I feel so sorry for the people who came late to the property market bubble. Through fear of missing out on ever owning a house, many were railroaded into taking on mortgages by estate agents, mortgage brokers and banks. Now, more and more are facing the grim reality that they would have done much better if they had waited a year or two. What were the banks, mortgage brokers and estate agents saying at the height of the bubble? Banks…. “Are you sure you don’t want to borrow more?” Mortgage brokers? “Blue skies ahead…don’t worry…interest rates will probably come down”. Estate agents…”you’d better hurry or you’ll miss out.”

As negative equity grows at the astonishing rate of 60,000 homes a month, ministers are urging the government to rescue borrowers. That sounds all well and good and nice like….but who pays for all this? The answer is that the people who DID have the sense to sit on the sidelines during the boom will pay, along with every other member of society.

I have no issue with people who lose their jobs having their mortgage interest paid by social security payments, but what I do take issue with is bailing out people who are coming off fixed rates who can’t afford the new repayments. The interest rates aren’t earth shatteringly different than they were a few years ago, although they are a bit higher, but why should my hard earned income be taxed away to help these people? Many of them bought with the sole intent of selling the property after a few years and now are unable to do that. They have learned a valuable lesson that the property market isn’t a one way bet, despite what the banks, estate agents and mortgage brokers told them.

If the government bails out these homeowners, it is exactly like them standing outside a bookmakers shop and handing wads of cash back to the losing punters from my pocket. It’s just not on!

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Tags: Bailout, Interest Rates, Mortgages, negative equity, Social Security Payments

If you are looking for ways to improve your chances of receiving a loan, the best option is to build your collateral in order to show the lender that you have a strong financial history and are a dedicated to repaying the loan.

In banking terms, collateral is used to indicate assets that secure a debt obligation. In the case of a house mortgage, for example, the house serves as the collateral for the mortgage loan. This way, the bank is completely secured against the risk of the borrower not being able to meet the interest payments – if you cannot make the payments, the bank will seize your home.

There are two different types of collateral that banks will consider. The first type of collateral is secured lending, otherwise known as asset-based lending. The other type of collateral refers to more ‘liquid’ assets such as cash or securities, often known as ‘margin’.

Depending on the needs of your lender, having a strong amount of collateral will likely help you secure a loan more easily, and may even allow you to negotiate lower interest rates.

One of the best ways to improve your collateral is to start making smart investments. These don’t have to be large; you can start small and build yourself up over time. In fact, most people build their collateral using the loan system – they use small loans to make smart investments and eventually they have a large amount of collateral to their name.

Easy Ways to Improve Your Image without Collateral

You don’t have to buy a home to improve your image in the eyes of a lender. Here are some simple ways to improve your financial image:

• Make bill payments on-time: avoid trying to wait until the last possible minute to pay your bills. Get on-top of the bill payment situation – and pay your bill as soon as it arrives in the mail
• Avoid maxing out your credit card: interest rates and payments can become very difficult to manage and can become easily out of control. Try to make more than the minimum payments each month
• You don’t have to carry a credit card balance: one of the many myths of building collateral is that you need a credit card balance. In fact, many credit scores don’t distinguish the fact if you carry a credit card or not
• Open a checking or savings account: although not critical, many lenders will look at your credit history and look favourably on the fact that you represent stability
• Obtain a secured credit card: these cards allow you to make a deposit with a lender – and the amount usually becomes your credit limit. The issuer takes on very little risk because if you don’t pay on time, it can go into your account to cover the bill
• Use a co-signer if possible: If it is feasible to obtain a co-signer for your first few credit accounts. In these circumstances the credit rating of the co-signer will be added to your own
• Make smart financial decisions: Make sure your credit is in place before you make large purchases

Building collateral is one of the most important things you can do in order to obtain a healthy financial situation. Start today, as the process does take time. However, the rewards for having good credit will far outweigh the problems associated with having no collateral.

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Tags: Accounts, Bank, Banking, Current Account, Money Management, Mortgages, negative equity, Savings

The Bank of England has tried to help mortgage borrowers, and prevent a further decline in the economy from a repeated fall in house prices by reducing interest rates earlier this year. Interest rates currently remain unchanged for the time being and stand at 5 per cent…

What does the Credit Crunch mean for Mortgage Borrowers?
Unfortunately, many mortgage lenders have been unable to pass these savings onto home-owners because of the uncertainties in UK economic growth and in some cases (such as the difficulties experienced by Northern Rock in August last year) because the cash has quite literally run out to fund their current housing stock at the same lower interest rates. What is potentially more worrying for home-owners is that interest rates are unlikely to reduce any further in the near future because of rising inflation which currently stands 1 per cent above the UK Government’s target of 2 per cent – there is even the possibility that they may rise again. All this means that there exists an economic stalemate for the time being, with market predictions bringing little joy to home-owners, businesses and employees over the next few months, and possibly well into 2009.

What the Credit Crunch means for mortgage borrowers is uncertain. Banks other than Northern Rock have also felt the ‘credit crunch’. Such a case is that of Bradford and Bingley, the latest bank that has found itself being unable to fund its Buy-to-Let business as the cash it requires is simply not available from their traditional avenues of finance. As a result, Bradford and Bingley has recently suffered massive falls in its stock share price because of a profits warning for 2008 – more and more of their mortgage customers are increasingly missing their monthly repayments on property that is potentially decreasing in value as average house prices continue to fall month on month. These figures also echo a steep rise in repossession figures for the first quarter of 2008…

Credit Crunch Budgeting and Financial Planning for Everyone
For many, one way to cut a path through these difficult times, when cheap re-mortgaging and low fixed rate deals are harder to come by, is to revise how they manage the money that’s already in their pockets, ensuring that they make the most of every pound by making savings and reductions wherever possible. Ensuring that sensible financial budgeting is at the forefront of everybody’s minds is very important, as well as keeping both eyes open for the best deals on mortgages rates, the banks’ current account deals and where it is possible to save money, on the highest interest savings accounts.

