The bearish case for property

Just in case you were beginning to feel positive about the UK housing market here's the counter argument from the Weekend FT.

Landlords hit by high cost mortgages

Yesterday I read an article in the Weekend FT confirming what we already know - mortgages for Buy to Let landlords have become extremely expensive. Not content with inflicting high interest rates, many of the BTL lenders that remain in the market (very few!) have imposed high arrangment fees, ranging from 2% of the loan amount to 3.5%. To put this into context, the arrangement fee for a mortgage of £200,000 could be as high as £4,000 - and this is before valuation and legal fees come into it! The odd lender who does charge a flat fee imposes a higher interest rate - clients just can't win.

Figures from the Council of Mortgage Lenders (CML) showed that new Buy to Let lending fell for the sixth consecutive quarter in the first six months of 2009. It accounted for 6% of all lending on the first first quarter, compared to 12% last year for the same period.

The high costs make it difficult for landlords to switch to a new mortgage deal and many are having to stay with their existing lender. This may lead to problems when interest rates rise.

Jacqueline Thornton CertPFS

How are your savings doing?

So you've worked hard for your money and you expect your savings to do the same. But are they? Many savings accounts are now paying less than 0.1 per cent or less, including those which claim to be "premier" or "reward". Even those accounts which require a notice period are not immune to these low rates - for example the Cater Allen Soverign 30 day account pays 0% interest. How do you make sure that your savings are earning the best rate of interest possible? The answer is simple - review what you have and if needed find a better alternative. Abbey 5% Home Saver account is a regular savings account paying 5% aimed at prospective first time homebuyers (although the accumulated cash can be used for any purpose). It does require ongoing monthly deposits of between £100-£300 per month. If even one month is missed the interest rate drops to 0.1% for that month, after which it reverts to 5%. This shows that there are good deals to be had, if only you shop around.

Jacqueline Thornton CertPFS

Source: Financial Times 17/18 May 2009