Looking ahead as to what may happen in the housing market in 2011, the only thing I know is that whatever you read and whatever views people may have, nobody can predict the future with any great deal of certainty.  There are too many different things that can happen that will shape which way property prices will go this year.  Will tax rises reduce our ability to service mortgages?  Will lenders decide to make it easier or harder to obtain a mortgage this year?  Will the government step in to attempt to make housing more affordable for first time buyers.  Will interest rates rise?  Unless you can answer all of these questions and more, it is very hard to make any meaningful predictions about what will happen.

In an attempt to show us which way things are going to go, every month the change in the property price index is on the news.  I question the relevance of looking at property prices this often, because what does it really show us?  One month it may have gone up half a percent and then the next month it may have gone back down half a percent.  Both times this would be on the news and told with optimism or pessimism about future trends, whereas in reality over the 2 months, nothing has happened.  You wouldn’t sit and watch the FTSE100 all the time to see how it progresses throughout the day, because it’s the long term picture that matters, not the short term.  Despite this, the media will still talk about how property prices are on the way up one month, then on the way down the following month. 

Another reason to question the usefulness of such an index is that it shows average changes across the country.  What really matters is how prices are changing in the region you live in, which could be very different to the general picture across the country.

The housing market is always full of surprises and we can never be sure of what the future holds.  In my opinion, when it comes to your home, it is best to ignore all speculation about which way prices are going to move and do what’s right for you at all times.  A house is firstly your home, not an investment .  If you are unsure of the options you have, it is worth contacting an Independent Financial Adviser who specialises in mortgages to provide you with impartial advice on what is right for you.  Kieron Bassett Financial Services has two Independent Financial Advisers.  Contact us on (01524) 832057, via e-mail, info@kieronbassett.com, or log onto www.kieronbassett.com.

Jason Hinde CertPFS

24^th January 2010

It is not just the banks who are enforcing new rules, the FSA are in the process of assessing the UK’s entire mortgage lending system and trying to make sure that we don’t see times like we did in 2008 and 2009 reoccur.

A lot of these new rules do however make sense, and even though it is going to make things a lot more difficult for those who are not in strong positions, it can only be a good thing in the long run to ensure that we don’t overstretch.  One thing that is being examined closely is the maximum income multiples that are allowed to be lent.  Although at first it appears that the higher income multiple that can be used the better, perhaps this is the main reason why so many people struggle when things get hard.  At the moment, the very maximum mortgage we can obtain is based on five times what we earn, but imagine if it was ten times what we earn.  We couldn’t all be in bigger and better homes, instead the homes we are in would just cost us a lot more to buy.  Although we wouldn’t all commit ourselves to such a big mortgage, there would definitely be those who would.  So looking at it the other way round, if in the future we were all forced to borrow less, houses wouldn’t cost as much as they do now, and we wouldn’t need to commit so much of our monthly outgoings to our mortgage repayments.

For some of us, the changes that are happening in the mortgage market are painful, and perhaps it is wrong for the FSA to enforce so many new rules so quickly, but in the long term I believe it is the right thing to do.  This should mean a more stable market for future generations, although perhaps they should introduce these changes over a longer period so we don’t have to take the full impact all at once.

Kieron Bassett Financial Services have two independent financial advisors who can help guide you through the mortgage market and find a deal that meets your needs.  For no obligation, independent advice contact us on (01524) 832057, via e-mail, info@kieronbassett.com, or log onto www.kieronbassett.com.

Jason Hinde CertPFS

1^st November 2010

Paying rent to live somewhere is often described as ‘dead money’.  I personally think this is a term we need to get away from using, it only adds to the stigma people have about renting.  We don’t describe any other use of money in this way, such as holidays or expensive new clothes, yet once your holiday has ended or your clothes are worn out, we don’t look back and say it was dead money, because we appreciate what we had.  If you are enjoying living in a home, then surely that’s money well spent?

