The government was keen to encourage people to install solar panels but now it appears they might have a detrimental affect on contractor mortgage owner’s ability to sell their home.

Mortgage lending institutions have been refusing to grant remortgages to homeowners who rented their roofs on a 25-year lease to solar panel companies.

One couple from Southampton approached several lenders for a remortgage and were refused by each one, even though their existing mortgage provider gave them permission to take part in the rent-a-roof scheme.

The couple’s existing mortgage is with RBS but when they wanted to remortgage, a broker found them a more suitable deal with Skipton building society. They even paid the booking fee, but as soon as the Skipton found out about the solar lease, it could not go ahead with the loan. They were also refused a loan from the Nationwide, again because of the solar installation. So far their only option appears to be a variable rate remortgage through RBS.

If lenders are refusing to grant a remortgage to people who have signed up for these solar rent-a-roof schemes, will they also refuse to give first time buyers a mortgage to buy such a property? If so, a lot of people who may have considered moving home are going to be trapped.

Property owners who paid to have solar panels installed will not experience this problem; it just affects those with a PV lease.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

The Nationwide recently became the latest mortgage lending institution to demand that borrowers have at least 50% deposit if they want an interest only contractor mortgage.

Previously, the UK’s largest building society demanded just 25% deposit or equity, but as from the 21st of March that requirement has gone up to 50% for new borrowers. Customers who already have an interest only mortgage will not be affected unless they want to increase the size of their loan.

The Cheshire, Derbyshire and Dunfermline, subsidiary brands of Nationwide, are also affected by the change, but property investors wanting a buy to let mortgage through The Mortgage Works will not be affected.

The Coventry Building Society has also increased its deposit requirement for interest only loans to 50%.

Martyn Dyson, the head of mortgages at Nationwide, defended the lender’s actions saying that other major institutions had restricted their lending criteria on interest only home loans recently and Nationwide needed a strategy to manage application levels in a sustainable manner.

Santander has already implemented a 50% LTV cap on interest only deals and it’s probably only a matter of time before other lenders, such as HSBC and the Woolwich, follow suit.

Earlier this month the FSA expressed concern that people in their 50s who had taken out an interest only mortgage were sitting on a ticking time bomb.

Some people think interest only borrowing is reckless, but as one mortgage broker explained, it can be a sensible option providing the borrower implements a proper repayment strategy.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Are you brave enough to build your own home? If so, you could avoid stamp duty and make an instant profit!

One couple that wanted to do exactly that bought a plot of land in Devon just over 13 months ago. They now own an eco-property with four bedrooms. It cost them a total of £385,000 to construct and that included the cost of the land and all the fees. The house would cost more than £400,000 if you looked on the open market for a comparable new property.

The couple found their plot through BuildStore and got their contractor mortgage through the company. There are currently over 8,000 plots on the BuildStore website with prices as low as £6,250 in County Fermanagh. Providing the plot costs less than £125,000, there will be no stamp duty payable.

Some mortgage lending companies have pulled out of the self-build market but Building Societies such as the Norwich & Peterborough and the Leeds still lend to people who want to build their own property.

The Norwich & Peterborough offers an 80% LTV tracker mortgage at 4.39% above base, plus arrangement fee of £795. The Leeds Building Society deal is a 75% LTV variable rate at 6.19% with a £999 fee. Both these mortgages are released in instalments and in arrears.

BuildStore itself has an Accelerator loan where funds are released before the work is done. Borrowers can get a 75% LTV mortgage at a variable rate of 5.24% over three years. There is an administration fee of £495 with this deal plus a 1% completion fee on top.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Peter Dockar, the head of mortgages at HSBC, said recently that a lot of first time buyers are naïve and more interested in buying a property in a trendy area than making sure their investment is structurally sound.

People looking for their first contractor mortgage should think beyond their immediate desires or they could face financial problems further down the line.

HSBC recently surveyed first time buyers and discovered that only 5% took subsidence into consideration and only 6% thought about the cost of modernising a property when looking at house prices. Apparently only 33% of estate agents also consider this to be an important factor.

First time buyers make a serious financial commitment when they buy a home and it is essential that they weigh up all the potential costs before they make the decision to purchase their biggest asset.

There is another area that first time buyers do not seem to consider and the HSBC survey did not cover this. Mortgage lending companies are offering various incentives to entice people to buy now, but if house prices keep on falling, first timers could quickly find themselves in negative equity. Buying a property with only 5% to put down as a deposit can be a risky business.

