In recent years as many as 4 out of 10 mortgages have been taken out on an “interest only” basis. Many of these borrowers expected that assumed growth in house prices would help them pay off their loans – but something went wrong. Instead of house prices increasing they went into reverse. Over the last two years many properties have lost as much as 25% of their pre credit crunch value.

The Financial Services Authority (FSA) has estimated that as many as 4.2 million borrowers have to face the possibility that their interest only mortgage could mean that they’ll not be able to move for some years to come as the sales proceeds from their home would not leave them with sufficient to fund the deposit for their next home. Indeed, some would be left still owing money to their lender after selling their home due to negative equity.

To make the situation even worse, as unemployment has risen, it is inevitable that some of these borrowers will have become unemployed or have been forced to take new employment on lower wages.

At the moment many mortgage advisers are advising clients to switch from interest only deals to conventional repayment mortgages. But if they cannot afford to do this they should either over pay on their current mortgage or start up a regular saving plan.

If you are caught in this “interest only” basis then please do not ignore the problem. It’s a ticking time bomb.

Economists say that the average age of a first time buyer who isn’t receiving financial help from their parents is 37 compared to 31 for those who are lucky enough to get help from Mum and Dad.

This is not surprising bearing in mind that the latest figure from the Council of Mortgage Lenders shows that the average deposit for a first time buyer has increased from £13,194 in September 2007 to £31,875 now.

And even when a buyer has their offer accepted, the problems don’t stop. Despite recent increases in sale prices, surveyors are still down grading house values and frequently the value they attach to the house for lending purposes is lower than the agreed sale price.

The Halifax has reported that house prices grew by 1.5% during the summer but the price of flats and maisonettes popular amongst first time buyers grew by nearer 2.5%. This is due to a shortage of affordable properties suitable for first time buyers.

The figures also show the affect of the lenders tightening up on lending multiples combined with lower prices post credit crunch. The average advance to first time buyers has fallen from £118,750 to £95,625.

All this is not good news for the property market. A healthy property market relies on all sectors of the market being buoyant.

Millions of people in overdraft will see their overdraft charges cut. The Halifax, with more than 5 million customers with current accounts, ha instead introduced a daily penalty of £5 if you go into the red. The bank previously charged £35 for a refused payment due to insufficient funds, £35 for authorised transactions whilst in the red, and £28 for using an unauthorised overdraft.

This all amounts to a month is £155 rather than £238 A DAY under Halifax’s previous charging arrangements.

The NatWest has announced that it was cutting the charges for a bounced cheque from £38 to just £5.

This all seems to have resulted from pressure from the Financial Services Authority although letters we have seen from banks imply that it is simply as a result of a “long-term review”.

No matter what the truth, it is a fact that banks need to be more transparent in their charging and customers need to be given a fairer deal.

Building Societies are beginning to introduce some cheap mortgage deals – but you’ll have to get up early to bag one.

The Newcastle B. S. and the Coventry have stolen a march on their competitors by launching some fantastic rates but there are signs that the Newcastle could their deals very soon and the Coventry withdrew theirs after just seven days,

The basic problem is that the building societies are unable to borrow in the money markets and all their mortgage lending have to be funded by investors savings and mortgage repayments from their clients. So if their deals turn out to be very popular, the money runs out in a flash.

And first time buyers still shouldn’t get too excited either. They may be the first to get out of bed and queue at the building society, but all these deals still require a deposit of at least 20% and a near perfect credit history.

The credit crunch remains with us.

Just imagine. You’ve been to the show house, fallen in love with the housing development and signed up to buy a house off plan for £500,000 and paid the 10% deposit. The only problem you may have thought was that you’d have to wait 12 months to move in.

Ten months later the letter arrives to say that the house will be ready in 8 weeks. But things have changed. House prices have fallen and the building society values the house at £425,000 and, as business is not so good, your income has fallen too.

What do you think the building society will say? Yes, you guessed it – no mortgage! But you have signed a contract to pay the balance of £450,000 for your new home and the builder wants his money and you’ve signed a legal contract to pay.

This sort of situation does happen. Berkeley Homes is in the process of taking an unknown number of it’s clients to court to recover the money they are owed.

So please be very cautious if you are tempted to buy a home off plan especially if you are having to raise a hefty mortgage to complete the deal. And also be aware that, despite the recent upswing in house prices, some commentators are still forecasting that house prices will go into reverse again next year.

Please be careful.

A court case has revealed that Mohammed Patel aged 24, took commissions from car owners to stage accidents in their cars, thereby enabling them to file inflated insurance claims.

Many motorists driving behind Patel were put at risk when he would suddenly apply his brakes at roundabouts causing the following car to slam into him. He tended to select lone elderly drivers as he believed they would cause less fuss.

To assist his scam, he would often disengage the brake lights on the car he was driving so that the “victim” would have no warning of impending danger and would be more prepared to think themselves at fault.

The owners of the cars Patel drove then claimed there were several people in the car who suffered whiplash injuries and the damage to the car was exaggerated. The court heard that around £17,000 was claimed for each accident and Patel admitted to 93 staged accidents - but in practice there were more.

