Buy to let landlords with a contractor mortgage get a better return on their investment in their properties are located in the North of England, according to Paragon.

The buy-to-let mortgage lending company has published data showing that investors in the North West of England get an annual 6.6% yield on their properties compared to 5.7% in the London suburbs and 5.9% in the centre of the Capital. The North East of England also provides good yields at 6.5%, followed by the South West and the East at 6.4% and 6.3% respectively.

However, yields fall north of the border. Scottish landlords only get a 5.5% annual return on their investment.

Paragon’s director John Heron explained that rental yield figures are a good indication of how well property portfolios are performing and as such they are of great value to landlords.

It is interesting to note that a distinct North/South pattern has emerged during the first quarter of 2012. Whilst property owners in the south have not suffered as much from falling house prices as their northern counterparts have, southern landlords are not receiving as good a return on their buy to let investments.

The average rent in London stands at 69% higher than the national average of £716 a month but landlords in the Capital have much higher mortgages. The lowest average rents are found in the North, Wales and Yorkshire and Humberside; all areas where house prices are still falling.

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While people with older properties have seen thousands wiped off their value in the last couple of years, the price of new-builds has increased by 7.7% over the past 12 months.

There are now fears that first time buyers who take advantage of government initiatives could end up in negative equity.

As home owners with a contractor mortgage will be well aware, data from the ONS shows that house prices are flat or falling depending on the area. The government has intervened to help first timers in a bid to kick start the housing market, but the majority of their measures centre around newly built properties and they are increasing in price. Whilst builders are benefiting, young homebuyers could be left with inflated debts.

The ONS statistics show that the average house price in Britain rose by a mere 0.3% in the year to February, but the average price of a newly built property increased to £221,247. The figures also confirm a 20% increase in sales of new-builds. The stamp duty holiday no doubt contributed to this increase.

The Government recently launched the NewBuy Guarantee scheme, which is designed to help people get a 95% LTV mortgage on newly built properties valued at up to £500,000. The idea behind the scheme is to attract first time buyers who are fed up with renting. But there is still a very real danger that when interest rates rise, these buyers will be stuck with a mortgage they can no longer afford, and if house prices fall again, a property they are unable to sell.

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People with a contractor mortgage may be pleased to learn that house prices are starting to edge upwards again and according to Rightmove, the average asking price for a UK home now stands at £243,737.

In the South West, the number of properties for sale is 5.5% down on last year and this has pushed average asking prices up to a record-breaking £270,735. The South East is seeing prices just £810 lower than their previous peak, whilst in East Anglia they are £2,489 lower.

The average asking price in the Capital is almost £500,000, a historic high, as demand outstrips supply.

Miles Shipside, a Rightmove director, said we’re seeing new records being set in regions where there is a lack of supply, and estate agents report a similar situation in some other regional markets. He went on to advise sellers to research their local housing market to determine the sort of property buyers are looking for, the average time it takes to sell and the eventual selling price.

Although property prices in the South of England are doing well, the same cannot be said of those in the North West, Wales and Yorkshire and Humberside where prices have dropped by 1.2%, 1.5% and 0.2% respectively.

Despite the increases in the South, house prices have fallen by 9.9% in real terms since May 2008. If they had risen in line with RPI inflation, the average house price would be £270,459.

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According to the RICS, demand for property in March reached its highest level since 2010 as people rushed to buy before the stamp duty holiday came to an end.

Enquiries from first-time buyers rose as did those from existing contractor mortgage owners thinking of moving home. However, it remains to be seen whether this increase in activity can be sustained throughout the rest of the year.

London still outperforms the rest of the UK housing market, but the north-west also recorded increased activity last month. There are still regional variations and interest from buyers in East Anglia, the north of England and Scotland appear to have all but dried up.

Despite increased demand, the RICS reported that house prices decreased in all areas except London. Hometrack on the other hand reported that prices rose by 0.2% across the UK.

It’s not easy to work out what’s going on with house prices. Lloyds TSB has conducted research that shows that only 40% of towns have registered year-on-year increases in house prices, compared to 82% in 2010.

With all these differing reports, its not too hard to see why the housing market remains flat. First time buyers are no doubt concerned that if they buy now they’ll run the risk of ending up in negative equity and people who are considering selling will want to wait until they see house prices recovering before they out their property on the market.

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New research from moneysupermarket shows that the average contractor mortgage rate on some fixed rate and tracker deals increased this month.

The study shows that the average rate for a two year fixed rate product is now 4.15%; up from 3.82% in October last year. The increase means that a £150,000 mortgage would now cost £327.72 a year more than it did 6 months ago.

Five-year fixes dropped to a low of 4.57% at the start of the year but have since increased to 4.72%.

