Have you seen your mortgage repayments rise?

Repayments for fixed-rate mortgages have increased by around £68 a month, it has been reported.

The Bank of England found that the 1.4 million households coming off such a mortgage deal in 2008 were subject to this 10 per cent increase.

And 80 per cent of people with mortgages think their homes have dropped in value over the past 12 months, the report by the Bank shows.

Do you need to remortgage in the next 6 months? Get a free quote and advice from a FSA authorised advisor

Meanwhile, 4 per cent of mortgages are now in negative equity, although this figure looks set to increase.

Available monthly income has declined by £100, according to 30 per cent of households questioned.

The report notes: "Around 40 per cent of mortgagors reported that they owed more than £90,000 and almost 15 per cent said they owed more than £150,000."

Furthermore, one per cent of those surveyed claim that they will consider a property remortgage in order to cope with bills and credit commitments.

In related news, uSwitch.com recently claimed that three million Brits on tracker mortgages could see themselves with an extra £260 a month because of the latest interest rate cut.

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More brokers assisting clients, says AMI

The Association of Mortgage Intermediaries has revealed that brokers unable to assist clients due to lenders offering better deals direct decreased from half to a third in September 2008.

AMI says this downward trend is set to continue. AMI director general, Chris Cummings says: “It is extremely positive that brokers are again getting access to the best products. Consumers wish to deal with mortgage intermediaries and record numbers have done so during the course of 2008.

“It must always be remembered that consumers want help and advice to find the most suitable mortgage for them – they put ‘service’ as the number one reason to use an intermediary, not ‘rate’.

“We welcomed the intervention of the government in the mortgage market. We now need to see a concerted effort from lenders to kickstart the market and ensure the slump we are currently in does not become worse.”

Although client approval is on the rise, the number of brokers who expect to see fewer lenders operating in the intermediary market over the next 3 months has gone up from a half to three quarters. Also, ‘Maximum LTV reached’ dominates the reasons for brokers being unable to assist both purchase and remortgage.

Also, more than a half of mortgage broker business is now dedicated to other services aside from mortgage and remortgage procreation.

Cummings adds: “There are clearly still real difficulties in the market and intermediary firms are looking at how they can weather the storm.”

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What good are colleges if we can't afford them?

My bills this month include payments to the colleges of my two older children.
Together, the amount due exceeds my husband's monthly take-home income.

Yet we fall into the "very, very lucky" category because both children have scholarships that cover most of their costs.

Honestly, I don't know how the average family does it.

No college student or parent could have been surprised by last week's report by the National Center for Public Policy and Higher Education, which gave 49 states flunking grades on college affordability. In Michigan, the report says that even after financial aid, the average poor or working-class family has to pay 48 percent of its income per year to cover costs at a four-year public college.

The problem has gotten substantially worse over the years. My senior-year tuition at Michigan State University in 1980-81 was about $1,500, or $3,400 in today's dollars when adjusted for inflation. This year's MSU juniors and seniors are paying about three times that amount, more than $10,000.

For families without college nest eggs, the options are grim. Kids take out a crushing amount in loans, or parents remortgage their homes or empty their savings accounts, or kids work more than they really should or simply drop out, overwhelmed by spiraling bills.

At the same time, there's a constant drumbeat about the importance of a college degree in today's job market. Yet there's no guarantee that a degree will result in sufficient income to cover student-loan obligations.

Talk about your lose-lose dilemma.

It's true that college graduates have, on average, substantially higher lifetime earnings than nongraduates. It's also true that America has the best university system in the world. The United States has 14 of the world's top 20 colleges, according to a recent ranking by U.S. News and World Report. (No. 18 on the list was the University of Michigan.)

But American colleges also tend to have, by far, the highest price tags. Tuition at Cambridge University, which is Great Britain's equivalent of Yale or Harvard, is about $5,000 this year. In many European nations, college is free or tuition is minimal because of government subsidies.

Is it any surprise that Americans are falling behind in college attendance rates?
President-elect Barack Obama has made investing in education one of his top priorities. That's welcome news if he delivers. It's not good enough to have the best universities in the world if most people can't afford to go.

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Repossessions bringing down remortgage valuations

Homeowners looking for remortgages are suffering lower valuations due to increased numbers of repossessions and forced sales.

Energy Reports and Surveys (ERS), the valuation part of conveyancing company LMS, explained to the Independent newspaper that valuers have to take several considerations into account, including the recent selling prices of three comparable properties.