So if you are involved in a similar accident or are suspicious about any accident you are involved in, inform your insurers and they will investigate and, if necessary, get the police involved.

In the last six months we have witnessed a dramatic change in mortgage choices. In May this year 8 out of 10 new borrowers chose a fixed rate mortgage with the remainder opting for a tracker or discounted mortgage.

Yet just six months later consumer choices have totally changed. Last month 8 out of 10 new borrowers selected trackers or discounts and just 2 went for a fix.

This has all come about because general financial opinion thinks that low interest rates are here for a few years as the British economy claws itself out of recession. Everyone knows that the Bank of England’s Base rate cannot remain at 0.5% for ever – it will rise – but expectation now has those increases pencilled in for a few years hence (probably up to 2011).

So will those borrowers who locked into fixed rates at under 4% for 5 years back in April and May, be the eventual winners? Let me have your views.

Those homeowners paying a variable rate mortgage need to keep an eye on their monthly repayments because some lenders are increasing their standard variable interest rates (SVR).

For example, Accord which is part of the Yorkshire Building Society has recently increased its SVR by 0.65% to 5.99%. This follows a number of rate increases by the Cambridge, Scottish and Ipswich building societies. Other mortgage lenders are expected to follow suit.

More people are now paying SVR’s after completing their fixed rate deals as the new tracker and fixed rates available are often to expensive. But there can be a big gap between the best and worst SVR’s. The nationwide is currently holding their SVR at 2.5% for existing borrowers although it is 3.99% for new borrowers.

The average SVR over 15 of the largest lenders is 4.8%. This means that a mortgage of £150,000 over 20 years at this average SVR would cost £973.

Yes, on the quiet the Post office has moved into mortgages. You should now be able to find details of their mortgage products in every Post Office whilst mortgage advisers are on hand to assist with applications in 250 of the largest Post Offices.

They have ten varying mortgage deals varying from 5 year fixed rates to “life of loan trackers”.

They charge a fixed application fee of £599 on every mortgage application including buy-to-let mortgages. However, you must have at least a 20% deposit to apply for any of their mortgage products.

The Conservative Party has said that it will abolish Home Information Packs at the start of a Conservative Government but sellers will still have to produce an Energy Performance Certificate (EPC) – that’s presumably because EPC’s are mandatory under an EU Directive.

We are yet to find out whether the EPC would have to be renewed every time a property is put on the market or whether it will be valid for a fixed period of time. What is clear is that the cost aspect of a EPC will be only a little less than the current cost of a HIP.

That’s because it’s the energy saving element of the HIPs that costs the most money to provide. But does the public have any confidence in the energy ratings? It seems that EPC assessments can come out with very different ratings depending on who surveys the property so it clearly is not a reliable assessment.

And in any case, when we’re off shopping for a new home do we really bring energy assessments into our selection criteria? Certainly not me!

But could there be another reason for EPC’s? I can just forsee some green politician suggesting that properties be subject to a new energy tax based on their EPC rating!

Have you noticed that many banks are encouraging their credit card holders to pay low monthly repayments?

Unsuspecting credit card holders pay up to three times extra in interest on some cards and it can take sixteen years more to repay a debt just by using one of the more expensive cards.

All cards require you to pay a minimum monthly payment that is supposed to pay that month’s interest and a little more besides. However, some card operators have such high interest rates and such low minimum repayments, that clients can be left chasing their credit tales for decades.

For example, clients paying the minimum with Egg or Lloyds TSB would take twenty one years to fully repay their debt whereas with MBNA it takes four years and eight months. Some difference!

Some borrowers are finding it impossible to gain access to the best mortgage deals, loans and credit cards despite having paid all their bills on time. Why? Because the credit reference agencies have made errors on the credit file they hold on that person.

Nobody gets everything right one hundred per cent of the time and this applies to the credit agencies as well. They make mistakes – but you pay dear for their mistakes!

Confusing you with someone else, recording other peoples’ credit problems on your file and general inaccuracies can wreck your credit rating and cause you untold headaches.

Our advice is check your files held by the three main credit reference agencies – Equifax, Experian and Callcredit. You are entitled to receive a copy of your file for an administration fee of £2 - and go through it with a fine tooth comb. If anything is wrongly recorded, the agencies have procedures you can follow to have your file corrected. The problem is that it all takes time and is a pain in the neck!

But until your record is corrected credit will either cost you more or even be refused. So once you have your record spot on, it’s a good idea to make the same check every year.

The FSA wants to reform the way mortgage lenders agree new mortgages. It’s proposals include a ban on self-certification mortgages and more detailed verification of the borrowers income.

The FSA’s 7 points are as follows:
1. A ban on self-certification mortgages which some have labelled “liar loans”.
2. Borrowers to provide far more detils about their income.
3. Abolish fast-track applications where mortgages are approved without detailed checks.
4. More stringent affordability checks to ensure borrowers can cope if interest rates rise.
5. Buy-to-let mortgages to be regulated.
6. All second charged loans to be regulated
7. All non-bank mortgage lenders to be subject to new and more rigorous, capital requirements.

