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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June saw a surge in remortgage activity, according to research by the Mortgage Advice Bureau and the Coreco Group.

Last month, remortgage activity increased by an impressive 65% compared to June 2010, and 30% compared to May this year. The level of remortgages now stands at its highest since September 2008.

64% of people remortgaging opted for a fixed rate product, up 5% on the previous month and the average size of the loan increased by nearly 10%, to £150,740.

There is continued high demand from people looking for a buy to let remortgage and many analysts say this market will remain strong.

Brian Murphy, the Mortgage Advice Bureau’s head of lending, said June’s mortgage activity continues to rebound, with remortgage applications increasing significantly for the second consecutive month. Borrowers are taking full advantage of low interest rate deals ever since the threat of a Bank of England rate rise has subsided.

Meanwhile, first time buyers are still entering the housing market, according to the Home Sale Network of UK independent estate agents.

Ian Appleyard, a director of Blundells, said that the contractor mortgage market is still challenging for first timers, but many can still find ways of obtaining their first home.

62% of the estate agents who took part in the survey said that problems raising the deposit was the main reason why first time buyers were prevented from purchasing, whilst 33% cited the lack of mortgage availability.

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Mortgage lending companies are thinking about changing their strategies in order to attract more borrowers, a move that will undoubtedly win favour from people looking for a contractor mortgage.

The Bank of England’s MPC held the base rate at its historic low rate of 0.5% yet again this month and this sparked a discussion over the possibility of the rate remaining the same until next year. As inflation appears to be coming back under control, there is a greater chance that the base rate will stay as it is.

Barclays and the Skipton Building Society are leading the price war to attract more borrowers. Skipton has knocked 0.5 percentage points off some tracker mortgages and fixed rate deals, whilst Barclays has cut its Woolwich tracker and some fixed rate products.

Northern Rock and the Halifax have lowered the rates on multi-year fixed rate buy to let mortgages by nearly 0.5 percentage points.

The UK’s high street lenders believe there are good opportunities for new business. Ray Boulger, from mortgage broker John Charcoal, says there are good deals around for people looking to remortgage. He predicts that we could shortly see the cheapest five year fixes go below 4%, a situation we have not witnessed for months. The forecasted increase in mortgage rates is now in reverse, he added.

Latest data from the Bank of England shows a significant decrease in net mortgage lending in March. 600 million was lent during the month, a decrease of nearly 100 million on February’s figure.

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Although there was little movement in house prices last month, some surveyors think that may be about to change.

New research shows that signs of improvement are starting to appear in the housing market. Last month saw a year-on-year rise of 7% in the number of valuations carried out for residential mortgages. A lot of analysts think an increase in valuations will lead to an increase in the number of sales, which in turn will start to push prices up.

Colin Dorman from Connells Survey and Valuation pointed out that there are signs that activity is at last picking and the housing market is starting to look a little healthier.

Mortgage activity in recent months has been buoyed by householders looking to remortgage before interest rates rise. However, the RICS reported a flat month for the housing market in March, with falling demand and low levels of sales. Members of the RICS remain downbeat about the prospects for Q2, with nearly 25% more surveyors thinking house prices will decrease rather than increase.

A study carried out by Connells Survey and Valuation showed that “>remortgage activity decreased slightly last month but 56% more valuations were carried out for remortgages than in the corresponding month last year.

The research also found a 26% rise in the number of first time buyers entering the housing market in Q1 2011 compared to the previous quarter. 34% of all valuations were carried out for first time buyers, the highest proportion for more than six months.

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There are nearly half a million UK households with debt problems, according to the Consumer Credit Counselling Service and this figure is bound to increase if interest rates rise.

A new report has warned that an increase of two percentage points would lead to the average home owner paying an additional £307 a month in outgoings. It’s more important than ever for people looking to secure a new contractor mortgage to make sure they shop around and choose the best provider.

The Leeds Building Society recently introduced a unique three year fixed rate home loan. The unique aspect is that borrowers are not tied to the deal and can remortgage with another lender before their three year term is up.

The three year fix comes with a rate of 5.14%, free valuation and a relatively low £699 fee. However, the mortgage is only available to customers with at least 20% deposits.

The Hanley Economic Building Society currently offers an 80% LTV fixed rate deal at 3.75% until May 2013 and charges fees of £499.

Meanwhile potential first time buyers who are forced to rent because they cannot get a mortgage have seen rents rising by 3.9% in the last year. The average rental payment now stands at £684 per month for tenants in England and Wales.

High house prices and a lack of affordable mortgages forced an extra 180,000 people into the private rental sector last year. Some of these opted for a flatshare, but now even that market is seeing the effects of the surging demand. The average rent for renting a room in somebody else’s property now stands at £399 a month.

