Which Financial Products Might be Affected by the PPI Scandal?

The PPI scandal has been going on for years now, yet it is still going strong. The first investigation that kicked things off began in 2005, and the mass repayment process has been going on since 2011. Yet still hundreds of millions are being paid out in compensation every month, and hundreds of new claims are coming through every day.

Many people are still unsure about the exact details of the scandal and whether they may be affected. Specifically, they aren’t sure whether they have taken out a product which may have been affected. As such, they are unsure how to begin looking into whether they have been mis sold PPI and are entitled to make a claim.

What is PPI?

PPI stands for payment protection insurance, and refers to a kind of insurance cover to give borrowers protection if their circumstances change. For example, if you were suddenly and involuntarily made redundant you would  be protected. In itself, PPI is not a bad thing. The problem is the widespread mis-selling on the part of banks and lenders.

How was PPI Missold?

Lenders used various mis-selling tactics. Sometimes, people were not made aware that they had a legal right to look for better PPI rates, and instead told they had to take the policy offered by the lenders themselves. Others were given more comprehensive (and more expensive) policies than they really needed, or policies they did not need at all and could never claim from. Still others had PPI added to their policy without even being told and never knew they were paying extra for it.

Which Products Does This Affect?

The PPI misspelling scandal has affected virtually any kind of credit. Among the most common knds of credit affected by PPI mis selling are mortgages, credit cards and personal loans. Those who have been mis sold PPI are eligible to reclaim fees and charges associated with the policy if it has been active within the last six years or, of course, if it is still active.

How to Find out if You Have Been Affected

If you have taken out any kind of credit which has been active in the past six years, look over your agreements to see if PPI has been attached. Not everybody who has been sold PPI is eligible to make a claim, as legitimately sold policies are not eligible. If you are unsure as to whether your policy might have been mis sold, you may want to seek advice.

Mortgage Applications get Tough Overhaul

With new rules due to take effect on Saturday 26th April as part of the Mortgage Market Review (MMR), mortgage applications will get tougher. Applicants will now face a series of lifestyle questions as part of an attempt to put together a complete and comprehensive picture of their ability to afford repayments.

Lenders will now be asking about an increased range of outgoings, even including things such as haircuts. Though the rules officially take effect on Saturday, some lenders have already integrated the necessary changes into their application process. This reform represents the biggest shake-up of mortgage rules in over ten years, but the Council of Mortgage lenders insists that the transition to the new system will be a smooth one.

The Financial Conduct Authority described the changes as a way to “hardwire common sense” into the way mortgage applications are handled. According to the FCA’s chief executive Martin Wheatley, “The core principle is a very sensible one – lend to people what they can afford to repay.”

It is hoped that the rules, which were drafted during the financial crisis, will protect consumers from reckless lending. Providing a mortgage without making sufficient affordability checks could lead to people being left unable to make repayments, and this overhaul of the application system is intended to make such situations less likely to arise.

Mr Wheatly said that “We’ve come out of a period, particularly in 2008-09, when there was no attempt to verify people’s ability to pay, and we’ve ended up with lots of payment problems.” He went on to suggest that “if we had a different interest rate environment we’d see a lot of foreclosures.”

Up to now, many mortgage eligibility checks have been simply based on household income without any look at expenditure. If people earned an income equivalent to a certain multiple of the repayment levels, they would be eligible. Now, outgoings will be taken into consideration and eligibility will be based on the amount of income that will actually be available for use in repaying the mortgage each month.

The Building Societies Association (BSA) insists that contrary to some concerns, the changes will not result in the housing market being closed off to people on lower incomes. The BSA’s head of mortgage policy Paul Broadhead said “It is highly unlikely that a single purchase or category of expenditure will make the difference between yes or no decisions.” However, many consumers and even mortgage brokers remain unconvinced.

The Mortgage Market Review was initially intended for implementation last Summer, but it was postponed after consultations with lenders resulted in the decision to make changes.

Useful Tips to Improve Your Credit Rating

A poor credit rating can harm your ability to take out loans and lead to you getting turned down for credit. If you find yourself repeatedly being turned down for credit, this can itself leave a black mark on your rating and make matters worse.

There are several reasons you might have a poor credit rating, but there are also things you can do to improve it. This can make it easier to get credit, and result in you getting better rates on credit cards, mortgages and other loans.

Look Into Your Credit History

A credit history can include not just your own records but those of a spouse or any person with whom you have had a joint loan. Sometimes, people are included by mistake because they live at the same address or even have done in the past. Getting hold of a copy of your credit report will help you make sure that all the information is accurate and there are no false black marks.

