Index Financial

An offset mortgage is a common mortgage product in the UK, and is designed for the purchase of domestic property. The key feature is the ability to reduce the interest charged by offsetting a credit balance against the mortgage debt. For example, if a mortgage balance is £200,000 and the credit balance is £50,000, interest is only charged on the net balance of £150,000.
There are limits however, and may be subject to periodic review. The lender may also put restrictions on the lending limits towards the end of the mortgage term with the goal of ensuring capital repayment. Offset mortgages were introduced in 1997, and were initially thought of as a niche product.
However, borrowers in the UK could save a whopping £345 billion collectively- if offsetting were as widespread in the UK as it is in Australia, according to a new report.
Director of sales at Intelligent Finance (IF), Cammy Amaira said, “In Australia, the popularity of offset has a lot to do with mind-set. Australians value home ownership as much as we do, but they don’t want their mortgage to take over their lives, making offset their ideal choice.” IF was launched in 2000 and is a division of the Bank of Scotland.
Mr. Amaira added that offset mortgages have “come a long way” in the past ten years in the UK; but IF would like to see the financial option take a boom in popularity, like it has in Australia and the “latest number crunching roves it’s definitely worth it”.
The average borrower in the UK could save a very attractive approximation of £70,000 with an offset mortgage, the research from Intelligent Finance has revealed.

In the wake of the recent interest rate cut by the Bank of England, mortgage lenders have moved to slash home loan rates- in keeping with the trend.
In a further effort to avoid a sluggish economy, mortgage lenders have announced they will pass on the savings to consumers which could equate to a £100,000 mortgage being decreased by £16 a month.
Economic adviser to the British Chambers of Commerce, David Kern stated, “The MPC’s decision to cut interest rates to 5.25% was necessary for the economy. In the face of worsening global and domestic conditions, a refusal to act would have entailed unacceptable risks.”
Mr. Kern also asserted the move is “not adequate on its own” as threats to growth are “much more acute” now than the risks of inflation. “We would have welcomed a bold UK move to five per cent,” he concluded.
Where as a rally for a hedge against inflation is an understandable stance in these tough economic times, a balanced approach will most certainly cause fewer tidal waves, as consumers inch their way forward through these critical issues.

The majority of fixed rate mortgages are currently only held for up to five years. But if Chancellor Alistair Darling gets his wish, fixed rate mortgages may settle in at the 25-year mark, becoming the norm in future lending.
According to Chancellor Darling, the impact of 25-year fixed mortgages would give homeowners more security- which he asserts has been lacking across the current uncertain financial landscape.Currently, Nationwide is the only major UK lender offering a 25-year, fixed rate mortgage. However, Mr. Darling also added that he wants to see “greater availability of affordable, long term fixed rates.” And that, “for many households, particularly those on low incomes, fixing the level of mortgage repayments for several years makes real sense. It can also contribute to wider macroeconomic stability.”
Supporting Alistair Darling’s views on fixed rate mortgages, the building society has recently announced its partisan outlook of the same sentiments. The society announced that the 25-year fixed rate mortgage was sold out in just five weeks when it launched in March of last year.
Maintaining a balance in lending practices to offer a variety of financial products to consumers in all walks of life, may in the end, prove key to long-term lending trends.

Because of clear signs of the slowing UK economy, the Bank of England dropped interest rates by one-quarter per cent to 5.5%. This additional decrease in rates came as a welcomed reprieve for borrowers; especially since it arrived on the heels of E. On (the major power company) raising its prices to consumers.
Energy and the cost of its delivery, is poised to become the hot topic among consumers and economists alike as the price of oil continues to fluctuate at record breaking highes. These painful realities are being felt on a global scale, while industrialized nations strive to maintain economic balances between costs and inflation.
Ray Boulger, of John Charcol, offered: “With the Monetary Policy Committee (MPC) receiving significant criticism for not cutting the rate for a second consecutive month in January, after a unanimous vote for the December cut, together with discussion on whether a 0.5 per cent cut might be necessary to achieve economic stability, there was never any real doubt on the outcome of today’s meeting.” Mr. Boulger also added that the MPC is now effectively “running hard to stand still.”
The nine members of the MPC vote every month and the decision it makes on interest rates are based on the results.
Necessitating a watch on inflation as well as addressing the slowing economic growth, the Bank ruled out a bigger cut. Maintaining a timely balance of all economic factors can be a daunting task; but any economist can attest that making too great a cut in rates in too short a period of time can bare negative consequences of its own. Monetary balance, common sense borrowing and transparency in lending will be key aspects in assisting a healthy economy in the UK.

Global Insight predicts that interest rates could be as low as 4.5% by the end of 2008. It is also esteemed that in the first half of 2009 rates could decline further to 4%.
“We currently forecast interest rates to fall to 4.50 per cent by the end of 2008 and to 4.00 per cent in the first half of 2009. This is based on our assumption that the UK will avoid recession, but will see extended below-trend growth,” offered Howard Archer, chief European and UK economist for Global Insight.
He also added that the company’s specific predictions of the GDPs growth will be limited to 1.8% in 2008 and 2009 which would be “the equal weakest performance since 1992.”
With the most recent interest decision, which was expected to cut rates by at least another quarter per cent, there is no denying the slowing of the over-all economy in the UK.
This new landscape will however, offer a correction to the lending and housing industries, thus bringing more affordability to home buyers as housing prices and lending rates dip with the trend.