I rent the property I live in, and I think I get a good deal for what I pay (hopefully my landlord won’t be reading this and think that means it is ok to bump up my rent).  I don’t pay for the building to be insured, I get a free cooker which gets maintained, free maintenance of my boiler and electricity supply and some landlords will often give you assistance with decorating and general maintenance if you have lived in the same property for a long time.  You also get the added bonus that if you ever do need to move or upsize, you can do so without paying out thousands of pounds in mortgage costs and solicitors’ fees. 

Renting a property is almost always cheaper than buying one in the short term, and especially in the current mortgage market where you need to have a good credit score and at least a 10% deposit, there are not as many restrictions that can stop you living where you want.

On the other side, if you purchase a property, even though buying your own house may cost more money at outset, you should hopefully one day own it without a mortgage, meaning you don’t need to commit as much of your retirement funding to pay to put a roof over your head.  Over the long term you would hope to see a rise in property values that beat inflation too, giving you options such as downsizing or equity release to boost the money you have available for day to day living and luxury items.

Overall I would say that if you can afford to buy a property and live comfortably, it should be a good investment over the long term and is probably the option I would pick over renting if I could.  However, owning the home that you live in is not the most important aspect of the house, the most important thing is to make sure you are happy there.  If you are ready to start thinking about buying a house is it worth contacting an Independent Financial Adviser who specialises in mortgages to help you obtain the mortgage that is most suited to your needs and discuss the pros and cons of buying and renting.  Kieron Bassett Financial Services has two Independent Financial Advisers.  Contact us on (01524) 832057, via e-mail, info@kieronbassett.com, or log onto www.kieronbassett.com.

Jason Hinde CertPFS

6^th September 2010

Although all the above is excellent news, it can cause problems with regard to keeping a roof over your head.  The reason for this is that in the past, when unfortunately, people succumbed to disease much easier, the life policy attached to the mortgage was triggered and the debt was paid off.  But now as modern medicine is keeping people alive much longer and allowing many people to adopt a normal lifestyle after recuperation, financial problems could occur during this period due to a gap in their cover. 

Only 20% of people have critical illness cover that would help pay your mortgage off if you had a life threatening illness and therefore bridge the gap.  Unfortunately, the life cover that most people possess is ineffective in these circumstances.  So why do people not buy critical illness cover integrated with their life cover? The main reason for not buying this potentially valuable cover is because most consumers view it as expensive, followed by a nagging suspicion that it is very difficult to claim on the policy.  

Critical illness policies do tend to get proportionately more expensive as we get older as the risk of a critical illness rises much faster than a stand alone death claim, particularly as we reach our forties and fifties.  I believe the policies are competitively priced, but I accept that sometimes people’s budgets do not stretch far enough to cover the whole mortgage with a critical illness plan.  The good news is that the plans have become more flexible to allow you to for example to cover the whole mortgage if you die and in addition a portion of the loan if you are diagnosed with a critical illness.  So in short the plans can be flexible and tailored to suit your budget, and with many providers paying out in excess of 90% of all claims there should be little deterrent to taking out a policy.

Overall critical illness for many is a matter of priority.  For example in 2003 42% of people said they would cancel their satellite or cable TV subscription if they needed to save money.  Now this figure has fallen to 26%.  This statistic indicates to me that satellite and cable TV has been gradually moving from being a luxury to becoming a necessity in the household budget.  In theory critical illness should be more of a necessity than it was in 2003 as medical advances have made it a more relevant product, and should be central to the household budget.  So if people did turn off their satellite or cable TV which I still regard as a luxury, in most cases they would be able to buy a critical illness policy to cover the whole of their mortgage with the savings made.  It is just about what is important to you.

If you would like to review your protection needs you should consult an Independent Financial Adviser (IFA).  Kieron Bassett Financial Services are an Independent Financial Advisers and we are open six days a week.  Contact the office on (01524) 832057 or via e-mail info@kieronbassett.com to arrange an appointment.

