Monthly Archives November 2011

100% Mortgages are Back! – Or are they..?

A new product that has appeared on the mortgage scene is being called a 100% LTV Family Guarantee Mortgage.

This has been designed for families who wish to help their children get on the property ladder.

As the name suggests, a family member must provide a guarantee and that guarantee must come in the form of security on their property and must cover at least 25% of the child’s new mortgage.

What’s more, the security on the family member’s property must not take the total combined liability of all the secured debt (mortgages, loans etc.) above 75% across both properties.

eg: Parents have house worth £250,000 with a £100,000 mortgage.

75% LTV on parents home would be £187,500

Child wants to buy £120,000 flat.

25%  of flat value = £30,000

A £30,000 charge is placed on the parents property and the child gets a mortgage of £120,000 (provided the child can afford it).

In this example, if the parents mortgage was over £157,500  (75% less £30k security) it would not be possible.

For a small percentage of the population this represents an opportunity for parents without liquid funds available, to help their children onto the property ladder.

The risk is there for the parents because they could be forced to sell their home if the child defaults.

The risk is there for the child because their parents would disown them if they didn’t keep up the payments and as a consequence put the family home at risk.

The risk to the lender is minimal because they could repossess the £120k flat to cover all of the mortgage and they would also be able to go after the security in the parents home.

So although the borrower has a 100% mortgage, 25% of it is covered by security in the guarantor’s property.

The offer is a 3 year fixed at 6.48% (repayment only).

For the few who qualify for this product, it might actually work out cheaper for the parents to dip into their equity at a lower rate and gift the deposit to their child. The only drawback then is the parents would have to make the repayments on the money they raised – or try to get money out of their offspring!

Guarantees can come from parents, step parents or grandparents.

Independent advice could help determine the most appropriate solution!

The Greek Referendum

How many European leaders slapped their brows when they heard the news about the proposed referendum in Greece? I’d hazard a guess at ‘quite a few’.

Having spent ‘hours’ in meetings discussing the way forward for further bail-outs for Greece the Greek Prime Minister decided his public should vote on the matter.

Why? Can you imagine what would have happened here in the UK if the ConDems had allowed us to vote on the austerity measures?

More people would have voted than they did in the elections and there would probably have been a unanimous result of a resounding ‘no’ to cuts. After all, we are all so well informed we know what’s best for the country far better than any highly qualified economists, surely?

So when a country that is going to have to put in place some much tougher measures to avoid bankruptcy suggests the people should vote it’s hardly surprising the rest of the world puts its head in its hands and sighs.

A quote from an article on Interactive Investor puts it quite nicely: 

‘There is no pleasing some people. Not content with borrowing and spending his own country into economic oblivion, Greek Prime Minister George Papandreou single-handedly capsized global stockmarkets on Tuesday.

By giving the Greek people a referendum on the second tranche of bail-out funds from the eurozone, Papandreou has destabilised fragile investor optimism and placed a banana skin under the increasingly shaky domino his country has become’

The whole global debt crisis is no longer being understated as it was in 2009 when everyone was trying to pretend certain problems didn’t exist and global economies would return to prosperity in Q1 of, er, no wait, Q2..? Ah, Next year then…?

I recently received a hand-out at a meeting that showed Barclays Corporate base rate predictions sticking at 0.5% for at least another year.

I’ve also noticed forecasters downgrading their predictions for UK growth to a more pessimistic figure of about 0.3% so that when the news came out that growth was actually a staggering 0.5% the press could put a positive spin on the result – ‘UK Growth Higher then Predicted’!

Previously they’d have released optimistic figures only to be disappointed.

The threat of a ‘double dip’ recession is real but with growth so stagnant will it have much of an impact on consumer confidence that is already low (unless you sell iPads)?

Of course it could be avoided by swift action which is why Mr Papandreou’s decision is seen as a veritable spanner in the works.

What’s this? My Overdraft Protection isn’t Compulsory?

For as long as I can remember I’ve had a monthly entry on my bank statement that was called ‘O/D Protection’.

I thought this was a compulsory part of having an overdraft and for a time I was occasionally dipping into the overdraft so protection seemed like a good idea.

It wasn’t until my bank changed the title of this to ‘Payment Protection’ that it caught my attention.

What with all the automated sales call about PPI I keep receiving I thought my bank had taken it upon themselves to mis-sell me some without me even knowing about it.

I spoke to my bank and they explained that, (a) The ‘Payment Protection’ is what used to be referred to as ‘O/D Protection (b) It wasn’t compulsory and (c) It was effectively a PPI policy.

It was at this point that I remembered my recent credit card PPI claim that the Ombudsman has upheld.

If my credit card PPI claim had been upheld on the grounds that it was mis-sold then quite clearly I have a case against my bank for a PPI policy I didn’t realise was optional AND I wouldn’t have been able to claim on due to my self employment status.

The original O/D Protection was applied to my account in 1998 and has cost me approximately £4 per month and is still running (they’ve said they can’t cancel it until a dispute is settled… which seems odd if they’re probably going to have to give me all my money back anyway – with interest).

So that’s 13 years at £4 per month = £624

I think I have a pretty strong case but I now have to go through the standard procedure for making a PPI claim which means form filling and joining the back of the queue of the thousands of other people currently claiming!

I doubt I’ll see a refund this side of Christmas but it just goes to show that mis-selling has indeed been a scandal and it wasn’t always called PPI (Payment Protection Insurance).

Check your bank statements, check your other financial commitments such as credit cards and loans and then visit the very helpful Financial Ombudsman Service  website to find out if you’d qualify for a refund and a simple DIY guide to making a claim.

If you have the time, it’s not too difficult to do yourself.