Take Out a New Credit Card

Take out a new credit card, even if it means accepting a very high interest rate. Use it regularly, but only for small amounts which you know you will be able to pay off without incurring any interest. This will help you build up a record of paying off debts promptly. It will take at least six months for you to see any effect on your credit rating, but after this it will have a noticeable positive impact.

Cancel Old Credit Cards

As well as taking out a new credit card, you should make sure you have cancelled any old ones. Many people frequently take out new credit card agreements but neglect to cancel old ones that they no longer use. From a lender’s point of view, it looks like you have taken out a large number of credit cards. This can make them think you have much more debt than you really do.

Make Sure You Vote

Or at least that you appear on the electoral role. If you do not appear on the electoral role, or if you have clearly failed to update your details after a change of address, this does not look good on your credit report. It is one factor that can lead lenders to decide you may be less trustworthy and perhaps worth avoiding altogether. All this can be avoided by simply registering to vote.

Can the Government’s Help to Buy Scheme Help You?

The government’s Help to Buy scheme has given a massive boost to the UK’s housing market. According to recently-revealed statistics, around 6,000 people used the scheme to apply for mortgages in its first three months alone. In November 2013, there were nearly 28,000 first time buyers – 28% higher than at the same time in 2012 – and a large part of this growth came from Help to Buy.

However, many people within the industry are saying that a lot of confusion remains about the nature of the scheme and the type of person it could help. So how could you decide whether it can benefit you?

How Does Help to Buy Work?

There are two ways the Help to Buy scheme can work, depending on your circumstances. Better-off buyers who can meet the rates of a mortgage offering a 95% loan can benefit from a mortgage guarantee option. However, the more popular choice is known as equity share.

Equity share is designed to help buyers with a 5% deposit reduce their monthly repayments, making the mortgage more affordable on an ongoing basis. This option is available on new builds only, and they must come from one of the 400 participating house builders around the country. The government will loan buyers a further 20% of the home’s value, allowing them to put down a 25% deposit. The government loan is repayable at any time or when the property is sold. It does not incur interest for the first five years, and does not affect property ownership.

Who can Access Help to Buy?

Help to buy provides access to mortgages with an effective deposit of 5%, yet much better rates than a straightforward mortgage where 95% of the property’s value is loaned. It is particularly aimed at first-time buyers who wish to purchase their first home and get onto the property ladder but have not yet saved up enough for a larger deposit.

While the scheme is largely aimed at first-time buyers, this is not a prerequisite. Those who already have a place on the property ladder but are looking to move into a new home with a small deposit are eligible. Everybody buying a home in England and Wales potentially has access to the scheme as long as the home’s value does not exceed £600,000. However, the government does understandably require that you are intending to use the property you buy as your main residence. The scheme is not an option for those looking into buy-to-let investments, and certainly not to those looking for a second home.

Tips for Finding the Right Mortgage

With so many mortgage products on the market, it can be very difficult to find the right one for you. The range of options can be confusing and make it difficult to compare different mortgages effectively. The problem can be a particularly big one for first-time buyers, for whom buying a property and finding a mortgage are completely new territories.

There are a number of things you can do to help yourself find the right mortgage, and ensure that you get the best deal possible.

Finding Mortgages

It’s not surprising that one of the best places to look for mortgages is the internet. It is easy to look for different providers online, and comparison sites can help you compare the essential details of many different mortgages at once.

However, the internet is not the only place to look for mortgage deals. For a start, it is worth talking to your bank and finding out what they can offer you. Even if you have already looked at their products online, sometimes banks can offer deals for existing customers that don’t appear in their standard offerings.

It may also be worth approaching a mortgage broker. If you are finding it very difficult to choose a mortgage, this could be the best option. A mortgage broker will help you find the best option for your circumstances, as well as providing helpful advice on the process.

Deposits

It is worth saving up for the largest deposit possible. The amount of deposit you are able to put down is one of the biggest factors affecting the rates you are able to get. If you do not have a very big deposit, it may be worth saving for a while longer as even a few percent can make a real difference to the deal you get.

Of course, there is a balance to be struck when it comes to how much deposit you should pay. So how much is too much? Of course, this depends in part on your finances. The very best deals usually require a deposit of 40% plus, but many people will not be able to put down this much at once. Generally, the more deposit you can put down the better if you are paying anything up to 25%. After that, you are close to the best rates and won’t get such a big advantage out of increasing.

