they take over control of the property but in a lot of cases this is actually illegal. Denise Ford, chair of the Association of Property and Fixed Charge Receivers, says:

“I’ve heard of courts granting possession orders and evicting tenants mid-way through their tenancy. That’s not legal, provided the tenants are paying their rent and abiding by the terms of their tenancy. They should go to the court hearing and object.”

This is good advice; as landlords we are very aware that tenants have rights, surely the courts ought to know what they are?

Of course, there is the tricky situation of cases where the borrower has not informed the lender that the property is now rented out. In these cases the tenancy agreement is often not binding on the lender and the tenant can find themselves without much to fall back on.

It certainly is a complicated area

After a glut of fairly positive stories regarding the state of the buy to let market, landlordexpert.co.uk chose to bring us back down to earth with a thump with an article outlining just how difficult things still are in the property market.

They point out that Council of Mortgage Lenders figures show 1,700 buy-to-let properties were repossessed by lenders in the first three months of this year. This looks even worse when you take into account the fact that the figure increases to 4,100 properties when cases of lenders appointing a receiver of rent are included.

The article points out that a lot of the trouble still stems from the almost manic rush on property that was taking place in the last few years of the boom period. Real estate agents report that during this period people were committing to places they had never seen or, in extreme cases, that had not even been built yet in order to get into the property action. In many, many cases they paid far too much for these properties. When the recession hit, things got extremely tricky for these investors.

The article also cites the fact that banks have halted the stream of buy to let mortgages and now what is on offer is better described as a trickle. If the current trend of buy to let mortgages continues for the year then there would be an estimated total of 89,600 new buy to let mortgages being taken out in 2009. This figure is in stark contrast to 2007 when when 346,000 buy to let mortgages were snapped up.

Sometimes it is good to be reminded of the reality of the situation.