It’s hardly surprising that there has been a sharp fall in the number of mortgage products on offer. With the cost of money for banks rising most of the specialist lenders have culled their heavy and medium adverse products. The prospects therefore for those homeowners unfortunate enough to fall into this category have become very gloomy indeed.

Figures released by the two leading mortgage sourcing systems reveal that the number of products has fallen by a dramatic 40% since the credit crunch hit last summer.
Trigold now shows 40,000 products on its system and Mortgage Brain 24,000.

The end of the era of cheap debt means that fewer aspiring homeowners will be tempted to borrow too much, but when they do decide to take the plunge they will need the services of an independent broker more than ever.

With fewer products to choose from- although 40,000 is still a decent number- borrowers need to be certain that they are getting the best deal and who better than their friendly independent broker to advise them?

The news that The Abbey, the Alliance & Leicester and Coventry Building Society will no longer allow people- mainly first time buyers- to borrow more than the value of their home has hardly come as a surprise in the current climate. They will soon be followed, I suspect, by Northern Rock whose reputation was largely built on their generous help to first time buyers with their 125 per cent deal and Birmingham Midshires.

Before Christmas, a third of lenders offered mortgages of 100 per cent or more. Today, just one in ten do so.

The decision to axe 100 per cent deals will make it even harder first-time buyers, to get on the property ladder. However, there is still hope.

For a similar cost to renting first time buyers can still purchase up to a 75% stake in a home of their own, via the Joint Equity scheme.

The scheme works by matching first time buyers with a private investor to help them purchase the property and on the share that the first time buyers don’t own they pay an investment return to their investor partner.

There is no landlord breathing down the necks of the first time buyers as the relationship is a true partnership-unlike that of a landlord and tenant. Plus as homeowners they can redecorate or improve the home whenever they like.

When the first time buyers choose to sell the property, they split any profit with the investor according to their ownership shares.

The required deposit from mortgage lenders offering this unique scheme is 10% of the share of the property. So if the home costs £100,000 and your share of the property is 50% you pay 50% of the deposit i.e 5% which equates in this instance to £5,000.

For more information and to obtain a free personalised illustration go to
www.joint equity.co.uk/buying.

With Mr Darling’s first budget fast looming on the horizon he is once again expounding the virtues of long-term fixed-rate mortgages inspite of the apathy felt by most borrowers towards them. Gordon Brown was convinced by Professor David Miles that such loans – popular in the United States and in Europe – are the key to housing market stability. Now Alistair Darling is expected offer help to lenders to encourage “more people to fix their mortgages as a matter of routine”.

“For many households, particularly those on low incomes”, said Mr Darling “fixing the level of mortgage repayments for several years makes real sense and it can also contribute to wider macroecnomic stability.”

Whilst few can fault the concept the problem remains that fixing a mortgage for any term over 3 years is a huge gamble. Who can say what is going to happen over that time- to interest rates and, more importantly, to you especially if you are a first time buyer? You could get married, divorced, have children, suffer a long-term illness, lose your job, change job , decide to go and live abroad, in short almost anything can happen and if you are in a fixed rate mortgage for 25 years which Mr Darling would like you to be your lender is going to charge you a punitive exit fee for escaping from this arrangement.

Over 20 lenders, including Abbey and Halifax, now offer loans with fixed-rate terms of ten years or more, but most homeowners fix for two. This is partly because the shorter term products usually offer better rates and homeowners realise, unlike the Government, that their circumstances are likely to change over anything longer than two years.

It is anticipated that the reforms likely to be introduced in Mr Darling’s Budget will make it easier for lenders to finance long-term fixes through covered bonds. This should mean that rates will be better than they have been in the past, but in a climate where the cost of borrowing in a year’s time is predicted to be heading towards 4 per cent who in their right mind would want to take out a fixed rate mortgage for 25 years?

I don’t know if you are like me, but I’m absolutely fed up with all the doom and gloom mongers. So it was refreshing to hear the Governor of the Bank of England advising many of them to get out of London and go and see that life exists outside the capital - it’s far rosier.

Yes, he said people there are just as concerned about the economy, but they are getting on with their lives and going about their business as usual.

Many of our customers outside of London are in fact doing just that. They recognise that there are opportunities out there and that the key to success is often to invest when markets are in a turbulent state.