Obviously you should not pour so much money into the deposit that you are left in a difficult situation afterwards. However, if scraping together a bit more will make a big difference to the deal you get, you may want to look for a mortgage that offers cashback upon completion. This can make a bigger deposit more manageable.

Your Loan or Mortgage and PPI

The PPI scam in UK has resulted as a direct consequence of the malpractices indulged in by the banks and the money lending institutions. It is the consumer’s right to know about the PPI basics before taking the policy. Failing to keep the customer informed about the conditions and terms has led to the widespread PPI fraud.

Many people are unaware about whether or not they ever had or currently still have a payment protection insurance (PPI) policy.  This is because it was mostly clubbed together with the loan or mortgage that they had taken. The payment for the policy was linked with the loan payments and most customers had been making the payments without knowing about it.

If you want to verify about having ever taken a PPI policy, you need to check any records or paperwork you have from when you first took out your mortgage or loan.  If you can find no evidence of PPI, this does still not mean that you never had it.  You are within your rights to approach your lending company/bank and enquire.

If you have been mis-sold with any PPI policy, you can make PPI claims directly to the concerned policy provider. A complaint can be done by filling in a complaint form. There are templates available online that can be customized according to your particular requirements. You can fill the form directly or print out the form and enter the necessary details. The filled in form with the required copy of documents should be sent to the bank or money lending company which you had taken the policy from.

The claims are usually seen within eight weeks but if this is delayed further or the money lender refuses to accept your claim, you can get PPI help by taking your complaint to the Financial Ombudsman Service.

There are PPI claim agencies which also offer assistance to resolve PPI claims swiftly and efficiently – a good option for those who are uncertain about their PPI status and documents/paperwork as the PPI claim company can look into the whole matter for you.  They usually work on a no win no fee basis so you have nothing to lose by trying to see if you are owed any money back from your loan/mortgage lender.

Are 5% Deposit Mortgages Worthwhile?

5% deposit mortgages have been something of a hot topic for first-time buyers for a while. The return to prominence of low-deposit mortgages is often seen as a boon for those seeking a first step onto the property ladder. 95% loan-to-value mortages, requiring just a 5% deposit, are often assumed to be the best-value option for buyers on a budget, but “cheap” and “good value” don’t always mean the same thing. Even for those feeling the squeeze, it may be worth saving up a little longer.

Benefits of 5% Mortgages

Of course, 5% deposit mortgages, which include the government’s help to buy scheme, aren’t actually a bad thing, and they will certainly suit some people. Those on very tight budgets may have doubts about their ability to afford a larger deposit even if they do save up for longer. Similarly, those who are on tight timescales, either out of necessity or because they are keen to buy sooner rather than later, might find that it is worth sticking to a small deposit in order to seek a mortgage immediately.

In short, the 5% mortgages are very good at what they were designed to do. Specifically, they were designed to allow more first time buyers to enter the property market, and to open up home ownership to those who cannot afford more common deposit amounts. For people who find themselves in these situations, especially with the economy still in recovery, they are perfect.

Disadvantages of Small Deposits

Even some people who are on tight budgets, however, might want to hold out until they can give a larger deposit. Even pushing your deposit from 5% up to 10% can bring significant advantages.

For a start, mortgages that require a deposit of 10% are more common than those requiring 5%. Over the past year, the number of available mortgage products requiring a 10% deposit has risen, while the number requiring 5% has fallen by more than a quarter. The increased competition that comes from having such a wide choice of products is also a factor encouraging lenders to keep rates down on these loans.

5% mortgages also carry a higher risk factor than those where 90% or less of the property’s value is borrowed. For example, it can be difficult to remortgage onto a better deal once your initial term is up. The fact that more of your home’s value has been borrowed means that you may not have repaid a large enough percentage to qualify for better deals.

Lastly, approval rates are higher on mortgages with a deposit of 10% or more. This is partly because interest rates tend to be lower. Therefore, those on low incomes are more likely to be able to afford repayments with a 10% deposit than with 5%, making lenders feel more secure in offering the mortgage.

Approved Mortgages at Highest Levels Since 2009

The number of mortgage approvals is now at its highest level since 2009. This level has been achieved after a drastic increase in the approval figures.

Recent figures have shown that the number of mortgage approvals in September was 40% higher than at the same time last year, and 10% higher than just one month earlier. This brings them to heights unseen since December 2009.

However, the figures do remain significantly lower than they were before the derailment of the property boom. The total number of approvals in September was 42,990. This compares to 78,117 in December of 2006, which was the peak of the property boom. The boom came to an end the following year. These figures also put them at less than 80% of the average for the total period between 1997-2013. This means that approval rates still need to increase considerably before they can be considered impressive when considered in the context of previous years.