Kieron Bassett CertPFS

23^rd August 2010

We don’t mind paying a few extra pounds each month so that we don’t have to eat cheap beans, yet some of us won’t pay a few extra pounds a month to ensure that our insurance policies are comprehensive and cover us for everything that we need.  There are lots of reasons why people compromise the quality of insurance for a few pounds.  Perhaps it is because it can be hard to tell sometimes which insurance policies are best, with most providers concentrating on telling you their prices, instead of what they actually cover you for.  Or maybe it is because when we spend all day searching the markets to try and save money, we feel compelled to switch our insurance providers so that we don’t feel like we have wasted a day.  Whatever the reason may be, I believe it is worthwhile making sure you take a closer look at the quality of what you are buying.

One type of cover in particular, I feel as though we should all spend more time looking at is critical illness cover.  Critical illness policies are often sold with life insurance policies and cover you for things like heart attacks, cancer, strokes.  Each company provides a list of the things that their insurance contracts cover, which can help you decide who has the best plan.  Some companies will cover you for say 10 critical illnesses, and another may cover you for 20.  So although you may have to pay a little bit more money, you can get a lot more for it. 

If you would like an independent opinion of the quality of insurance products, feel free to contact us, and we can provide you with information about the different insurance contracts available, using our own experiences and opinions as well as the opinions of other independent insurance ratings agencies.

If you would like to review your protection needs you should consult an Independent Financial Adviser (IFA).  Kieron Bassett Financial Services are an Independent Financial Advisers and we are open six days a week.  Contact the office on (01524) 832057 or via e-mail info@kieronbassett.com to arrange an appointment.

Jason Hinde CertPFS

9^th August 2010

Unfortunately although the tracker rates are cheap at present they do not offer long term security.  Many borrowers are budgeting fairly tightly at the moment and a sudden spike in rates could cause hardship for many, and for some who are presently balanced on a knife edge it could signal repossession.  We have witnessed the fall in base rates fall 5.5% to 0.5% in a little over a year and have now seen these rates remain at this level for the last 16 months.  However I think because we want to mentally protect ourselves, many of us are convinced that rates will remain low for some time and that when they do eventually rise rates will rise in small 0.25% increments.  This may well be the case, but with recent data showing that the economy has grown at a faster pace than we first thought over the last six months, and with inflation rising it is possible if this trend continues that rates will rise sooner rather than later.  Also in addition to this there is also the possibility that rates could also rise faster than we first thought, as they did come down very quickly and they have been held at historically low levels for a long time now.

Capped mortgages are in theory the ideal product in the environment we find ourselves in as these plans can be tracker rates, moving up and down like most mortgages.  But then a cap is placed on the mortgage rate to stop it rising past a certain point during the term of the deal.  Traditionally we have had a capped rate market but unfortunately during the credit crunch they had all but disappeared.  However as mentioned earlier they have made a comeback with two lenders offering long term capped rates The Stroud and Swindon and the Hanley Economic are offering tracker rates from as low as 3.09% with the rates being capped for at least five years at 5.99%.  These deals are unlikely to be around very long, but hopefully these mortgage deals may alert other lenders to offer the product of the moment for many.

Kieron Bassett Financial Services have two Independent Financial Advisors.  Contact us on (01524) 832057, via e-mail, info@kieronbassett.com, or log onto www.kieronbassett.com/cms.

Kieron Bassett CertPFS

26^th July 2010

Having a history of missed payments, CCJs or bankruptcy has always had an affect on obtaining credit, but now it is a lot more significant than ever.  Lenders may limit the maximum loan to value they will offer you, charge you a higher rate of interest, charge bigger fees, or you may find that you are not able to obtain a mortgage at all.

Even slight blips in your credit file can mean that you end up paying the same amount each month towards your mortgage for a property that costs £100,000 as you would have done for a property that cost £120,000.

