Contractor mortgage hunters who are concerned that interest rates may rise dramatically in the next couple of years may want to consider taking out a ten-year fixed rate product.

The Norwich and Peterborough Building Society announced last week that is was launching a 75% LTV mortgage fixed at 3.99% for ten years. The fee for this product is a modest £295 and includes free legal fees and valuation.

Home buyers in the UK have been reluctant to commit to a long-term mortgage because of hefty early repayment charges, but David Black from Defaqto, the financial statisticians, said that they are worth considering for people who know they are going to remain in a property for a long time.

There are not a lot of long-term fixes on the market at the moment and the Norwich and Peterborough offering has the best rate, as well as low arrangement fees.

Recent research from Moneyfacts found that fees on home loans have been rising dramatically in recent months. This time last year, purchasers paid an average arrangement fee of £899, now the figure is £1,498.

Moneyfacts.co.uk spokesperson, Sylvia Waycot, said that people tend to ignore the cost of arrangement fees in the overall excitement of purchasing a home. But this could prove a costly, particularly if the cost of the fee is added on to mortgage. Consumers should always take incentives and charges into account, as well as the headline rate, when shopping around for the best deal.

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Confidence in the British housing market is the lowest it has been for over a year as fewer contractor mortgage holders expect to see house prices increase in the next few months.

The most recent Housing Market Sentiment Survey from Zoopla.co.uk shows that only 55% of homeowners think that residential property prices will increase in their local area in the next six months. Three months ago, the figure was 59%.

Those who do expect property prices to rise during the first six months of 2012 predict the rise will be just 2.2%.

Homeowners still believe their property is a cut above the rest and will outperform the average. Despite predicting an average 2.2% increase for other homes in their locale, they expect their own home to increase in value by 2.8%. 29% of the survey’s respondents expect local house prices to fall but when it comes to their own property, only 24% expressed that sentiment.

Homeowners in the capital continue to buck the trend with 72% of residential property holders expecting to see house prices rise in the first half of 2012. Owners in London have predicted that house prices will increase by 4.7% in the first six months of this year.

48% of those surveyed said they will only believe the property market is improving when it becomes easier to obtain a mortgage, whilst just 11% of those surveyed believe mortgage availability has improved in the last three months.

Nicholas Leeming from Zoopla.co.uk said homeowner confidence has been battered by the general economic uncertainty. We are unlikely to see confidence return to the housing market until the economic outlook improves.

However, the housing market in London continues to be detached from the rest of the country. Overseas investors are still buying properties in the capital and this has led to increased prices and confidence levels for Londoners.

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The Council of Mortgage Lenders is alarmed at the government’s proposals to alter the way SIM operates.

The Support for Mortgage Interest scheme was set up to help people who are in danger of losing their home because they have lost their job.

The minister for welfare reform, Lord Freud, is considering whether new SIM claimants should be entitled to indefinite financial help without the taxpayer having the opportunity to recover at least part of the costs. One of the proposals put forward is to set a time limit after which a charge will be put on the property of any claimant who still wants to receive SIM. The government would then recoup at least some of the benefit when the property is sold.

Lord Freud explained that the current benefit does not encourage people with a contractor mortgage to sort out their finances. It is also an unsustainable expense, costing the government £400 million every year.

There is currently no limit on the length of time homeowners receiving pension credit, income support or employment and support allowance are allowed to claim support for mortgage interest, but since the beginning of 2009 some people receiving jobseekers’ allowance have only been allowed to claim SMI for years.

The coalition is also In October last year, the government cut the rate at which SMI is paid and now it is thinking about extending the qualifying period from 13 weeks to 39 weeks, and cutting the mortgage limit to £100,000.

One major concern raised by the CML is over the proposal to pay SMI directly to the claimant rather than the mortgage lending institution. The government wants homeowners to be responsible for making their mortgage repayments but the CML believes that some claimants would spend the money on things other than their mortgage.

The chief executive of Shelter, Campbell Robb, said the proposal to reclaim SMI after a property has been sold was interesting but expressed concerns about the plan to extend the qualifying time to 39 weeks.

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Will Sir Richard Branson’s purchase of Northern Rock open up the mortgage lending market? Contractor mortgage hunters definitely hope it will.

As part of the deal, Virgin Money inherits 75 Northern Rock branches, more than 2,000 employees, a mortgage book worth £14 billion and an additional one million customers. Brokers now believe that Virgin is in a position to put up a serious challenge against the largest mortgage lenders in the UK.

There are not many innovative mortgage deals around at the moment and Virgin could set the marketplace alight if it comes up with some quirky home loans.

David Hollingworth, the head of communications at London & Country, said Virgin is not going to sit around. It wants to lend money and now has a good vehicle in Northern Rock to help it build a presence.

Virgin is a respected brand name and as Peter Suttill, the MD of Burwood Financial Consultants, points out it is an established brand taking over another well-established institution. This gives Virgin a competitive edge over new start-up banks such as Aldermore and Metro Bank.