ERS managing director Paul Staley said that since the open market has stalled, forced sales and repossessed homes are being used to calculate averages.

As they are selling for as much as 50 per cent below their peak values, open market homes are suffering falls in valuations by as much as 30 per cent.

Friends Provident head of protection Mark Jones has also noted that people seeking remortgages may suffer from fewer available deals and stricter lending criteria.

Writing on ifaonline.co.uk, Mr Jones also said that people with faulty credit records and smaller deposits would find the situation particularly problematic.

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Why It's Vital To Overpay Your Mortgage Now

Why overpaying your mortgage now could lead to a better deal next time you remortgage.

With the Bank of England base rate down to a tiny 2%, many of you on tracker and standard variable rate mortgages will now be enjoying lower monthly repayments.

If you’re smart -- and you can afford to -- you may already be following my Foolish friend, Rachel Robson’s advice. In her recent article: Make The Most Of The Base Rate Cut, Rachel tells us why it makes sense to continue to make the same monthly mortgage repayments, even if your interest rate has been cut. This means you can overpay your mortgage without actually spending any extra money every month.

Overpayments allow you to do two things: One, clear your mortgage early. And two, save heaps of interest to boot. In fact, you would be a fool not to!

On the other hand, fellow Fool writer, Cliff D’Arcy reckons if your mortgage repayments have been reduced following the recent base rate cuts, it could be even better to save the surplus in a high-interest savings account. As he explains in Save More Or Pay Off Your Mortgage, this could work out well if you can earn more interest on your savings (after tax) than you’re paying on your mortgage.

Why overpay?

Both ideas have their own merits, but overall I’m more convinced overpaying is the best solution right now. Here’s why:

We all know the dreaded credit crunch has played utter havoc with the mortgage market. A couple of years ago, a 10% deposit or equity stake in your home would have been more than sufficient to secure a decent mortgage deal.

But these days the most competitive home loans are reserved for borrowers with a whopping 40% to put down. That’s one reason why it’s so important to get your loan-to-value (LTV) -- which is your mortgage loan as a percentage of the value of your home -- as low as possible. And the quickest way to do that is to pay your mortgage down as quickly as you can by overpaying.

Take a look at the table below which shows how much mortgage interest rates differ depending on the borrower’s LTV:

Two-year fixed rate remortgage deals from the UK’s biggest mortgage lenders

Lender	Lowest Fixed Rate With 10%+ Equity (90% LTV)	Lowest Fixed Rate With 25%+ Equity (75% LTV)	Lowest Fixed Rate With 40%+ Equity (60% LTV)
Abbey	5.84% *	4.49%	4.29%
Barclays (Woolwich)	No deal available	4.99% **	4.39%
Halifax	6.44% *	4.79%	4.69%
HSBC	6.99%	5.79%	5.19%
Lloyds TSB/C&G	5.69%	4.59%	4.29%
Nationwide	6.68% *	5.78%	5.38%
Northern Rock	6.69% *	5.19%	4.79%***
RBS NatWest	6.64%	4.99%	4.99%
Average	6.42%	5.09%	4.75%

LTV = Loan to value. *Based on a maximum LTV of 85%. ** Based on a maximum LTV of 70%. *** Based on a maximum LTV of 65%.

The table compares the lowest rates on offer to remortgagers with equity stakes of 10%, 25% or 40%.

Borrowers with a 60% LTV -- in other words, those who have a 40% equity stake -- could pay an average rate of 4.75%. This is 0.34% lower than the deals available at 75% LTV, and a whopping 1.67% lower than the average rate on offer to borrowers with just 90% LTV.

Having a 60% LTV is a fantastic position for any borrower to be in. But a 61% LTV normally puts borrowers up into the next category, making interest rates more costly, even though the difference in equity is just 1%.

Falling house prices

When you next come to remortgage, you’ll put yourself in the best possible position for a competitive mortgage deal if you manage to get your LTV down. But the trouble is, as house prices continue to fall, reaching that all-important low LTV is becoming increasingly difficult.

According to research by Savills Estate Agents for The Sunday Times, even people who bought homes ten years ago could see the level of equity in their properties slump dramatically by 2010. These homeowners currently have 51% equity, but Savills reckons this could drop to just 25% (or a 75% LTV).

If Savills are right, when these borrowers next come to remortgage, the best deals -- like those shown in the table -- will no longer be in reach.