One way of tackling problems before they happen, is to ensure you take steps to protect yourself.  Making sure you have an emergency fund is important to ensure you have a buffer for when things go wrong, like if your washer, dryer and boiler all break down at the same time.  Income protection cover and accident, sickness & redundancy cover can help replace your income if it should suddenly stop due to you being off work due to an accident, illness or if you’re made redundant.  Life cover can help protect your family from financial stress should the worst happen.

Making sure you keep your credit file clean is as much for your own benefit as it is for the benefit of any partner you have, or will have in the future.  Having a blemish against your credit file means that you and your partner will feel the affect, even if they have maintained their finances perfectly.

If you are having trouble keeping up with repayments, the worst thing that you can do is stick your head in the sand.  If you ask for help the minute you are feeling the strain, you are much more likely to come out of the other side unscathed.  Lenders appreciate it when you let them know that your struggling, and they should try and help you if they can.  If you have family or friends that might be willing to help you, don’t be afraid to ask them too, instead of waiting before it’s too late.

It’s not always easy to organise your finances, and there will almost certainly be points in everybody’s lives where they feel financial strain.  If you have had some problems in the past that has stopped you being able to obtain a mortgage from your bank, that doesn’t necessarily mean that all the lenders on the market will decline your application.  It is worth contacting an independent financial advisor to talk about that options you have.  Kieron Bassett Financial Services are an Independent Financial Advisers and we are open six days a week.  Contact the office on (01524) 832057 or via e-mail info@kieronbassett.com to arrange an appointment.

Although on the face of it this is good news for buy to let investors, there is a sting in the tail for standard rate tax payers as any gain is added to your income and you could end up paying 28% on most of your gain.  For example, if someone has taxable income of £25,000 per year and sells a second property for a £50,000 taxable profit, they will pay higher rate capital gains tax on any taxable income that takes them past £37,400 taxable income where higher rate tax starts.  Our example shows that even someone comfortably paying standard rate tax can be caught paying higher rate capital gains tax on £37,600 of their gain, if they sold this year.  Unfortunately, the new rates make it difficult to avoid the higher rate tax with houses involved, as opposed to shares where for example a £50,000 taxable gain could be spread over a number of years by selling just to the end of your standard rate entitlement each year.

However, if you prefer investing into houses rather than shares and want to avoid higher rate capital gains tax there are some measures you can take.  Firstly, you can buy lower priced properties, and then secondly turn them over more quickly to take advantage of the tax breaks.  Of course this strategy has to be weighed against the cost of buying and selling and finding other similar properties in the market.

With regard to holiday homes the news is better.  This government has reversed Alistair Darling’s decision to abolish tax breaks on them, and they have extended this perk to include properties in Europe.  Briefly, provided you have furnished lettings and you make them available for letting for 140 days a year and actually let them for 70 days on short lets, you can offset the costs of running and maintaining the property against income.  This can be a very valuable tax break for a higher rate tax payer who lets it out for 70 days only as it allows them to offset the loss against their higher rate tax bill.  With holiday homes there are also potential capital gains tax advantages.  For example, a holiday home owner can delay paying capital gains tax by selling their existing holiday home and investing the proceeds into another one.

Overall, although buy to let landlords appear to have got off relatively lightly in the Budget with the changes in capital gains tax most homeowners are worse off with regard to take home pay.  This squeeze when it bites I believe will overshadow the recovery of the housing marketing in this area, as many families are already hard pushed.  Although many may wish to move, I believe in the short term many will just hunker down and absorb the cuts in take home pay and the pay freezes that will filter through from the public sector in particular.  With all the changes happening and the possibility of interest rates rising I believe it could be worth having a financial health check with an Independent Financial Advisor in attempt to control outgoings as real incomes shrink for many.

