People looking for a contractor mortgage may want to take advantage of the discounted fees being offered by some of the UK’s major mortgage lending institutions.

The Leeds Building Society now offers a three year 75% LTV fixed rate home loan at 3.04% and the booking fee is just £199.

HSBC is holding a New Year sale and has slashed fees on tracker mortgages. The bank is also offering trackers at 2.99% for people who can put down a 20% deposit.

Yorkshire and Clydesdale Bank have also chopped their fees to enable mortgage borrowers to save as much as £999 on a first time buyer home loan.

However, taking advantage of low fees is not always the best option. The Clydesdale/Yorkshire pair offer a two year 75% LTV fixed rate mortgage at 3.49% but despite Yorkshire Building Society charging a fee of £495, its 2.99% deal works out cheaper over the mortgage term.

Moneynet.co.uk’s Andrew Hagger points out that sales do not always offer the best value for money. However, HSBC’s offer is worth looking into because it cuts nearly £1,000 off its already market leading deals.

He went on to express his pleasure that the mortgage market is showing signs of activity so soon into the New Year, but warned consumers that a reduction in fees does not automatically make a mortgage a best buy. Consumers should always work out the full cost of the loan if they want to obtain the best deal.

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Nobody can have failed to notice that trouble has been brewing in the Eurozone recently. But what exactly does that mean for UK homeowners?

The Bank of England MPC set the base rate at 0.5% on the fifth of March 2009, and it has remained there ever since. Although savers have undoubtedly suffered, people taking out a contractor mortgage have had plenty of cheap deals to choose from.

However, mortgage lending rates have been edging up recently and they could increase at a faster rate if the eurozone crisis implodes.

In the last couple of weeks, ING and Nationwide have increased the rates on selected home loans. The Chelsea Building Society has also increased rates on some of its products. A two-year tracker mortgage with the Chelsea now has a rate of 1.89% above base – up from 1.69% above the BoE base rate.

Wholesale rates, the rates at which the banks borrow money, have increased because of the troubles in the Eurozone. And these are the rates that determine the cost of fixed rate and tracker mortgages.

Mortgage lenders are having to pay more to borrow money and its not surprising that they pass the increase on to their customers. So far the increases have been minimal, and plenty of cheap mortgages are still available.

But what will happen in the New Year? John Charcoal’s Ray Boulger is concerned that the Eurozone crisis will cause lenders to reduce lending. It will cost them more to borrow the funds, competition will decrease and rates on new mortgages will increase. Furthermore, if less funding is available, deposit requirements will increase once more and first time buyers will once again find it impossible to get a mortgage.

Add to that the government’s decision to remove the stamp duty holiday and 2012 could be end up being another year of misery for the housing market.

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Barclays Bank is coming to the aid of first time buyers by extending its contractor mortgage range to offer home loans to people with just 10% deposit.

Woolwich, the mortgage arm of Barclays, is offering a competitive three-year fixed rate deal at 4.99%. The mortgage does not attract a fee and competes with the 4.89% offered by the Chelsea Building Society, which does charge a fee of £195.

The bank has also launched a five-year fix with an interest rate of 5.49%. This deal does attract a fee of £499 and HSBC has a cheaper product at 4.89% without a fee. Borrowers taking out a £120,000 mortgage with the Woolwich would pay £736.19 a month compared to £693.84 with HSBC.

People will struggle to find a mortgage if they only have 5% to put down as a deposit. However, the Skipton Building Society does have a two-year 95% LTV mortgage at 5.99% plus a fee of £195.

Andrew Hagger from moneynet.co.uk said it’s great that the larger institutions have started competing for business from first time buyers again. The majority of would-be homeowners would have no problem meeting their monthly repayments, but they been held back by high deposit requirements.

Meanwhile, the crisis in the Eurozone is starting to have an effect on mortgage rates.

Over the past month, ING Direct, Northern Rock and Santander have increased the interest rates they charge on tracker mortgages for new customers. And although the Woolwich has come up with some good low deposit fixes, it has raised the cost of its trackers by up to 1.5%.

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Tracker mortgages started to become very popular after the Bank of England cut the base rate to 0.5% way back in March 2009.

But in recent months, contractor mortgage lenders have been coming up with a multitude of excellent fixed rate deals to rival the trackers. The Leeds Building Society for example launched a two year fix last week at 1.99% – the same rate as the cheapest tracker.

Experts have been quick to warn borrowers looking for the security that comes with a fixed rate product that these rates will not stay as low for much longer. In the past two months, the Libor rate has risen and as this determines the rate mortgage lending institutions can borrow at, lenders are bound to pass the increase on to consumers.

Wholesale rates will also be affected by the eurozone crisis because it is having an effect on the supply of money.