Indeed, brokers at The Fool’s Mortgage Service say the average LTV for borrowers who have remortgaged in the last three months is 51%. Right now these homeowners should be able to access the best mortgage deals, but it could be a very different story if house prices do indeed fall significantly by 2010.

So that’s why I think it’s really important to overpay your mortgage if you can. This will help you to combat collapsing house prices and reach a lower LTV.

Even if you haven’t just had the benefit of an interest rate cut, it still makes sense for all homeowners to overpay. After all -- credit crunch or not -- the sooner you become mortgage-free, the better!

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Remortgaging at a better rate?

Ever thought of remortgaging at a better rate?
Ever thought of releasing equity from your French home?

Validus Financial Services (part of the VEF Group) have some interesting news for you. Their phones lines have been buzzing over the past few days with clients anxious to take advantage of the new, low interest rates in France. Maybe its time you thought about it too!

Equity Release:
Maximum loan to value is 80%. All loans will be subject to a valuation of the property.
Rates are as as low as 4.7% (fixed for 3 or 20 years on repayment mortgages) or 5.25% for interest only.

The lender will need to know what the funds from the equity release will be used for. They prefer:

•Renovations
•Donations
•Renovations
•Inheritance taxes
•Repurchase of shares
•Financing of other projects (boats, other properties, planes etc..)
•Cross border investments

This form of mortgage is best suited to owners of second homes/holiday homes/buy to lets in France. France hasn’t yet ‘got its head around; equity release on principal residences.

Just think: as you will be receiving the loan in euros and can avoid any exchange loss by taking advantage of some of those bargain properties on offer in France at the moment.

Remortgages:
You can remortgage your existing property in France and you can even apply for a larger amount (for example to cover renovation costs), subject to status. 70-80% LTV is the maximum loan amount possible and interest rates are the same as the equity release mortgages.

Although there are usually notaire fees payable on securing a new mortgage on a property, in many cases, the charges can be absorbed into the loan itself.

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Plan remortgages 'well ahead of time'

Landlords looking to remortgage should get ready to do so after three to six months.

This is the advice of Kate Faulkner, managing director of Designs on Property.

Noting that mortgage costs increases are "pretty horrendous", she said that seeking a remortgage must be started "really early".

She also recommended that landlords obtain valuations of their properties as early as possible.

"You need to know how much more money you are going to have to give now rather than later on," she stated.

According to research carried out for Cheltenham & Gloucester, published in September, 32 per cent of people would opt to stay with their current mortgage lender with a higher rate than risk being rejected by another.

The survey, conducted by Tickbox and Opinion Matters, also revealed that 42 per cent of homeowners are concerned about the lack of choice within the mortgage market.

Recent figures form the Council of Mortgage Lenders have shown that while 41,000 home loans were approved in August, this dropped to 35,000 in September.

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Remortgaging warning issued by expert

Commercial mortgage and home mortgage customers looking for a new loan should move quickly in the current financial climate, new analysis has indicated.

According to independent property experts Designs on Property, recent increases in the cost of mortgages mean that customers should start looking for a new deal "really early".

The loans market has been affected recently by the credit crunch, which has led to a 50 per cent contraction in the market over the past year according to the Council of Mortgage Lenders (CML).

This increases the impetus behind mortgage holders taking the initiative, Kate Faulkner, managing director of Designs on Property, said.

"If you are going to remortgage you must get on to this really early," she commented.

"It's not something that you can do six weeks before you remortgage; it is something you need to be thinking about six or three months into… you [could] get a professional valuation of your property as soon as possible just in case you have to remortgage and you are asked for more money."

Figures from the CML show that, over the three months to September, there were 11.69 million outstanding mortgages in the UK.

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Remortgaging not a short-term venture, expert warns

This article was brought to you by Rentman the premium rent management software.

Landlords using property software should think about remortgaging sooner rather than later, an expert has warned.

Kate Faulkner, managing director of Designs on Property, commented that following the effects of the economic downturn on the residential lettings market and the wider economy, increases in mortgage costs have been "pretty horrendous".

However, property owners looking to remortgage must get on to the process long before their current deal ends, she suggested.

"It's not something that you can do six weeks before you remortgage, Ms Faulkner said.

The effect of recession on UK property prices and interest rate cuts from the Bank of England might lead to improved mortgage finance in the near future.

