First post :-(

JillJ72

Hello,

My first post here, first visit here too, afraid it's going to be a bit of a rant!

We moved house Nov08, and paid under market value as it was. We have a small loan we ported from our old house, and took a new loan for this house as well, fixed to Sept09.

The fixed rate on the small loan ran out in Nov08 and is now on SVR. Today I rang our lender to ask about refixing, and possibly pulling both loans together (small redemption fee to pay to do this). They told me the House Prices Index (HPI) indicates we've lost £20k off the value of our house, meaning our LTV which was 84% is now 95% and squeezing towards 100%. As a result they don't have any mortgages they can offer us.

I am very aware that locally a number of houses have been repossessed and have sold a fair way under market value. Would this skew the HPI and how could we challenge this?

We're now in the conundrum of being able to afford our mortgage but when interest rates start to rise again we will feel the pinch, and with house prices forecasted to drop further, I am really concerned about being left exposed to SVR and seeing the LTV reduce to nothing. I feel like we've been 'dropped'. Surely it's better to offer products to customers to retain them and their mortgage payments, than put them on SVR and see them default as rates rise, etc etc... I don't want to go there

We have no plans to move for the next 5-6 years minimum, yet I am now feeling rather :eek: about what may happen in the months to come.


Any advice? Will this situation improve? And how do you go about shifting your mortgage from one lender to another?

Many thanks,

J

beecher

If your LTV is 95% you wont be able to shift your mortgage to another lender. Work out how much you'd have to overpay to have your LTV come down to 90% - do you have enough savings to be able to pay off the difference? Try to overpay/save as much as you can in the hope that your LTV is brought down. Other htan that you'll just have to wait and see where you are in September.

JillJ72

Thanks for your thoughts.

This sounds like a hiding to nothing. House prices are dropping, the LTV will squeeze more quickly to 100% than it will take us to tighten our budget to save back to 90%.

So basically we are stuck at the mercy of our lender's interest rates, unless the situation improves and stabilises?

I can see a lot of people struggling in 2009, not that they aren't already. Anyone for a lottery ticket?

JillJ72

OK, if house prices don't fall any further, we need to find min £10k. I should've asked for a magic wand at Christmas :-)

Joe_Bloggs

@Jill72
You do not mention your lender. You do not mention the SVR you face.
The Loan to value issue will not be helped by lumping other debt on to the mortgage.
If you can afford the mortgage then perhaps put some money by for the times when you may not be in the position to afford the mortgage. Look at you finances in a calm and objective manner. Don't lose sleep but resolve to take more control over time.
Get rid of debt at the highest interest rate if possible.
Discover what you can do, take note of Martins advice.
J_B.

JillJ72

Hi there,

Lender is Abbey, SVR is now 4.sthg% as it came down yesterday, awaiting a letter in the post.
We will be going through our finances with a very fine toothcomb and reining in where possible.
Our debt exposure is minimal - small vol outstanding on a credit card, car loan finishes in Feb, so we will have a cushion when interest rates start to climb again.
It's the annoyance that there are no mortgage products available because our house value is going south; I'd read about this happening to others and was a bit aghast it has now happened to us.
But I take comfort in knowing it's a national thing, and will indeed be perusing MSE for advice/info, etc.

Can the HPI be challenged? How are the results formulated?

Thanks x

jill2002

Hi,

Just checking that you have your facts right.

You moved in Nov 08 - and your existing deal ran out in Nov 08 ??

You took the new loan on a fixed rate till Sept 09 ??? Abbey haven't been doing any 1 year fixed rates - are you sure these dates are correct ?

The SVR is currently 4.94% (and may reduce again after this week's cut) which is lower than you will get on a new fixed rate deal at the moment. Why don't you do as suggested - accept the SVR rate is low at the moment and save an amount into a savings account so that IF the rate rises, you have savings there to 'top-up' your shortfall when they rise again.

It is unlikely that challenging the HPI valuation would change as your 'under-value' sale is one of the ones that has caused the values in the area to fall and if others have been sold 'under value' then this is obviously the norm and is now classed as the 'current value' so the HPI will take this into account and a challenged valuation will see all the low values and affect yours.

By the way - to get a new deal from Abbey you will need a LTV of 85% or less not 90% as stated.

JillJ72

I didn't make myself clear in the original post, and made a typo. We moved in Nov07. We had a small loan that we ported from a previous property, and took out a new new bigger loan on the new property. The first loan was 5 years fixed that expired Nov08 (so ran 2003-8), the bigger loan is 2 years fixed 2007-9.

The price we paid for our house was under what it could have been, but still average for this area against other properties available. If we'd bought the house we were going to go for originally we'd be in a smaller space and in negative equity already! Over the past 9 months a number of houses in the local area have sold a good £30-£40k under the market average, they are repossessions (sadly) - does that affect the HPI? In real terms we've suffered a 12% drop in value. It's that we've seen our 16% deposit reduced to virtually nothing, and that our LTV is now >=95% that's a headache.

LTV of 85% with Abbey. There is no way we can get to that point; house prices will no doubt continue to fall for the foreseeable future, negative equity is the only way to go. And SVR will be a gamble come Sept09.

What do people think interest rates will do? Come down further, remain at a low rate for the year, or start to rise in the next few months? Will banks ease up on their lending criteria? Are you forever tied into the one lender if your LTV is >=95%?

Gorgeous_George

SVRs may stay low for a few years. This gives you time to plan for when/if they rise.

Your LTV will probably soon be greater than 100% i.e., negative equity. Only by saving or overpaying your mortgage will you be able to face the future from a position of strength.

But remember, it's all about balance. Don't forget to enjoy life otherwise it's pointless.

GG

JillJ72

I remember negative equity in the 90s, it's what helped my parents get on the ladder! I don't regret the price corrections now, it's been an overinflated market for a while, but we're new to the outright ownership game and it's a bit of a blow to find ourselves having to work a way through it. But... we are in a house that will grow with us, we're happy, healthy and together, we have a lot for which to be thankful. And a lot to learn!

Let's hope SVRs will stay lower rather than higher. Financial review is the next plan of attack, to see what we can squeeze and from where. Balance, moderation, compromise.