Two-year tracker mortgages were up for grabs at a low 3.37% last August, but they now stand at 3.63%, meaning borrowers will pay an extra £250.92 a year.

Clare Francis from moneysupermarket.com believes borrowers should act quickly if they want to secure a good deal. A lot of people move onto their lender’s SVR when their introductory deal ends and a number of mortgage lending institutions intend to raise their variable rate next month. Around 1 million borrowers will be hit by rises from lenders such as the Co-operative Bank, Halifax, Bank of Ireland and RBS.

Finding the ideal mortgage must be a nightmare these days. There are new deals coming to the market on a regular basis, but some of them also disappear very quickly if they become too popular. Some lenders are trying to woo people with low headline rates and then stinging them with expensive charges for arrangement fees.

The one thing that is certain is that interest rates will rise eventually and once they do, you can be sure the banks and building societies will be quick to respond with yet more increases to their mortgage rates.

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The number of people seeking advice on remortgaging has hit an all time high according to unbiased.co.uk.

37% of all the searches to its “find a mortgage adviser” section were concerned with remortgage enquiries last month. Karen Barrett, the website’s chief executive, put this down to mortgage lending companies increasing their interest rates and possibly further tightening their lending criteria.

She explained that the FSA wants to do away with irresponsible lending and this will affect people who already have a contractor mortgage when their existing deal comes to an end. 11.2 million households have interest only deals and a lot of lenders now demand 50% equity before they will grant such mortgages. Furthermore, several lenders have announced that their variable rate is to increase in the near future and in all probability, more will follow suit.

Some lenders have started offering 90% LTV mortgages but borrowers should make sure they understand what will happen to their repayments if interest rates start to rise substantially.

37% of mortgage related enquiries to the unbiased.co.uk website also came from first time buyers, whilst residential landlords looking for a buy to let deal accounted for another 20%. Only 7% were from self-employed people looking for a contractor mortgage and 4% were from older people interested in equity release.

The figures from unbiased are slightly confusing in that the list of top ten mortgage advice drivers adds up to 141%. One has to assume that people tick more than one subset when they visit the site.

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Mortgage lending companies may be charging low interest rates but they’re making up for it by raising their arrangement fees by an average of 25%.

The Bank of England base rate is still at 0.5%, making contractor mortgage monthly repayments relatively cheap, but the average arrangement fee now stands at £1,502, an increase of £321 in just three years.

A lot of people just look at the headline rate and don’t take the “extras” into consideration when they’re mortgage shopping and this can be a real mistake.

Take the example of a first time buyer who wants a £120,000 mortgage. Do they go for a three-year fixed rate deal at 3.75% plus £2,249 fee, or a similar fix at 4.25% with a fee of just £999? The first option might appear to be the best deal at first glance, but if you do the maths, you’ll find that the arrangement fee makes it more expensive.

We’ve heard a lot recently about lenders increasing their standard variable rate and fixed rate deals have also been quietly edging up in the last few months.

The one good bit of news is that average deposits have now come down to 25% and there are lenders who are prepared to grant 95% LTV mortgages, although you will pay the price in much higher interest rates if you opt for one.

The housing market is still going through a period of adjustment; experts reckon prices will continue to decrease, at least in some areas. The base rate has to increase eventually, although again nobody knows when.

It’s not the easiest of times to be stepping onto the housing ladder, but good deals can still be snapped up by the mathematically inclined.

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Once your contractor mortgage is paid off and the house is all yours, you’d expect to be able to sit back and relax a bit. But that isn’t happening for a lot of older homeowners because the value of pension funds has decreased dramatically in the last couple of years.

Obviously the last thing people want to do is sell their home so an equity release plan might seem like a viable option. The amount you can raise through an equity release scheme depends primarily on your age. Somebody aged 55 would only be able to get around 20% of the value of their home, whilst a 75-year-old could borrow as much as 40%.

The interest rate on equity release mortgages is around 7%, which means the size of your debt will roughly double over 12 years. However, if you take out what is called a “lifetime mortgage”, you aren’t actually making any repayments. The capital plus interest accrued is deducted form your estate when you die, or if you sell the property.

Another option is the reversion scheme whereby you sell a portion of your property but keep the right to remain there for life. Once the property is sold, the reversion company takes its share and the balance goes into your estate. Of course, if house prices increase, you don’t get the full benefit if you need to sell up for any reason before you die.

Back in 2007, 32.548 equity release plans were taken out. By last year that figure had dropped to 22,366. But the government is considering reforming funding for long-term care and if they take property values into account when assessing a person’s ability to pay, more might have to turn to these schemes.

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People with a contractor mortgage are feeling justifiably nervous about their repayments at the moment.