According to wealth manager Courtiers “it is important to keep an eye on fundamentals when markets are volatile” and the fundamentals as far as UK residential property is concerned are inescapable. Demand outstrips supply. We build too few houses and estate agents rarely have enough properties to sell.

Moreover, if you are looking for a solid investment in these troubled times nothing beats residential property- a fact highlighted today by the Dutch Bank ABN Amro.
Unlike most research which is often carried out by those with a particular axe to grind, this is quite revealing. Over the past decade the bank found that the best returns were provided by property. Equities came way down the list.

So if you want more bang for your bucks, always provided you can afford it of course, now’s the time to take the plunge.

Although business groups and homeowners would welcome a slash in the cost of borrowing, the Bank of England is expected to cut rates by a mere quarter of a percentage point to 5.25% from 5.5%. ‘Steady Eddie’ is unlikely to have been replaced by ‘Merv the Swerve’.

The Bank of England's Monetary Policy Committee (MPC) will announce its rate decision at 1200 GMT after a two-day meeting.

Many economists are predicting that rates will fall further this year, but it will be a gradual process as the Bank doesn’t want to cause undue panic in the markets which is what happened to some extent recently in the USA.

What will the cut today do for mortgages? Not a lot I’m afraid. Whilst every cut helps lenders have been increasing their rates over the past few weeks, so when they cut their rates next month we will really only be back to where we were.

What we need perhaps more than anything at the moment is for confidence to be restored in the banking community itself. This is why the Chancellor’s announcement yesterday to introduce measures to lure investors back to the credit markets which provide funding for banks’ loans to homeowners was so important.

Research from the One Account shows that home owners are abandoning the aspiration to emulate the rich and famous and are turning back to traditional money making favourites.

So, according to them, out go hot tubs, swimming pools and his and hers sinks in bathrooms as we return to basics to add value to our biggest investment.

The survey carried out by the mortgage lender The One Account reveals that we all have an inflated expectation of how much value our improvements will add to our homes. For example we seem to believe a luxury Jacuzzi or pool will add in excess of £10,000, but the survey found that in reality it adds nothing - yes a big fat "zero".

So what is hot at the moment to add value? Well according to One Account's valuers;
1 A garage or off street parking
2 An extension
3 Loft conversion

However, we have to remember that surveys do not always tell the whole story and they need to be considered alongside real life.

The problem about translating greatest returns on investment into what we should do is that the investment vehicle is also our home so there is the "lifestyle" factor.

Lifestyle in this instance relates to what you want to do to your home to increase your enjoyment of it. What can you do that will enrich your life? Experts call this the utility factor and you need to weigh cost against benefit and time to enjoy.

If you are going to be in a home for 10 years and an alteration, that you want and will enjoy, costs £2,000 but adds no value, the utility cost is £200 a year or 55p for every day you use it. If you consider that whatever you do is worth the cost of a newspaper a day then it is good value – to you. However, if you intend to stay in the house only 2 years the same alteration costs £1000 a year or £2.74 per day and you might not think it is worth it.

There is another factor to consider if the alteration does not add any value it might add "wow" in the eyes of the future purchaser and while they will not pay more they might ask for a lower reduction because they really want your house and the sale might be quicker. How much is it worth to you to sell your house in 3 months instead of 6?

For example, I have always liked 2 sinks in a bathroom, I have no idea why maybe its an age thing. Ages ago I extended the master bedroom and built an on-suite bathroom. As I liked 2 sinks the additional cost, around £350, was acceptable and I had them fitted.

Did it add any value – no.
Did we "enjoy" having 2 sinks – yes.
Did it sell the house quicker – yes, the purchaser fell in love with the en-suite and that sold my house.

The moral I think is do what suits you and balance your lifestyle requirements against best value and if you want an ornate garden pagoda and can afford and it will enrich your life then do it. But remember to add the garage at the same time!!!

Anyway back to The One Survey the full results were;


Rank

1. Garage or off street parking

2 Rear or side extensions

3 Loft conversion

4 Conservatory

5. Kitchen refit

6 New bathroom

7 Double glazing

8 Central heating

9 Underfloor heating

10 Swimming pool

11 Jacuzzi

12 Sauna

13 Sunken baths or gold plated accessories

14 Ornate garden pagoda


The other thing the survey found was that the biggest turnoff for buyers was poor quality workmanship, extensions that clash with the existing property and stone cladding.
The survey got that right then.