Jon Pain, the FSA’s Managing Director is reported as saying, “We have to, learn from the lessons of the past. Affordability tests are important as we want to be sure that a borrowers net income is enough to cover the prepayments.”

Next Wednesday, judges at the Supreme Court will rule on the legal battle about unfair bank charges.

This is the case between the Office of Fair Trading and the main high street banks and will decide whether the OFT can assess the fairness of overdraft charges – which have been as much as £39 a time for exceeding your account limit. The Court of Appeal has already ruled that charges can be assessed but the banks appealed to the Supreme Court which is the highest court in the land.

It is estimated that 1.1 million people have £1.7 billion worth of charges awaiting this decision because a freeze was placed on complaints back in July 2007 when the banks appealed against the Court of Appeal’s decision in favour of the OFT.

Banking experts believe that the banks could face a £20 billion payout if they were forced to repay all the charges under dispute.

Millions of Spanish holidaymakers could fall victim to a credit card scam. It’s all because hackers have broken into the computer systems of a Spanish based credit card service company and stolen details of credit cards used in Spain.

At the moment the advice is, if you’ve been to Spain and used your credit card within the last 12 months check your card statements VERY carefully and question any transaction you do not recognise with your credit card provider.

In the meantime, card providers all over Europe are trying to identify which cardholders are at risk and rushing new cards to them.

A spokesperson for Visa said, “Cardholders who are affected by this fraud will get back any money stolen through their cards, subject to the terms and conditions.”

According to a recent report from the housing charity Shelter, banks are still prepared to offer a mortgage of up to 5.5 times your annual salary if your credit history and your job are both good enough.

Having said that anyone taking such a weighty mortgage would have great difficulty getting their family budget to balance and places them in serious danger of becoming financially overwhelmed.

Back in more conservative banking days, a big mortgage was judged at around 3.5 times annual salary which left the homeowner to comfortably afford the other family bills.

There are concerns that bank staff are being increasingly pressurised to drive sales and both Barclays and Santander were prepared to offer a 5.5 multiple. The Royal bank of Scotland (RBS) and NatWest both offered 4.75 multiples and Direct Line, a subsidiary of RBS offered 4.8. (Info from Shelter)

Recent information published by Lloyds shows that the average claim for theft from gardens is £730. When you think about it it’s not surprising. Think about the luxury garden furniture, barbecues, the patio heaters, lawn mowers and hand and power tools etc you keep outside or in your shed.

Mainstream home and contents policies usually include garden contents but with limitations. These vary widely from a few hundred pounds to several thousand depending on the insurance company. And usually there is also a limit on the maximum value of any one item.

So now’s a good time to tot up what your “garden contents” are worth. Then read the small print on your policy. If you have something which is especially valuable like a sit on mower, then it’s as well to speak to your insurer. They may want it to be specified and they will certainly want it to be locked up.

Some insurers will increase their cover for “garden contents” for a modest premium so it’s well worth speaking to them before you switch to another insurer.

Good news for mortgage hunters! Last week a number of mortgage lenders cut their rates as the Bank of England kept its bases rate steady at 0.5%.

Northern rock cut up to half a percent off its trackers and 0.3% off its fixed rates.

Then Nationwide cut 0.31% off its fixed rates and 0.2% off its trackers.

Then Alliance & Leicester cut trackers by 0.4%.

To us this looks like the lending market sharpening up its act following criticisms that their rates were far too out of line with the BoE’s base rate. If we are right more is to come!

However, we anticipate that the brake will only be released on people who have substantial deposits and perfect credit records. It’s going to remain tough for the rest.

If your mortgage lender is part of one of the nationalised banks such as Intelligent Finance (which is part of Halifax a rescued bank) or Northern Rock, the odds are you’ll b told to get a new mortgage elsewhere if you want to move home.

Mortgage clients at Northern Rock who took out their mortgage after 12th may 2008 are only being offered refinancing if the remortgage is of the same value as the clients existing mortgage.

Whereas Intelligent Finance has informed its clients that if they want to remortgage, they have to go to other lenders owned by Lloyds Bank (such as Scottish Widows or the Halifax). If they go elsewhere they could face exit penalties. And as from April 2010, no one with a mortgage with Intelligent Finance will be able to refinance their deal wit IF.

Over 100,000 people have attempted to get credit card debts and loans cleared off by using legal loopholes – but now a Judge’s decision seems to have closed the door for them.

The people owing the money have been trying to get their debts declared “unenforceable” because, for example, a credit agreement was worded incorrectly or could not be produced. But now a judge in the Commercial Court has ruled that even when an agreement is found to be “unenforceable”, this does not mean that a borrower was no longer liable for the debt.

Consequently, the borrower is not entitled to have their credit record wiped clean and the lenders still have the right to appoint debt collectors to recover payment.

A spokesperson for the lending industry said, “Some borrowers took out loans fully understanding what they were doing and properly borrowed the money. They have been trying to get the loans written off by using a technicality and that’s a cynical practice”.

We agree.