First the Halifax raised its interest rates and now the Co-operative Bank has made the decision to follow suit. Around 54,000 mortgage holders are likely to be affected by the increase, which will see the Co-op’s standard variable rate go up to 4.74% at the beginning of May. Average monthly repayments will increase by about £15.

The average borrower has an outstanding balance of £48,000 and another 11.5 years remaining on their mortgage. Their monthly repayments will go up to £455 from £440.

The Consumer Action Group has branded the increases as shocking, especially when you consider that the Bank of England has kept the base rate at a historically low 0.5% for more than three years.

A spokesperson for the Co-op acknowledged that people with a high LTV mortgage may be concerned about the increase and it will offer them an alternative option. They will be offered the opportunity to take out a five-year fixed rate home loan at their current interest rate.

The Co-op’s variable rate will still be less than that charged by the Clydesdale and Yorkshire group who are putting their rate up to 4.95% on May 1st.

RBS is increasing the rates on its One Account and Offset mortgage to 4% and Halifax customers will see their SVR increase to 3.99% at the beginning of next month. The Bank of Ireland is also increasing variable rates, but in its case the rise will be implemented in two stages.

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People looking for a contractor mortgage may be interested to hear that house prices rose in March for the first time in 21 months. At least, that’s according to research by Hometrack, the property tracking website.

The website’s research showed that average asking prices rose by 0.2% compared to February, after two months where they remained unchanged. The rise was attributed to the end of the stamp duty holiday.

House prices in London increased by 0.5% in March, but despite the average increase, only 4 regions recorded rising prices. When taken on a year-on-year basis, prices were actually down by 1%.

New buyer registrations increased by 4.4%, but this was well down on February’s figure of 18.1%.

However, figures from the Nationwide completely contradict the above! According to the Building Society, prices dropped by their greatest amount in two years after the stamp duty exemption ended.

The reintroduction of stamp duty on first time buyer properties valued at between £125,001 and £250,000 could further stifle the already struggling housing market. Confidence levels amongst UK consumers fell in March and are now at the same weak level we witnessed in the latter months of last year.

It must be extremely difficult for people to get a handle of what exactly is happening in the housing market when we get contradictory reports.

Robert Gardner, an economist for Nationwide, predicts that house prices could increase later this year if the economic recovery gets into full swing, but he thinks they will be unchanged, or even slightly lower, this time next year.

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People who took out endowment policies to pay off their contractor mortgage are finding that their policy has not lived up to expectations. Experts now believe as many as 360,000 families may have to sell their property this year to pay off their debt.

In a lot of cases endowments are paying out £100,000 less than was promised when the policy was taken out 25 years ago. In fact, some people will only get around £25,000 even though they’ve been saving regularly for a quarter of a century!

Mortgage lending institutions are now less likely to lend to someone who is approaching retirement age and so these endowment holders will either have to raid their savings or sell up. House prices have increased by as much as 250% in the last 25 years, but if homeowners have to sell they could be forced to move to a different area away from family and friends.

It is thought that as many as 2 million households could be in a similar situation over the coming five years.

Endowment mortgages became popular during the late 1980s. In excess of six million policies were taken out and insurers saw annual premiums increase to more than £2.3 billion. The idea behind them was simple; they would pay off your mortgage and give you a lump sum. But, in order for that to happen, investment returns needed to be good. And since the recession, they most definitely have not been.

Five years ago, a man who had paid £50 a month for 25 years into an endowment with Norwich Union would have received £42,133. A similar policy maturing today would pay out just £23,465.

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The stamp duty holiday has come to an end so first time contractor mortgage borrowers have to fork out more money to buy their dream home.

For the last couple of years, first time buyers had been able to buy a property valued at £250,000 or less and not pay stamp duty. However, as from March 25th, properties costing between £125,001 and £250,000 once again attracted a 1% stamp duty levy.

Enter the Halifax to the rescue; or is it? The Halifax has offered to pay 50% of the stamp duty levied on first time buyers. However, prospective buyers should do their maths before rushing to take up this deal. The lender is offering a two year fixed rate home loan on 85% and 90% LTV mortgages and no fee is payable. But the interest rate is a whopping 5.99%. The repayments on a £150,000 mortgage would work out as £966 a month!

The Co-operative Bank has recently launched a couple of 90% LTV, fee free mortgages. Its lifetime tracker mortgage tracks at 4.09% above the Bank of England base rate. Monthly repayments on a £150,000 loan would work out as £841. It also had a three-year fix at 4.69% giving monthly repayments of £850.

Whilst the Halifax deal would save you £750 in stamp duty, opting for a cheaper mortgage rate could result in bigger savings in the long run.

It always pays to do your homework in advance and take the fees, interest rate and benefits into consideration before signing up for a mortgage.

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