In spite of this development, many prospective first time buyers are now deciding that home ownership is an unrealistic goal. Many are instead choosing to spend the money on holidays, cars, and other methods of treating themselves.

A recent study by L&Q Housing Association has revealed some results which, considering the surge in mortgage approvals, are perhaps surprising. The study looked at more than 2000 people under the age of 35, and revealed that half of them no longer expected to ever own their own home. A third of those studied had instead decided to spend the money they would otherwise have saved for a home on luxuries and on expensive treats such as getaways and vehicles.

According to L&Q Housing Association’s Assistant Director of Sales, Lucy Chitty, “despite signs of recovery, many of the younger generation view the prospects of owning their own home as an unlikely dream.”

She went on to observe that, according to the findings of the study, “many people now see becoming a home owner as so unrealistic that they’ve decided to splash money on temporary luxuries or intangible things, further reducing their ability to buy property in the future.”

The fact that these findings have emerged in the midst of seemingly positive developments like the surge in approved mortgages casts doubt over the success of the government’s Help to Buy scheme. This scheme has come under criticism before, with many holding that it is increasing demand while  ignoring insufficient supply.

 

 

7 Tips To Help You Get A Mortgage

1. Prepare yourself to see a good independent mortgage broker – Have a look around to check what is available and what you can (and cannot) afford. After that, get all of your financial documents in place, which should include pay slips, bank statements and contracts of employment. Make sure you don’t procrastinate on this, or you might find yourself rummaging through draws and boxes in the unsociable hours of the night.

2. Develop a credit record – This is especially recommended by experts in the field. Be sure to check your credit record and make sure it’s clean. Remember that not being registered on the electoral roll could definitely hurt your chances of getting a home loan. When lenders search up on an applicant and discover they aren’t on the electoral register, their immediate reaction would be to wonder if they may be hiding something.

3. Talk to your parents – It can be quite difficult to save up for a deposit and if your parents can’t help with cold hard cash they may be able to utilise the equity in their home or even act as a guarantors. “Some lenders also offer deals where parents use their own savings to reduce the deposit required,” says an expert.

4. Use a credit card – Seeing no credit history can make lenders twitchy. This is why it is often best to use a credit card and repay in full each month so you can prove you can manage credit responsibility.

5. Never exceed your overdraft limit – Avoid going near your overdraft limit for your current account for at least three months if possible. This shows that you’re in control of your finances, which means no bounced cheques.

6. Get your paperwork in order – If you’re self-employed, you’ll most likely have a much more difficult time talking to the bank. It’s likely you’ll need to provide much more proof (in terms of paperwork) and answer even more questions. Usually, you’ll need to show that you’ve been gainfully self-employed for two to three years before a bank will even consider you.

7. Don’t get trigger happy and keep applying for mortgages – If you keep on applying for mortgages over a short space of time, these applications can negatively impact your credit rating. Anything that shows desperation on the side of the house buyer would definitely result in raised eyebrows in the lenders office.

Mortgage Approval Rates on the Rise

The number of mortgage applications which have been approved is on the rise. The Bank of England has stated that the figure is at its highest peak since December 2009. This suggests that the housing market may be recovering from previous downfalls.

In May this year 58,242 application were approved, a figure which went up by 3,888 in comparison to the previous month. April 2013 had seen 54,354 home loans granted.

Although the number of home loans are increasing, the matter is somewhat different for businesses. The amount of money being lent to businesses is actually falling. A massive £1.3bn was the difference between April and May for business loans.  The governments Funding for Lending  Scheme was introduced in August 2012 to encourage banks and building societies to make more loans. Despite this however, business lending has dropped by 3.6%.

Although business lending may not suggest any recovery in that market, home loans have however indicated a more positive view. Mortgage approvals had increased by 24% in May compared to the previous year said the British Bankers Association (BBA). BBAs figures suggest however that business loans had fallen by £1.7bn in May.

“No real surprise that the mortgage approvals numbers were strong”, said economist Philip Shaw. They had been flagged from a firm report from the BBA a week or so ago. The Funding for Lending scheme is helping to increase mortgage availability and push down mortgage rates,” he then added.

The Bank of England’s statistics do show improvement in the demand for houses and flats however the situation is still not the same as it was 10 years ago. The number of mortgage applications is still half of what it was a decade ago. December 2003, saw 133,000 mortgage applications approved.

‘While the numbers continue to rise, they are still well below what they were at the peak of the market before the crisis,” said Mark Harris a mortgage broker.