Find out all the costs involved

As with a new mortgage, there are many costs associated with remortgaging – so make sure you know exactly how much you are going to need.

Consider the mortgage arrangement fees associated with each deal. Many variable-rate mortgages come without an arrangement fee, but most fixed-rate mortgages do carry them. If you’re willing to pay an arrangement fee, a fixed rate is probably worthwhile, since it gives peace of mind over how much you will pay each month, and can usually be added to your mortgage payments. However, if interest rates go down, you may end up paying more than you would with a variable-rate mortgage.

You will also need to consider any ‘additional’ services offered with your mortgage, particularly PPI (Payment Protection Insurance). If you can afford to pay the extra each month, PPI is worth having – if something occurs that prevents you repaying your mortgage, the insurance should cover your costs, often for over a year. If it’s going to be a burden on your finances, though, it may be worth waiting until you are in a better position financially.

Make sure you’re safe if your payments go up

This doesn’t apply to fixed-rate mortgages, since the payments are the same each month – but there is a risk with variable-rate mortgages that if the interest rate rises, so will your mortgage payments. Make sure you have room in your finances for any unexpected rises, and expect your disposable income to take a hit if they do.

Some lenders offer a ‘cap’ on their variable rates, which could help you plan for the worst-case scenario (i.e. rates are as high as they can go).

Check for early repayment charges

If you are hoping to pay off your mortgage early, some lenders will ask for an ‘early repayment charge’ (also known as a ‘redemption penalty’. The idea behind this is that it makes up for what the lender would have gained in interest, had you continued with the mortgage as normal. However, these most commonly apply during fixed rate or discounted rate periods and many lenders offer deals which don’t include such charges.

Avoid mortgages with annual interest

Some mortgages work out their interest on an annual basis, meaning the amount of interest you pay every month is based on the money you owe at the start of each year.

Mortgages with daily interest charge you interest depending on how much you owe at any given time, so as you pay off more of the mortgage, the interest decreases with it. This might not make a huge difference at the time, but over the course of your whole mortgage, you will end up paying a lot less in interest – and the mortgage can technically be paid off years earlier.

Think Money (http://www.thinkmoney.com) are a financial solutions company based in Salford Quays, Manchester. The company specialises in a range of financial services, including remortgages, loans, debt help and advice (including debt management plans, IVAs, and debt consolidation).

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2. Borrowers face significantly higher mortgage costs, and when it comes to the crunch, lenders have withdrawn many of their cheaper fixed rate and discount credit deals.

3. Moneyfacts, the financial analyst reports that due to the credit crunch, an estimate of up to 90 mortgage deals a day are currently being withdrawn.

4. According to Axa, 8% of higher earners are considering ditching health or life insurance policies, while 1 in 5 plans to stop saving or reduce pension contributions this year.

5. Prudential found that the credit crunch was causing workers to cut back on pension contributions. The biggest pension provider in the UK said that a recent survey showed that people were halving the amount they were saving into pension plans.

6. Axa found that 15% of more more affluent households have been forced to raise extra cash by a spouse going to work or by the main breadwinner taking on extra work just to stay on top of the credit crunch.

7. A 30 year old paying 100 per month into a pension scheme who takes a five-year pension break could be 30,000 worse off at retirement, according to pension experts.

8. In the last year, the numbers taking out a mortgage to buy a home have plunged by a third. In February 2008, just 43,870 managed to get a mortgage, compared to 65,637 in the same month of 2007, according to the British Bankers’ Association.

9. According to research by MoneyExpert.com, 20% of people intend to cut back on spending this year by not going abroad this summer, while a further 16% will not holiday domestically either from credit crunch effects alone.

10. Research has showed that 26.3 million adults will reduce spending this year, with other big losers being food, clothes and entertainment spending, while 12% will put plans to but a new car on hold.

Solution: www.moneyme.co.uk

Source: Enterprise company publication Spring 2008

Credit crunch solution at http://www.moneyme.co.uk

http://www.moneyme.co.uk/credit_crunch_top_ten_facts.html

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The chief executive of HBOS (the UK’s leading mortgage lender) Andy Hornby says he thinks that things won’t change until the American housing market revovers, and this he thinks will be well into 2010.

He claims that until the American housing market shows a marked imrpovement, that American banks wouldn’t put their money into British banks, and it is this investment which is required for mortgage lending and personal lending. He also suggested that there isn’t much the UK governement could do in order to speed up this process.

“My personal view, for what it’s worth, is it will take 18 months to play through the system,” Hornby said yesterday. “It’s going to take at least that time before US house prices start to rise again, which is what’s required for banks to have the confidence to start lending again.”

Hornby added that there was “no doubt” that the UK would experience plummeting house prices, something that has not occurred since the 1990s.

But Hornby was not entirely pessimistic – he does not expect unemployment to reach the heights of that era.

However, in 2007 sales started to slow, and although prices didnt fall, the rate at which prices went up fell to a modest 5% per annum. We in the industry attributed this to a number of obvious factors:

1) The over buoyant market forcing prices up a little too quickly.

2) The fall in the value of the pound against the euro making property prices more expensive to Brits.

3) The fall in value of stocks and shares and the cancellation of many city bonuses leaving potential purchasers with less disposable income.

When the credit crunch started to really take hold in the UK at the end of 2007, the media jumped on the bandwagon and forecasted doom & gloom including (but not limited to) house price falls and a general tightening of belts throughout the country. Out in France, we assumed that the obvious knock on effect would be that the property market would start to stagnate, prices would start to fall, and 2008 would be a pretty lean year.

How wrong we were! Almost from the word go, 2008 has proved to be an excellent year for ski chalet sales, bucking all forecasts and pushing up property prices in the Northern French Alps. We are not back to the boom time of 2005 and 2006, but we certainly arent far off.

So why should this be? We think we can attribute this to a couple of simple facts. Investors are currently wary about putting their money into the stock markets or even into banks. So property seems like an obvious safer investment option. However, with the UK property in a spot of disarray, investing in the French property market, especially in an area where prices have carried on going up, is once again an attractive proposition.

This may be quite a simplistic view of what is happening, but for those people with chalets to sell, the Credit Crunch isnt such a bad thing…