Monthly Archives: November 2012

Talks about flood insurance are at “crisis point” and could leave 200,000 homes without cover, according to an insurers’ body.

Many thousands more householders could see premiums rise if no deal is struck between insurers and the government

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Another lender closes its doors to Interest Only

RBS had stopped non-advised customers taking out interest-only policies in October, with the bank now claiming that interest-only mortgages were a ‘declining part’ of its overall mortgage book.

The lender denied last month that it would make changes to its interest-only policy, but has now taken the decision to close this type of lending to all borrowers.

It said existing customers will not be affected by the move and that both brands will continue to offer buy-to-let products on an interest only basis.

Moray McDonald, head of home lending at RBS and NatWest, commented: “Residential interest only mortgages have been a declining part of our mortgage lending, with only 4% of customers now applying on that basis.

“As a fast growing UK mortgage lender we want to focus on the products most of our customers are asking for.

“We don’t rule out offering residential interest only mortgages to niche customer groups in the future but we would do that using specialist advisers rather than our broad base of branch and telephony advisers.”

FSA warns of mortgage fraud on quick property sales

Homeowners in mortgage arrears or facing repossession may receive an offer to buy their property for a discounted price in exchange for a quick sale. But the FSA warns these deals sometimes involve fraud which could lead to homeowners being prosecuted or losing housing benefits.

“Some homeowners facing financial difficulties may want to sell their property quickly to ease distress, or perhaps avoid repossession, and put the problems behind them.

“Some companies and individuals offer to help do this by buying the property at a discounted price in exchange for completing the deal quickly. The discount is often around 20% and can be as much as 35% below the market value of the property.

“The buyer may call these ‘below market value’, ‘BMV’ deals or ‘distressed property sales’.

“These offers may include a promise to complete the deal within as little as 48 hours, pay the sum in cash, help you avoid legal and estate agent fees, and guarantee the sale.”

Fraud in false sale prices

“We are aware that some quick and discounted property sales involve fraud, where the buyer asks the seller to state that the property is being sold for the full market value rather than the discounted price agreed.

“This is usually done so the buyer can borrow the full amount they have agreed to pay for the property from a mortgage lender, but the lender thinks they have paid a deposit for the property. In the current market, mortgage lenders will not lend the full amount needed to purchase a property and will require a sometimes substantial deposit. The bigger the deposit paid by the borrower, the more likely their mortgage application will be approved and the lower the interest rate charged.

“For example, if the buyer is paying £120,000 for a property they might not be able to borrow the full amount they have agreed to pay, even if it has been valued at £150,000. However, by telling a mortgage lender they are buying the house for £150,000 but only need to borrow £120,000 (or 80% of the inflated price), the buyer may be able to access some or better mortgage deals.

“Misleading the lender in this way is fraud and both the buyer and seller could face prosecution.”

How to protect yourself

“If a buyer asks you to exaggerate the price they will pay you for a property to ensure a quick sale, you should keep in mind that this is fraud and you could put the sale at risk and even face prosecution.

If you are receiving benefits, you should also consider that overstating the price paid for your property could affect your benefits payments as it may be assumed that you have additional money from the sale of the property.

“While a quick sale may be appropriate for some people there are other steps you can take to deal with problems paying your mortgage that might leave you better off, such as discussing your options with your lender.”

Caution over other home financing schemes

“In some cases you may be offered the option to remain in your property and rent it from the investor who purchased it. If so, this is a Sale and Rent back agreement and firms offering this must be authorised by us. If they are not shown on our Register with sale and rent back permissions, don’t deal with them.

“In addition, firms may offer you other solutions which appear to repay your debts and may allow you to remain in your home without selling it immediately. We urge you to treat all schemes like this with caution and see the consumer alert we issued last year on Lease Options and Exchange with Delayed Completion schemes.

What is mortgage fraud?

“Mortgage fraud occurs where individuals defraud a firm or private lender through the mortgage process.

“The value of a mortgage obtained through fraud is a crime. Fraud can occur through providing false details, failing to provide information required by law or even where you know only that the information used by others, such as the price of a house sale, might be misleading or untrue.”

The average purchase rate on a credit card has risen to 19.1%, the highest level since May 2011. According to latest research by Moneyfacts Group, credit card rates are believed to have risen as a result of providers allowing customers to pay back less of their balance each month.

The popularity of interest-free credit card offers has also meant that providers have to sustain these offers by introducing higher rates. The average rate has leapt from 18.1% in November 2011, with cardholders holding an existing debt of £5,000 and paying just the minimum repayment of £5, facing an additional £692 over the life of the debt compared to a year ago. Commenting on the findings, Rachel Springall, finance expert at Moneyfacts Group, believes many customers are blissfully unaware that credit card rates are on the increase as the busy Christmas shopping season begins.

“If in doubt, shoppers should opt for an introductory interest-free purchase credit card, which gives them some breathing space so they can focus on repaying solely the amount they have spent,” she said. “Since last year, the majority of credit card lenders allow their customers to pay as little as 1% of the original debt each month, which means card holders will be taking longer to repay their balance and are incurring interest for a longer duration.

It is more important than ever for customers to decide whether to move their existing debt to a balance transfer credit card and aim to repay the debt before the interest-free period ends.”

The justice minister has said that people should ‘never’ use claims management companies in PPI cases.

Lord Tom McNally, Lib Dem, was replying in the Lords to a question from Labour peer Lord Roy Kennedy.

He asked: “The mis-selling of payment protection insurance was an absolute scandal but the activities of some claims management companies is also a scandal with their unwanted text messages and phone calls.

“There is a serious problem with the industry, so what is the Government going to do about it?”

McNally replied: “The general advice is that customers should never use these firms. It is simple to make claims yourself and there is a template of a claim letter on websites. However, claims firms have at least enabled financially less confident consumers to seek redress.”

He added that a working group with members including the Advertising Trading Standards and Telephone Preference Service, is looking at how effective action can be taken to stop nuisance calls.

The Bank of England has today voted to keep the base rate at 0.5 per cent and the size of the asset purchase programme at £375bn.

The Bank’s Monetary Policy Committee today voted to keep the base rate at the record low level of 0.5 per cent where it has remained since March 2009.

The quantitive easing programme has been held at £375bn. The programme has not been changed since July 2012 when it was raised by £50bn.