As always, the best fixed rate deals are only available to people who can put down at least 25% of the purchase price as a deposit. The new Leeds deal is no exception.

For first time buyers, Chelsea Building Society has a 4.09% two year fix for those with a 10% deposit. Fees of £1,495 also need to be taken into consideration with this deal.

Meanwhile, the amount of money we spend on non-discretionary items, like mortgage repayments, food, petrol and utilities, is predicted to eat up 67.3% of our household disposable income this year, according to Oriel Securities. The economists also pointed out that spending on essentials only ate up 56.6% of disposable income ten years ago.

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Contractor mortgage holders breathed a sigh of relief again last week as the Bank of England kept the base rate at its historic low of 0.5% for yet another month. However, the BoE will eventually have to raise interest rates and consumers could be in for a shock when that happens.

The National Institute of Economic and Social Research claims that a 0.5% increase in the base rate could cost mortgage holders an extra £516 per year. Households have seen their disposable income decline over the past couple of years so any interest rate rise could have a disastrous effect on household budgets.

People with variable rate and tracker mortgages would be the first to feel the effects of any increase. Fixed rate mortgage holders at least have the security of knowing how much they need to pay throughout the term of the loan.

Meanwhile, mortgage lending institutions in Scotland have to abide by a different set of rules than those in place in the other UK countries when it comes to repossessions.

The Scottish parliament recently decided that lenders must continue to serve a calling-up notice on mortgage defaulters before they can repossess a property. After a calling-up notice has been served, the lender must wait for two months before they can begin repossession proceedings in court.

Kennedy Foster from the CML, expressed his disappointment that the Scottish parliament has decided not to reverse this ruling despite the majority of respondents to a recent consultation supporting a reversal. The Scottish Law Commission will now review this area but that might not happen for a couple of years and in the meantime, both borrowers and lenders will face extensive delays and higher costs.

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In the past two years, the number of capped tracker mortgages has increased from one to 39, and many mortgage lending companies are starting to include these mortgages in their portfolio.

People looking for a contractor mortgage are now faced with a multitude of products to choose from. You can select from one of the many fixed rate deals, standard variable rates or hybrid home loans that combine the two.

Capped tracker mortgages follow the base rate set by the Bank of England for a fixed term, but the lender guarantees the maximum interest rate that will be charged on the mortgage.

First Direct has two three-year capped trackers on the market at the moment. Borrowers with a 25% deposit can get a tracker capped at 4.38% that follows the base rate + 2.58%, whilst those with a 35% deposit pay the base rate +2.18% and have a guarantee that their rate will not rise above 3.98%. There is an arrangement fee of £999 for both of these deals.

Woolwich, the mortgage arm of Barclays, is the only lender currently offering a five year capped tracker deal. It offers the base rate + 2.70% and comes with a cap of 5.99%, but is only available to people with at least 30% deposit and it attracts a fee of £999.

Now here’s the dilemma. If interest rates only rise by a couple of percent in the next three year, the guaranteed cap won’t have been necessary but you’ll have been paying a premium for the privilege of having it. And once the mortgage term comes to an end, you’ll have to find a new product in a much less competitive mortgage market. If only we knew what the Bank of England intended to do about interest rates…

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Recent research shows that contractor mortgage interest rates remained virtually the same last month although the rate on tracker deals did fall slightly.

The study conducted by moneyfacts.co.uk shows that the rate on tracker mortgages dropped from 3.79% in April 2010 to 3.47% last month. At the same time, two year fixed rate mortgages edged up by a mere 0.01% to 3.69% and five year fixes remained unchanged at 5.1%.

Some industry experts have predicted that the interest rate on fixed rate products will decrease in the next few weeks.

It also appears that some people could be locking their money away in fixed-rate bonds to fund their future mortgage lending. People who have adopted this approach can now obtain returns of 2.82%, the highest rate seen since September 2009.

Meanwhile, depressing figures from the Council of Mortgage Lenders show an increase in the number of mortgage repossessions in the first quarter of this year. The previous five quarters had seen a decrease in the amount of homes repossessed.

9,100 residential properties were repossessed in Q1, a 15% increase on the 7,900 recorded in the final quarter of 2010. However, this figure was still 10% down on the corresponding period last year and equalled the average quarterly number throughout 2010.

The director general of the CML, Michael Coogan, said that many households are likely to suffer financial hardship over the coming months. Mortgage lending companies have options available to help people through temporary problems but they will need to bear in mind the regulator’s concern that being too forbearing can be as bad as too little.

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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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Yet again the Bank of England MPC has kept the base rate at its historic low of 0.5%.This low rate has now been with us for two years and could remain with us for some months to come.