The best mortgage rates are generally only available to people with a large deposit and although estate agents won’t point it out, first time buyers need to be aware that getting a 95% LTV mortgage could lead to other problems further down the line.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

There are around 11.2 million active mortgages in the UK at the moment and about 40% of them are interest only. With an interest only contractor mortgage, the borrower pays the interest, but the original amount he or she borrowed remains outstanding. This type of loan was common during the housing market boom years and the FSA has warned that a large proportion of them will be due for repayment by 2020.

The problem is that a lot of home owners simply don’t have the cash to repay them. 80% of people with an interest only mortgage do not have a repayment strategy, and even the people who have, are disappointed that their investments have performed poorly.

The FSA intends to tighten up the regulations concerning interest only lending. This probably won’t happen until next year, but once it does, people will have to prove they have a savings plan in place to pay off the mortgage. However, this will not solve the problem of the current interest only mortgages.

David Hollingworth from London and Country, a firm of independent mortgage advisers, says these people will have nowhere to turn. Furthermore, new age restrictions mean new mortgages must end before the borrower reaches 75.

Michael Fallon, a Conservative MP, explained that a lot of those in their late 50s will be stuck because they will not be able to remortgage.

The CML claims that mortgage lending institutions are aware of the problem and will be sympathetic towards borrowers. But at the end of the day, they are going to want their money back.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

If you have your contractor mortgage with the Bank of Ireland, you may be concerned to read that customers are facing interest rate increases of 50%.

The Bank of Ireland’s current standard variable rate is just under 3%, but the bank intends to increase that by a massive one and a half percentage points when introductory offers expire. People with a mortgage from Bristol & West will also be affected, but Post Office customers will not, even though the Bank of Ireland also provides their home loans.

The increase will be implemented in two stages. The bank intends to increase its SVR from 2.99% to 3.99% in June, and then three months later it will go up again to 4.49%.

Several mortgage lending institutions, including the Halifax and Santander, have increased their SVR recently. NatWest has also said it is to raise the interest rate on 200,000 home loans from 3.75% to 4%.

David Hollingworth from London & Country mortgages explained that a Bank of Ireland borrower would see repayments on a £250,000 mortgage go up by £204 every month once both stages of the increase were implemented.

He went on to say that the Bank has taken the decision because the cap on its SVR of 2.5% above base expires at the end of this month and it now costs lenders more to fund mortgages.

Now might be a good time for people with a Bank of Ireland mortgage to shop around for an alternative deal before other lenders get in on the act and raise their interest rates as well.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Contractor mortgage holders will be well aware that the Bank of England has held the base rate at it’s historic low level of 0.5% for just over three years. They may not be aware that the difference between the base rate and lending rates now stands at it’s highest level since records started to be kept at the beginning of 1995.

The average rate charged on overdrafts is 19.5%, whilst credit card customers are hit with interest at 17.3%. Experts have accused the banks of wanton profiteering and Lord McFall of Alcluith says the British public are losing faith with the banks.

A low base rate should translate into low mortgage interest rates and yet data from the Bank of England shows that the average standard variable rate mortgage stood at 4.16% in January. At 3.66% above base, that’s the highest difference in 17 years.

Mortgage rates will soon be on the up again. The UK’s largest mortgage lending institution, the Halifax, recently announced that its SVR would rise from 3.5% to 3.99% in May, adding an extra £39.99 a month onto the cost of a 25 year £150,000 mortgage. RBS has also increased its variable mortgage rates.

All this comes at a time when we’re getting next to nothing back on our savings. The average debt per UK household stood at £55,988 in January and the average Brit is in debt to the sum of 122% of their annual earnings.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

The Bank of England first set the historically low base rate three years ago and yet a large number of borrowers have not reviewed their contractor mortgage arrangements since then.

Just under 50% of all borrowers have not reviewed their home loan since the base rate dropped to 0.5% back in 2009. But that might be about to change as mortgage lending institutions threaten to increase rates.

Thousands of customers will be affected if rates increase and experts are urging them to take professional advice to ensure they get the best possible mortgage deal.

The Halifax and RBS recently announced that they would be increasing their standard variable rate and other lenders are bound to follow suit.

A study carried out by the website Unbiased discovered that more than 50% of borrowers have no idea what rate they are paying on their home loan. Of those who do know their rate, 42% are paying at least 5% on a fixed rate mortgage and yet the current best buy fix stands at just 2.54%. The difference between the two rates could be costing buyers more than £150 a month in mortgage repayments.

Karen Barrett, the chief executive of Unbiased, said that 14% of mortgage borrowers have decided not to review their home loan at the moment because the base rate is at rock bottom. But by taking this attitude, they are missing the chance to make substantial savings on their monthly repayments.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Grant Shapps, the Housing Minister, wants to revive the Right to Buy scheme that was first introduced by the Thatcher government in the 1980s. This could be good news for freelancers who currently live in council properties but want to take out a contractor mortgage and buy their home.