During the world cup, each manager doesn’t put his best eleven men on the field every time, he will choose the players that give his team the best mix and the options he requires for each game his team plays.  Then when he’s deciding who to bring on from the bench, he needs to have the flexibility to change a game in his favour, should he need to look at the situation differently.  Because, like a football game, we don’t know what is going to happen during our mortgage term, it can be very useful to have options and flexibility which allow us to adapt to our ever changing needs.

There are many different features that a mortgage can have which can suit each of us.  Perhaps a mortgage would suit you which allows you to make overpayments of upto 10% or even unlimited over payments without having to incur penalties (and when the world cup is on, England more than anyone, hate the word penalties).  Often you will find that if you have made overpayments to your mortgage, your lender will allow you to make underpayments of the same amount, which could come in handy if you need some extra cash at Christmas or to take away for your holidays.

With variable rate mortgages available at much lower rates than fixed rate mortgages at the moment, a lot of people have opted to take out a variable rate mortgage, even though ideally they would like the security of having fixed payments.  You can get a mortgage which will allow you to benefit from the lower payments that variable rate mortgages offer, then when you feel that interest rates are going to start rising, have the facility to switch to a fixed rate.  The fixed rate you can switch to will be dependent on the interest rates that are available at that time, but if you want to be able to guarantee your payments but can’t quite bring yourself to pay the higher rates at the moment, this may be an option worth considering.  You will see a similar approach during the world cup, where teams will play to score goals, then when they feel the time is right bring on a defender to try and maintain the scoreline.

Even if you already have a mortgage in place, you may want to revisit the terms and conditions from time to time to see if there are any options that you can take advantage of.  When you took out your mortgage, you may not have found a use for the features that are available, but a few years down the line, you may be able to start utilising these features, just like a football manager will review his tactics from time to time.

Because we’re all individuals with individual needs, it is vitally important that you contact and Independent Financial Advisor (IFA) so that they can tailor a recommendation to suit you.  Kieron Bassett Financial Services are an Independent Financial Advisers and we are open six days a week.  Contact the office on (01524) 832057 or via e-mail info@kieronbassett.com to arrange an appointment.

Jason Hinde CertPFS

14^th June 2010

There is however, still a way that you can obtain a mortgage without having to save for a deposit at all.  As long as the mortgage lender will let you, you may be able to take out an unsecured personal loan to use as your deposit.  Then you would owe say 10% of the value of your home to the personal loan provider and 90% to the mortgage lender.  This will be a more expensive and more complex way of buying a house and great care should be taken when doing so.  These types of loans require specialist advise to ensure you don’t end up taking out a loan, only to find out you can’t get the mortgage you wanted anymore, then being stuck with thousands of pounds of debt.

Likewise, you may have nearly of got the 10% deposit you need, and have seen your dream home for sale, only to think your going to miss out.  Again, as long as your income is sufficient to support it, you may be able to bridge the gap with a personal loan.

The cost of buying a property in this way can be expensive and you should ensure that you feel that you will be able to meet the monthly repayments for both loans and that the mortgage lender and unsecured loan provider are happy that you can afford the repayments. 

Although this trick can be used to help those with no deposit, it could potentially benefit anybody who is looking to get a mortgage.  Say for instance you are looking to remortgage and you need a loan that is 82% of the value of your home, you could borrow the 2% using an unsecured loan, thus making you eligible for mortgage products which will lend upto a maximum of 80%.  It is worth checking whether or not this ‘trick’ could benefit you every time that you take out a new mortgage.  It is still vitally important that you make sure that the mortgage lender will allow you to do this first.

Getting the correct mix of secured loan and unsecured loan to ensure you have the best overall package can be a complicated area and you should contact an Independent Financial Adviser who specialises in mortgages to help you obtain the deal that is most suited to your needs.  Kieron Bassett Financial Services have two Independent Financial Advisers.  Contact us on (01524) 832057, via e-mail, info@kieronbassett.com, or log onto www.kieronbassett.com.

Jason Hinde CertPFS

17^th May 2010