Most banks want you to deposit money regularly with them due to their shortage of cash liquidity, so high interest rate accounts are being offered to tempt you to give them your business.

Here are some recommendations for mortgage accounts, personal bank accounts, business bank accounts and high interest savings accounts available online

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Tags: Accounts, Bank, Banking, Current Account, Money Management, Mortgages, negative equity, Savings

Bank charges are specific fees set by the bank, when you fail to follow the agreed terms of the bank. When you approach any bank to open an account or apply for a credit card, you have to enter into an agreement and abide by that bank’s rules. In UK, bank charges are also called as penalty charges. Some of the reasons for penalty charges include:

1. Cheque Bounce
2. Exceeding the limit of credit card
3. Direct debit, which exceeds the overdraft limit
4. Failing to pay bare minimal payment on the credit card

However, bank charges have to reveal factual charges incurred by financial institutions.  A recent study depicted that, if your cheque gets bounced, some banks charge around £39 and £12 for missed payments on credit card and £28 each day, if your account does not have adequate balance.

These charges are far above the authorised charges that banks may charge you. If you are a victim of such unfair penalty charges or bank charges, then you can always fight your way to get the refund. It will involve taking legal action against the bank.

Procedure To Reclaim The Bank Charges:

1. Take out all your bank statements of past six years and see for any levied or penalty charges remarks. You cannot claim the bank charges that were charged before six years. You may obtain the past statements of last six years from the bank by writing letter to customer service section of the bank.
2. If your bank authorities tell that they will charge you for this information then state them clearly that as per Freedom of Information Act, you have the right to access the monetary information and this service is free.
3. Sum up the charges of past six years. If you think your bank has been unjust to you and has unduly charged you, then write a mail to bank demanding the repayment. Request the bank to repay the amount within 28 days and mention that if it fails to agree, then you will file a legal action against them.
4. Post this letter by register delivery to make sure that financial institution receives it. Send the letter to address of customer service section of the bank.
5. Bank will respond to it by either fulfilling your claim partly or fully or it may refuse to meet the claim entirely.
6. If the bank refuses to meet the claim or agrees to give only a percentage of your claim, directly move to court for some legal action.

Internet Court Service:

Visit any Internet court service, enter your information, and claim the amount. You will have to pay some fee to seek this service, but it will help you to obtain the claim.

Your case will be in court for hearing and bank will be obliged to defend their case. Next, if the bank decides refrains from defending the case, then it will have to pay the entire claim along with the court fees that you had incurred over the time.

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Tags: Accounts, Bank, Banking, Current Account, Money Management, Mortgages, negative equity, Savings

Not so long ago the rules of buying a property were clearly defined. Mortgage banks set some pretty strong criteria which had to be strictly adhered to and there were no room for negotiation. Equity of a minimum of thirty percent was required on a property, and if you didn’t have the thirty percent, you saved harder till you did. In the case of young couples who were buying their first home, it was fairly common practice for the bride’s parents to pay a fairly large chunk of the deposit, with the groom’s parents adding a little, and the young couple making up the balance. Sound idyllic? It was. For the simple reason, that then, which means up to fifteen years ago, property prices were realistic and an average family could afford to pay out the relatively small sums of money required to make the equity required to purchase a property.

However, as the property boom began to take of in the mid nineteen nineties, and property prices began to rise, it became increasingly difficult for buyers to raise the money required for equity. So what did the banks do? So anxious were they to sell mortgages and earn interest that they began to relax their restrictions on equity minimums. Fuelled by the seemingly never ending property boom, every year they demanded a little less equity, Not only that, the banks, so hungry were they to lend money and earn interest, were less than stringent in doing physical valuations on the properties that they were lending against. It seemed that no matter the state of the property, it would always rise in value. This was true, at least on paper, till the sub-prime mortgage crisis fell upon the World in the summer of 2007.

When the bubble burst, home owners were forced to wake up to the reality that their property values had dropped by ten per cent almost overnight and the predictions were that they could fall to as far as twenty five percent within the next few years. For veteran home owners, who had bought properties twenty or even ten years ago, and invested reasonable equities and seen their property rise to double in value, whilst it was upsetting it was by no means a disaster. Also for people who purchased a property five years ago or after, and had placed little or no equity into the property the situation is not easy, but is liveable with, at least in the short term. The people who appear to be hardest hit or those who bought properties in the early 2000s. Those who placed equity of between five to fifteen percent of the value of the property when they bought it.

Today their property is worth ten percent less, which means that they have lost whatever appreciation on the property value they earned, and are starting to dig into their equity. With property values continuing to fall the equation is that they will have lost all their equity and will actually owe more on their mortgage than the property is worth.

That is a classic case of negative equity and how innocent people who wanted to own their own properties and invested reasonable sums of their own probably hard earned money to do see the danger of having their equity wiped out. The best advice you can give to these people is to hang in, not to panic and in time their property value will return, and their equity will be saved. In may take time, but it will happen.

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Tags: Accounts, Bank, Banking, Current Account, Money Management, Mortgages, negative equity, Savings