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New research from unbiased.co.uk shows that nearly one in four homeowners think buying a house was the most traumatic experience of their life.

24% of respondents cited buying a house as most stressful, followed by starting a new job at 14%. 37% of young people aged between 20 and 29 said buying a house caused them the most stress, as did 24% of the over 70s.

It’s hardly surprising that people find the whole process stressful when you consider that first time buyers have problems raising deposits and existing mortgage holders worry whether they’ll be able to meet their repayments if interest rates rise.

We’ve become used to low mortgage repayments but the final quarter of last year saw a mortgage interest bill of just £43.5 billion, the lowest quarterly amount on record.

Many people have now moved away from fixed rate mortgages onto floating rate products. Other’s face the dilemma of whether to remortgage and switch from a variable rate product to a fix. Some analysts have pointed out that the Bank of England would need to raise the base rate to nearly 3% before borrowers would be better off with a fixed rate contractor mortgage.

Paul Diggle, from Capital Economics, says there is not a strong case for an immediate rise and even if one was forthcoming, it would probably not herald a sustained round of tightening. If that scenario pans out, people opting for a fix now could find themselves paying a lot more over the next two years than those who stick to a variable rate product.

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The threat of an interest rate rise spurred more people to remortgage in January, according to Countrywide, the mortgage broker.

32% of all last month’s mortgage applications were for a remortgage, a 5% increase on the final month last year.

The chief executive of Countrywide, Grenville Turner, pointed out that this increased activity was due to speculation that the MPC of the Bank of England was set to raise the base interest rate from its historically low 0.5%.

Fixed rate mortgage deals are growing in popularity, he said, which was a good indication that people will pay slightly more for peace of mind and the knowledge that their mortgage repayments will remain the same. 84% of all the applications for a contractor mortgage were for a fixed rate deal last month, the highest since August 2009 and a 9% increase on December’s figure.

86% of people looking for a remortgage chose a fixed rate product, an 8% rise on December and the highest rate since July 2009.

Turner believes that in the last two years the economic crisis led to a situation where people had only been moving home if they absolutely had to. Things have improved slightly and now discretionary movers, who account for around 50% of all transactions, are evaluating whether this is the right time to move.

Meanwhile, lenders have been pulling their best fixed rate deals and a lot of experts believe that the cost of these products will continue to rise. David Hollingworth, a mortgage broker from London & Country, advised people last week to act now if they want to secure a reasonably priced fix.

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The January Trends in Lending Report from the Bank of England shows that mortgage approvals for house buyers dropped to 40,000, a 21 month low, in December. To show just how big a drop this really is, in November 2009, 60,000 home purchase mortgages were approved.

As if that news isn’t depressing enough, mortgage lending institutions have been rushing to withdraw the best fixed-rate mortgage deals amid concerns of worsening inflation.

First time buyers and people looking to remortgage can be forgiven for showing signs of confusion when it comes to choosing a suitable contractor mortgage. Many lenders report a growing demand for fixed-rate products as speculation over the timing of an inevitable interest rate rise increases.

Last week, some of the leading lenders withdrew their best priced fixes and replaced them with higher rate products. Five year fixed rate deals had been proving a particularly popular buy in recent months but it’s now hard to find one at less than 4%.

Mark Harris, from mortgage broker Savills Private Finance, said last week that house buyers should select a fixed-rate product if they require certainty. He went on to say that a tracker mortgage would be suitable for home buyers who can afford a moderate rise in interest rates. 90% of well-off borrowers, who can afford a mortgage of over £1 million, are still going for variable rate deals, he pointed out.

As has become the norm in recent months, the best rate deals are only available to those people who can afford to put down large deposits. For example, Nat West offers a five-year fix at 3.95%, but you need a 50% deposit. For people who can only afford a 10% down payment, the Post Office again has one of the best five-year offerings at 5.99%.

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The House of Commons debated the Mortgage Market Review on Monday evening, giving MPs the opportunity to put forward their objections to the financial secretary to the Treasury, Mark Hoban.

Robert Syms, the Tory MP for Poole, said that the MMR in its current form would spell disaster for the economy, borrowers and first time buyers. He went on to explain that the MMR is designed to address market failures of only a small proportion of lenders, some of which are no longer in the market. He also argued that the view that consumers need protection from themselves is patronising.

Syms called for an MMR that would make it easier for smaller lending institutions to function in the mortgage market. He went on to caution against making reforms that would make it harder for home owners with short-term financial difficulties to remain within the housing market and remortgage.