However, not everybody sees Virgin as a threat to the Big 5. Andy Pratt, the COO of Alexander Hall, said he found it hard to envisage Virgin as a mass-market bank. He thinks Richard Branson would have been better off launching a virtual bank.

Northern Rock was a successful building society for more than 100 years but only survived 10 years as a plc bank before the government had to bail it out to the tune of £1.4 billion.

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Although money is in short supply at the moment, many Brits do not think about checking contractor mortgage rates to ensure they are getting the best deal.

Barclays recently conducted research and discovered that the only time 58% of homeowners change their mortgage is when they are moving home. And that’s despite them cutting back significantly in other areas in order to save money.

About 92% of the survey’s respondents said they were reducing their monthly outgoings and nearly three quarters said they would think about a remortgage if they could save at least £50 a month. However, the majority thought they would only gain about £10 a month by remortgaging.

Andy Gray, Barclays’ head of mortgages, said the survey results indicate that homeowners don’t realise that they can save money by remortgaging. Monthly outgoings are on the rise and a lot of British households are struggling to make ends meet. They would be well advised to consider their mortgage as part of any cost cutting exercise.

76% of respondents claim to spend at least three hours every month trying to make ends meet and 44% said they now devote more time to this than they have done in the past.

Barclays’ study has proved that a lot of people could save about £50 every month if they remortgage. Over the next two years, if everybody remortgaged, the UK could save £346 million.

It seems the message has got through to some homeowners. Data from the CML has revealed that remortgage activity in August was up 30% on the corresponding month last year. 34,100 remortgages were taken out during the month, worth about £4.2 billion.

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As the average age of first time buyers rises, an increasing number of us face becoming OAP mortgagees.

Mortgage lending institutions demand large deposits and potential homebuyers find themselves living in rental accommodation for longer than they anticipated in order to save enough to secure a contractor mortgage.

We now have a situation whereby more than 25% of private tenants looking to purchase a property are in their 40s. If they do get a mortgage, they will either have to pay it off faster than the normal 25-year period, or continue making repayments after they have retired.

More than 50% of people living in rented property would love to buy but can’t afford to get their first foot on the ladder.

Although lenders are slashing the interest rates on their mortgage products as the base rate remains at 0.5%, rents are rising and tenants will find it harder to save enough for a deposit. Record high rents of £718 across England and Wales were reported in September. Add rising inflation and energy prices to the equation and it’s not surprising that household finances are strained.

Another problem for people buying a property later in life is that some lenders have a retirement-age criteria, which means they may have to get a mortgage term of say 20 years rather than 25, and therefore make larger monthly repayments to compensate.

Aviva, the insurance specialist, discovered last year that 10% of homeowners over 75 are still making mortgage repayments and their average outstanding debt was £72,500. At a time when people should be allowed to relax and enjoy retirement, that sounds like a huge debt burden.

The government must take action to help first time buyers get on the housing ladder well before they reach the age of 40.

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Contractor mortgage borrowers now have four times the amount of debt people had back in 1991 and yet they only pay slightly more interest.

The average mortgage rate was 3.2% in September. In 1991 it was 11.39% and back in 1988, people were stung with an interest rate of 12.75%. Inflation is currently running at 5.2%, according to the RPI and yet when the average mortgage rate was 12.75%, the RPI was only 4.9%.

So why is there such a large disparity between 1988 and 2011? As any saver will tell you, savings earn next to nothing at the moment. Back in 1988, the average savings rate was a massive 11.2% – more than twice the rate of inflation. Savers are undoubtedly suffering at the expense of borrowers at the moment and it doesn’t seem as if the situation is likely to improve in the immediate future.

The personal financial landscape has changed dramatically over the last 25 years. We’re relying a lot more on credit cards to finance our lifestyle. The UK’s total credit card debt is now £57 billion, compared to £6.7 billion in 1988. Last month, outstanding mortgage debt stood at £1,242 billion; in 1988 it was £224 billion.

The Bank of England and the coalition are prioritising low interest rates in the hope that businesses and consumers will start to invest and spend more, thereby stimulating economic growth.

Savers have every right to feel despondent as they see their inflation eating into their savings, but homeowners with an offset mortgage should take advantage of the situation and make overpayments to their home loan in order to reduce the overall debt and repayment period.

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Although contractor mortgage interest rates are going down, the same cannot be said for application fees.

Mortgage application fees have increased by over 30% in the last 12 months. Last September someone applying for a two-year fixed rate home loan would pay a total of £973 in booking and application fees. That has now increased to £1,253. The average borrower now pays £939 for the application fee, compared to last September’s charge of £699.

Especially for people with smaller mortgages, these high initial fees can offset any savings made from low interest rates.

Leeds Building Society recently launched a two year fix at 1.99%, but in order to obtain the mortgage borrowers have to pay fees of £1,999 and an exit fee of £199. Anyone applying for less than £164,000 through this deal would actually be better off getting a higher interest rate loan with lower fees. The Yorkshire Building Society charges a higher interest rate of 2.69%, but with fees of just £95, somebody borrowing £150,000 would pay £600 less with them than through the Leeds over the two year term.