The sales of newly built city centre flats are being subject to conditions which could untether mortgage lending fraud. Lenders in the UK are wanting tighter, better rules to help prevent such practices from unfolding, and thus causing further rifts in the housing crisis.
Developers seeking to take advantage of uncertain market conditions may be tempted to offer deals which could lead to the inflation of property values, says the Council of Mortgage Lenders (CML).
CML is the trade association for the industry of mortgage lending and warns the incentivized deals could include cash-back offers, free holidays, paying of legal fees and buying of white goods, among the few mentioned.
The CML publication stated: “In recent years, discounts and incentives have had the effect of making the real value of new homes less than transparent. This is bad news for genuine buyers and for lenders. Buyers may find themselves with a mortgage worth more than the property’s value, while lenders may find themselves exposed to fraud and the risk of loss.”
Now that mortgage practices are under close scrutiny and lending is tighter than in decades, creating an atmosphere which may open doors to fraud must be carefully examined not only by industry experts, but also by would-be home buyers.
There are times when the oldest advice is the best advice for all; Caveat Emptor - Buyer Beware.

According to Savills, although house prices in London may be expensive they are not so in Manchester, making it an ideal location for those looking to own their first home. Real Estate in the city centre is available for a mortgage of around £100,000.
“There is a lot on offer. The market is going through a little blip at the moment but as far as property prices go, I think they are quite fairly priced in Manchester. A one-bedroom apartment is still quite affordable and that’s city centre living that you wouldn’t get in London,” stated Tom Rogers, residential investment consultant at Savills.
Rogers also emphasized that growth in the city is ‘significant’ over the last few years and it is ‘still growing.’
Manchester is a vibrant city with plenty of activity to attract new residents- according to Savills. First-time home buyers are encouraged to consider Manchester when shopping for their home.
Adding to the expansion of their city, Manchester has ear-marking £4.9 billion towards construction projects over the next ten years, according to ManchesterFacts.com.

More of the younger generations are seeking debt consolidation loans than their older predecessors.
Young Brits between the ages of 20 to 29 are most likely to receive a loan than the 30 to 39 age group- revealed a Halifax research survey.
Studies also show loan figures are much less of that which is sought in months other than January - with loan amounts in January being nearly double the amount of any other month of the year.
“For many people, the start of the year is a time to get personal finances in order - transferring debt from more expensive products such as store cards or other loans,” offered Neil Chandler, head of Halifax Unsecured Personal Loans.
According to recent findings, men are more likely than women to use a debt consolidation loan throughout the year. Conversely, however, women tend to carry less debt in general, than men.
The Consumer Credit Counselling Service stated that although many people seldom share information about loans with friends and family, it is highly advisable to do so. Sharing information on financial products can help others understand the availability and benefits of securing certain financial options.
If people were as willing to share financial information as they are recipes and sports scores, more people would not only be more educated on the subject, but they would also certainly feel more secure about their own financial positions.

It is believed that people should still be able to invest in property in spite of the recent credit crunch.
The belief that now is not the time for first-time buyers to invest is not true stated Darren Cook, head of mortgages at Moneyfacts.co.uk.
Mr. Cook also asserted that it will be possible for people to make initial investments on property with support from lenders.
“It’s not all doom and gloom for first-time buyers, it’s just that in the current mortgage market, they are not sure what is going to happen so they are being a bit prudent,” he explained.
Moneyfacts research has shown that since December 2007, 11 mortgage lenders have reduced the maximum loan-to-value on offers for mortgage products.
The experts state that even though fewer loans for 100% of a properties value are available, this shows lenders are being cautious in the wake of the credit crisis, but is not necessarily a closing off of the market.
In fact, as the turbulence of the housing markets begins to settle, home seekers should be able to find some good deals on homes where sale prices have fallen.

Last year the number of joint-home buyers increased from previous figures. The number of couples making first-time home purchases grew from 45% in 2006 to 50% in 2007, reported John Charcol.
The technical manager of the firm’s Web site Charcol.co.uk, Katie Tucker, said that the number of women buying independently has remained at about the same level; while the number of men purchasing alone has dropped to follow the shifting trend.
Ms. Tucker stated: “Buying together is a very sensible choice in terms of affordability. Not only for splitting the mortgage and the bills, but more cuddling up should save you on the heating!” However, as living with a partner is a major decision she also advised renting together before making the leap into purchasing.
Young couples should consider writing an “exit plan” in the event their relationship goes south, before the mortgage has been paid off. Remaining friendly in connection with large purchases could easily protect both parties assets and interests. And at the very least, the “exit plan” should clearly lay out who will pay for what and how much each person will pay- including writing up conditions under which the home would be put back on the market for sale.
Covering a couple’s bases by all accounts will leave much less to chance and worry, and give each person in the relationship more security in knowing what to expect in the event of relationship changes.
It is predicted by the Bank of England that in the first quarter of 2008, the demands for secured loans will rise among British homeowners.