Hoban explained that the MMR was necessary to ensure protection for both contractor mortgage hunters and mortgage lending institutions.

The MP for Nuneaton, Marcus Jones, joined the debate expressing concern about the lack of mortgage availability for consumers with just a 5% deposit. He said it was essential for first-time buyers to gain access to funding and lenders should set aside a proportion of their mortgage book for 95% LTV mortgages.

Hoban responded to this criticism by saying that increased lending could force house prices to rise and that would put home ownership even further out of the reach of many.

He did acknowledge that nothing was yet set in stone and that the FSA will fully assess the impact any change to the rules will have on the market before implementation.

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Barratt Developments has stepped in to help first-time buyers get a foot on the housing ladder.

The biggest house builder in Britain has tied up with Hitachi Capital (UK) to offer loans to parents and guardians wanting to help their children with the deposit they need to secure a contractor mortgage.

Newly built homes are generally considered more expensive than their older counterparts and therefore represent a bigger risk to the lender.

Under the new scheme, parents can submit an application for an unsecured loan of up to £50,000. Barratt says the scheme will make it possible for borrowers to take out an 80% LTV mortgage using a deposit of 5%. The 15% balance will be met through the Hitachi unsecured loan, meaning the buyer could spend up to £333,000 on the purchase of a new home.

The loan is charged at a fixed rate of 5.4% over 12 years, there are no penalties for early repayment and unlimited overpayments are also penalty free.

This new deal looks like a win – win situation all round. Parents wanting to help their child will no longer need to remortgage and young purchasers will be able to overcome the strict mortgage lending criteria that demand large deposits.

Barratt Developments chief executive, Mark Clare, said the builder was genuinely excited about the new offering because it allows parents to help their children in a low-risk way. The loan is the perfect solution for parents who do not have available capital but can afford the loan repayments. Many people under the age of 40 would like to buy their own home but up until now, they have been unable to meet the deposit requirements. This new product should make it easier for them to get a mortgage.

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Although Grant Shapps, the housing minister, has said we should not view property ownership as a long-term investment, the government is planning to make it easier for people to obtain finance to build their own home.

Self-builders currently account for 20% of all new homes built in the UK each year and yet many potential self-builders give up due to bureaucratic and complex regulations and lack of access to finance and land. Shapps now wants to remove some of the obstacles that have led to the UK sitting near the bottom of the European self-built homes league table.

About 10,000 self-build properties are completed in the UK every year, but for many the key stumbling block to the do-it-yourself approach is the lack of contractor mortgage availability.

The Norwich & Peterborough building society for example, will provide a 75% loan on the cost of the land and the same percentage towards the building costs. However, the payments are staggered and paid in arrears as the work progresses. The building society’s best buy self-build loan is a tracker mortgage currently standing at 5.3% that comes with the option to remortgage to a more standard mortgage after three years.

Self-builders can save thousands of pounds in stamp duty costs as it is only payable on the cost of land over £125,000. In March 2010, 60% of plots cost under this threshold. Stamp duty is not payable on the value of the finished property and you can reclaim the VAT on the majority of goods and materials used, provided they were purchased from a VAT registered supplier and providing you claim within 3 months of the property’s completion.

The chairman of the National Self Build Association, Ted Stevens, said it’s perfectly feasible to construct a three bedroom property for about £150,000. Data from some sources suggests that self-build homes can be worth between 25% and 30% more than they cost to construct once they are completed.

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If you’ve got a bit of spare cash left after the festive season, you may want to consider ways of keeping the roof over your head and your stress level at a minimum.

Now could be a good time to sit down and stress-test your finances to make sure your contractor mortgage payments are secure even if interest rates rise. There are some things you might want to consider doing to make sure you don’t end up struggling to meet the monthly repayments.

For example, now could be a good time to either increase your monthly payment or make a one-off lump sum payment. The majority of lenders will let you pay off 10% of the outstanding balance without incurring a penalty charge. Both these methods will reduce the amount of time needed to pay off your mortgage and should give you improved equity if you decide to remortgage at a later date.

If you’re on a standard variable or tracker deal, it might be worth considering switching to a fixed rate mortgage. That way, at least you know exactly what your monthly repayments are when interest rates do rise.

It is also possible to buy insurance against rate rises. MarketGuard has a policy starting at £30 a month on a mortgage of £100,000 that will pay out if rates rise by over 1%. It’s only a 2 year plan so home owners need to weigh up whether rates will increase significantly over that period.

Anyone who is currently having difficulties meeting their mortgage repayments should get in touch with their lender. Mortgage lending companies might be able to offer short-term solutions such as extending the term of the loan or switching to an interest only deal.

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