This latest decision, which will please people with contractor mortgages, comes after updated GDP figures showed that the economy contracted by 0.6% in the final quarter of last year.

Prior to the announcement, Lord Digby Jones, a former trade minister, said an interest rate rise would kill an already poorly performing housing market.

Homebuyers are already putting off buying a property in the belief that house prices will drop further. However, they may not be looking at the whole picture. Prices may well decrease but in the meantime, mortgage lenders have been increasing the cost of fixed rate mortgages in anticipation of an interest rate rise. The great deals that were available just a few weeks ago are no more.

People with standard variable rate and tracker mortgages have been happy with the low base rate. But eventually rates will rise and this could have serious implications for some homeowners. Some people obviously think it’s now a good time to remortgage and have been looking around for a fixed rate product to lower their risk.

A lot of economists believe that an interest rate rise is still several months away. Increasing the rate would make borrowing unaffordable for many and the UK cannot afford to let that happen at the moment.

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The largest mortgage lenders in the UK have 75% of the share of the market and yet provide only 29% of the best contractor mortgage deals, according to a new survey. The research investigated among others, HSBC, RBS, Santander, Halifax and NatWest.

Only 12% of the top 50 85% LTV two year fixed rate mortgages are on offer from the largest lenders. When it comes to two year tracker mortgages, the larger lenders come out better but they still offer less than 50% of the top 50 deals.

This data proves that biggest doesn’t necessarily mean best. The larger financial institutions appear to concentrate more on competitive deals for customers with deposits of at least 25%. It just goes to show that shopping around really can get you a better deal!

Meanwhile, Lloyds Banking Group has agreed to refund £500 million to around 300,000 mortgage customers who could have been confused about the interest rate charged on their mortgage.

The problem arose at the Halifax which is now part of the Lloyds Group. Customers were confused over the bank’s right to increase the margin on standard variable rate mortgages from 2% to 3% above base. Some customers will get a flat-rate reimbursement of £250 whilst others could get several thousand.

The Halifax agreed that its terms and conditions were not clear and some customers did not appreciate that the lender could vary the standard variable rate.

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Contractor mortgage hunters will be interested to learn that Halifax Intermediaries launched a range of new mortgage deals last Friday as well as cutting the rates on some of its two year fixed rate products.

The rate on a 60% LTV homebuyer two year fix has been slashed by 0.70% to 3.19%, whilst the rate on the 75% LTV equivalent product is now 3.59%, a 0.5% reduction. To avail of either of these products, you need to pay a fee of £999.

A number of remortgage products have also been reduced. A two year 60% LTV fix is now available at 3.39%, down 0.70% and a 75% LTV two year fix is 3.69%, a reduction of 0.5%. Again both of these products come with a £999 fee.

The mortgage lending company has also launched two new 60% tracker mortgages for homebuyers and people looking to remortgage. Rates start from 2.59% and attract a £999 fee. In addition, the fees on some existing trackers have been reduced by £500 to £999.

The head of sales at Halifax Intermediaries, Ian Wilson, said that brokers are now talking to clients looking to move away from standard variable rate mortgages and into fixed rate products. By reducing rates and launching new products, we ensure that we have competitive options available to these customers, he added.

Is it pure coincidence that these new deals are launched the day after the Bank of England’s MPC kept the base rate at its historic low or were Halifax adopting a wait and see attitude?

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Christopher Farrell thought he could become Alan Sugar’s next apprentice but instead he stands charged with four counts of mortgage fraud.

Farrell, who is 29, used to work as a mortgage and insurance adviser until August 2009 when he was fired. His next foray into the world of work was as a contestant on the UK hit TV show, The Apprentice.

Whilst working as an adviser he manipulated payslips and created fake documents to support mortgage applications for members of his family.

His solicitor explained that Farrell’s salary was just £1,600 per month but he earned commission if he made sales in excess of £5,000 a month. He had a wife and young family to support and in desperation he started inflating incomes so that mortgage applications would be successful and he would get his commission.

Meanwhile, it looks like house buyers are in for a difficult 2011 as the CML predicts that net mortgage lending will drop to just £6bn, its lowest level since 1980.

The CML has estimated net mortgage lending of £9bn for 2010, a far cry from the £110bn seen in 2006. If, as it predicts, 2011’s figure drops to £6bn, that represents a massive 33% decrease and is bound to cause concern among people looking for their first IT contractor mortgage.

Despite the low amount of money being advanced for home purchases, there are now 2,500 different products for house buyers to choose from, up from 1,600 at the start of this year.

Mortgage rates have also fallen this year with the average two year fixed rate mortgage finishing the year at 4.37%, down from 4.88% whilst two year tracker mortgages have dropped from 3.77% to 3.36% in the last 12 months.

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