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Still a long way to go on the road to mortgage recovery.

Byline: TREVORLAW

Recent housing market news from one mortgage lender has stated that UK house prices have registered their first annual rise since October 2010, rising by 1.3 per cent in January compared with a year earlier.

But it has also been highlighted that property prices were down 0.2 per cent on December.

It is fair to say the outlook for prices still remains unclear. It is thought the Bank of England funding for lending scheme was likely to have been a factor in a pick up of sales and prices.

The scheme operating since last August has been offering cheap funds to banks and building societies on condition they lend the funds to business and personal customers. It has been suggested that this increased the availability of mortgages especially to those able to provide a larger deposit.

That being said, for people who only have a 10 per cent deposit there are definitely better options now bringing a fresh change to the mortgage market than there were six months ago and I suspect this will improve over the next 12 months.

However, I feel that I must warn against too much optimism. Millions of people are still prevented from moving either because past house price falls have eroded the equity in their homes effectively locking them in to their current property or are unable to save sufficient monies typically asked by most lenders or they are first time buyers.

Then of course we still have Britain's ticking time bomb of interest only mortgages which could lead to hundreds of thousands of people in their fifties and sixties being forced to sell their homes because they are caught in a lending squeeze.

This is becoming a more common problem and those customers who are coming close to retirement age with an interest only mortgage may not be granted an extension to their home loan.

This is because lenders have changed their criteria for minimum equity needed for interest only mortgages whilst at the same time bringing down their maximum ages for lending.

For borrowers who took out an interest only mortgage backed by an endowment policy, many will see the natural mortgage term come to a natural end in the next 5 years only to find they may have a shortfall in the maturity value of the policy.

Figures from the Council of Mortgage Lenders show around 150,000 interest only mortgages are due to mature every year until 2020.

Some borrowers may have not considered how they will fund a shortfall with many choosing to bury their head in the sand and face the facts at a later date.

This is where the services provided by a mortgage broker are assisting clients who face this and other mortgage lender situations.

Their services are invaluable and they will look for the best mortgage for you. In 2008 there were approximately 34,000 mortgage brokers but today this number has dropped to 11,000.

So why would you use a mortgage broker? Firstly it is important to know that a broker is on your side and not the lenders!

The broker deals on a daily basis and know which lenders can best process and agree your application. They also know the background criteria that a lender has and can bring this experience to bear when advising you and processing an application.

A mortgage broker is qualified to give you advice and must be able to justify their recommendations.

Many call centre and branch based staff are not qualified to give advice and this seems to be the preferred route for many lenders.

A mortgage broker will also look at any related protection for your mortgage to ensure you are fully protected including life insurance, unemployment insurance and home insurance. In my opinion a fee payable to a mortgage broker is of good value.

Knowing what rate, term of mortgage, what lender to choose and features can all be complex matters.

Thorough knowledge and professionalism makes their advice well worth paying for.

Trevor Law is a director with Merito Financial Services, chartered financial planners, based in Solihull. E-mail: tilaw@meritofs.com
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Title Annotation:Business
Publication:The Birmingham Post (England)
Date:Feb 21, 2013
Words:691
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