Under the new proposals, tenants who have lived in a council owned house for five years will qualify for a discount of 35% if they decide to buy. Every year above the five years will add an additional 1%, with the maximum available discount capped at 75%. Tenants of council flats will get an even more generous discount of 50% after five years and an additional 2% for every year thereafter.

Ten years ago, there were around 84,000 council house sales every year. Last year, that figure had dropped to less than 3,700. Nine years ago, 71% of homes in Britain were owner occupied, that has now fallen to just 66% and Mr Shapps hopes the new Right to Buy scheme will reverse the downward trend.

The money raised from the sale of council homes will be ploughed back into the construction of new ones.

It sounds like a good idea in principle, but will it work in practice? First time buyers are already struggling to get mortgages and although the discounts will mean these properties are much cheaper than privately sold residences, mortgage lending institutions have already started to increase the rates on their home loans. Let’s hope they don’t price council house buyers out of the market.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Is 2012 going to be the year when longer-term contractor mortgages make a come back?

The Post Office recently took its ten-year fixed rate mortgage off the market, but reduced the rate on its 75% LTV five year fix in a bid to entice customers who are concerned about interest rate rises.

Barclays, on the other hand, has re-introduced a 10-year fix and also launched a product called the Future Fix mortgage. With this 5-year deal, borrowers start off on a tracker mortgage for two years and then switch over to a fixed rate for three years. Barclays claim this is an innovative deal that gives borrowers more flexibility.

David Black, an insight analyst at Defaqto, points out that four years ago there were 124 10-year fixed rate home loans to choose from. By March last year there was just one. Although numbers have been picking up, there are still only 10 such deals on the market.

An increasing number of borrowers are looking for long-term financial security and want to know exactly how much they are going to be spending on regular outgoings such as mortgage payments. Mortgage lending institutions have cottoned on to this and longer-term deals are starting to re-emerge. Ten-year mortgages are not for everyone but some elements of society will consider them to be a viable option.

The ability to see into the future would be extremely useful at the moment. We have no idea when the Bank of England will decide to raise the base rate; some experts even suggest it may not happen until 2015/16. Has anyone got a crystal ball?

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Thousands of customers who have a contractor mortgage with the Halifax could be about to see their monthly repayments increase.

The UK’s largest mortgage lending institution says it is to increase the cap on its SVR to 3.75% above base rate.

40,000 customers of the Halifax are to receive a letter informing them of the move. However, there are several thousands other borrowers who will suffer once their mortgage reverts back to the bank’s standard variable rate.

The new cap affects only those customers with an Early Repayment Charge on their home loan. They now have a three-month period in which to switch their loan to another provider or pay it back without charge. The Halifax says this does not mean the SVR is about to increase, but it has been driven by an increase in the cost of funding.

If the Halifax was to increase its SVR by 0.25 percentage points, it could add an additional £500 a year onto a £200,000 home loan, and that is an increase that a lot of UK families simply cannot afford. Last time the Halifax took similar action, it raised its SVR three months later.

The Halifax has had problems in the past with informing customers of its plans to cap its SVR. An incident in October 2008 led to the bank having to pay out £500 million in goodwill payments to customers who were confused as to whether they were affected by an increased cap.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

A lot of homeowners who currently have a cheap contractor mortgage deal may be concerned that interest rates will go up before their current deal comes to an end.

However, some mortgage lending institutions will let you sign up for a new deal three months before your current deal expires and six months before you buy a new property.

Fixed rate mortgage deals have been on the up since December and worried borrowers may want to consider fixing their new rate now. But, there are downsides to this. If the lender reduces rates after your application has been approved and you’ve paid the fees, you’re stuck with the higher rate.

Experts warn homeowners not to panic and take put a remortgage until they’re sure the deal is exactly what they want.

Moneyfacts recently said that the average two-year fix has increased from 4.16% in September, to 4.36% now. A typical £150,000 two-year fixed rate mortgage would now cost £821 a month, an increase of £16 a month or £384 over the mortgage term.

There are still some good deals available if you’re prepared to shop around. The Chelsea Building Society has a 70% LTV five year fix at 3.19%, but it does attract a fee of £1,495.

Smaller lenders have been coming under increasing pressure recently from tighter lending restrictions and some have actually withdrawn their services, according to Ray Boulger from John Charcoal. However, when the restrictions are lifted, rates could decrease again and people who opted to pre-arrange their rate may regret the hasty decision.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.