Clare Francis from Moneysupermarket explained that people often don’t see further than the headline rate but there a multitude of additional fees that can boost the cost of the mortgage up dramatically.

Exit fees are now higher than they used to and upfront non-refundable fees are also more prevalent. However, David Hollingworth from London & Country mortgage brokers says that mortgage lenders are now becoming more competitive and borrowers have more choice.

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We’ve had rock bottom interest rates for over two years now and you would think this would encourage people to make additional payments to reduce the size of their contractor mortgage.

Surprisingly enough, it turns out that few people are taking advantage of this golden opportunity. A study by Unbiased.co.uk has discovered that 63% of people with a tracker mortgage made no overpayments last year and only one in ten made an occasional overpayment.

Barclays also released their findings which showed that a mere 10% of its home loan customers are currently making overpayments and a further 6% intend to do so before the end of this year.

A lot of households could be concentrating on reducing their credit card debts rather than reducing their mortgage. We’ve also seen rising inflation and low wage rises, so a lot of people may not have any spare cash available.

Meanwhile, Capital Economics claims that the eurozone crisis will restrain mortgage lending well into next year.

The firm published its housing market update at the beginning of the week and pointed out that although mortgage lending has improved recently, a full recovery is unlikely any time soon.

Since June, the cost of wholesale funds has increased by about 2% and the rise shows that the financial markets are concerned that UK lenders could be exposed to the growing sovereign debt crisis currently underway in mainland Europe.

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Although sub-prime contractor mortgage lending dried up after the recession, there are still hundreds of thousands of people with sub-prime debts.

These borrowers are saddled with high interest rates, poor service and the documents relating to the loan are either impossible to understand or downright misleading. To make matters worse, in the majority of cases the original mortgage lending company has gone bust and the loan is now administered by a little-known company.

Earlier this month, the FSA fined Swift 1st a total of £630,000 and told it to refund customers with £2 million. Swift 1st became the fifth sub-prime lender to be fined for unfairly charging borrowers who fell into arrears with their mortgage repayments.

There have been numerous cases where sub-prime lenders have levied repeated large unexplained charges to people in arrears and sometimes the charges have led to homeowners losing their properties.

In one such case, a couple were billed £6,409 in fines and charges. Of that sum, there were eight fines of £50 for ‘arrears management’ and sixteen fines of £115 for repossession or litigation management and more than £1,800 of the total was for legal costs. The couple concerned had no chance of clearing their arrears because more and more charges kept being applied to their account and their home was eventually repossessed. To add insult to injury, once the property was sold, the couple were left with a shortfall of £63,375.

The FSA is trying to put a stop to this behaviour but if at all possible, anybody with a sub-prime home loan should think about moving their mortgage to a mainstream, reputable lender as soon as possible.

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Buy to let mortgages first hit the marketplace in 1996, making them 15 years old this year.

The idea came about after the recession in the early 1990s when demand for rented properties surged but there was not enough supply. At that time there was no scheme aimed specifically at residential landlords but by 1996, after extensive talks, the first buy to let mortgages were launched.

The first buy to let deal to be conceived was a 75% LTV mortgage costing 2% over the Libor rate. To qualify, landlords had to have expected rental income equalling 150% of the mortgage payment. By launch time, another three lenders had come up with a buy to let product.

At the start, some mortgage lending companies were openly critical of this new market. Others, such as Paragon, were convinced that the private rental sector market was strong and decided to concentrate solely on buy to let products.

During the 2000s, buy to let really took off and a lot of lenders joined the market. But substandard lending practices by some institutions led to major problems. That is all behind us now, and the buy to let sector emerged from the recession better than some people had expected.

The current mortgage market is very different to that of 2007. Gross lending is only about a third of what it was then and other specialist markets have collapsed. At the same time, the private rental sector is booming as first time buyers struggle to get a contractor mortgage.

Renting privately is now filling the gap between social renting and home ownership, but this may well not have been possible without the initial launch of buy to let mortgages fifteen years ago.

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People looking for their first contractor mortgage will know that lenders are asking for extortionate deposits, but did you realise that the average deposit has risen tenfold since 1990?

The average deposit now stands at nearly £66,000, according to new research from First Direct. In 1990, the average deposit was £6,793; now it is £65,924. During the same period, house prices have increased fourfold. The average loan to value in 1990 was 88% but today it has dropped to just 73%.

Bruno Genovese, First Direct’s senior savings product manager, said the average age of first time buyers is increasing and more and more people are struggling to get their first foot on the housing ladder. 2010 proved to be the hardest year for house buying in the past 20 years as the average house price reached more than six times the amount of the average household income.

Although a lot has been made of increased house prices, the average deposit needed to get a mortgage has increased more than twice as quickly as house prices and nearly four times as fast as income.

House prices did decrease in July, with homes in the West Midlands witnessing the biggest decrease at 4.6%. The only area which witnessed an increase was London where prices rose by 0.9%.

The average house price in the UK in July was £207,690 but that average drops to just £133,163 for buyers in the North East of England. At the other end of the spectrum, the average property in London is more than £200,000 more expensive at £347,271.

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