According to research by Tickbox and Opinion Matters fro Cheltenham & Gloucester, published in September, some 42 per cent of homeowners were concerned about the lack of choice available in the mortgage market.

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Five Advantages to Choosing a Remortgage

Remortgage Advantage 1: Reward for Credit History

Like most individuals or couples, you probably got your original mortgage earlier in your life. This means you did not have as long to rack up a decent credit history at the time you signed your contract.
However, you probably have built quite a nice credit report over time, especially if you have made all or almost all of your payments in full and on time.
Thus, as a reward for your good credit, why not check out a remortgage. You will be eligible for a lowered interest rate, as noted in the advantage listed directly below…

Remortgage Advantage 2: Lower Interest Rates

Yes, that is right… even if you have what you consider a decent interest rate on your mortgage, you may be able to beat that interest rate by a considerable amount with a remortgage.
Imagine taking out a remortgage in the same amount that you are paying now, but with lower monthly payments. That is like earning a raise overnight… and who would not want cheap land for sale Its the perfect way to find extra money without nosing around your sofa cushions and counting the change that has fallen there

Remortgage Advantage 3: Debt Consolidation Possibilities

Do you have a number of bills that you are obligated to pay each month. Are creditors starting to call on you at all times of the day and night. Do you feel crushed by the amount you owe companies and organizations.
If you are in this type of situation, a lender may be able to help you with a remortgage debt consolidation package. That way, you will be given the opportunity to pay only one bill each month instead of many.

Remortgage Advantage 4: Liquification of Equity

Depending upon the number of years that you have had your mortgage, you have no doubt built up a certain amount of equity i.e., the amount you have paid that has been put into your principle balance.
You can, in turn, take out a remortgage in an amount of MORE THAN your current mortgage, essentially temporarily getting back the equity in your home or property. This way, you can use the lump sum for emergencies cheap land for sale expenses and with lowered remortgage interest rates, you may still end up paying the same monthly repayment that you had been

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Homeowners use remortgages to maintain lifestyle

According to a study conducted by researchers at Durham University, the lifestyle and living standards of many homeowners depend upon remortgage cash from the increasing property values of the last decade or so.

They believe that if there were a freeze on releasing equity from the home, which in many cases is what is happening now that property values have started to fall, this will plunge thousands of homeowners into what they term a ‘welfare nightmare’.

Although many have used remortgage cash for luxuries such as a new car or to improve their home, many more have used it for necessities and they believe that by 2005, many were actually relying on this cash.

“The credit crunch is a welfare disaster for struggling households who have previously relied on the option to borrow up against the value of their home,” said Susan Smith, a housing expert at the university. “In the early years of this century we saw a form of self-administered welfare payment develop where homeowners cash in on their homes in boom times: to support children, smooth over a fall in income or meet the costs of relationship breakdown.”

Many cases like this will soon be in negative equity if they are not already. Although remortgaging for extras like a new car or home improvements can make financial sense as it is cheaper than taking out a personal loan, reputable mortgage advisors will have advised their clients that they should increase their mortgage payments to avoid paying for these items over a longer period and ultimately paying more for them. If clients are remortgaging to pay for lifestyle necessities, it is important to establish whether this is sustainable or a temporary move.

The study surveyed more than 8,000 customers across the UK from 2001 to 2005.

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Mortgage holiday

Mortgage re-payments

As two million people consider taking a mortgage payment holiday, a new report has a stark warning

Taking a mortgage holiday may not b the ideal answer for homeowners battling the credit crunch - it could push up monthly repayments by £54 million and total interest by £7.2 billion.

Louise Bond of price comparison website uSwitch.com said: "Mortgage payment holidays are a great facility for consumers that are looking to take a short break in order to get married, have a baby or generally chase their dreams.

"However, in this climate the facility should not be used by people that have been struggling to pay their mortgage or keep up with general living expenses for a long period of time.

"A holiday will not make the underlying financial issues disappear. In fact, both the repayments and the debt will actually go up after the holiday and, if anything, it could actually make the problem worse.

"These holidays are simply an agreed deferment but it is by no means a 'freebie' and the interest and the repayments still have to be made at some point.

"Just last month, two leading mortgage providers, Nationwide and Halifax, did the right thing and reviewed their policies on payment holidays. Halifax no longer offers this facility to those who have been made redundant and Nationwide is considering a new rule that will only allow consumers with at least 25% equity in their property to take a payment holiday.

"This is something every mortgage provider should now be addressing to ensure people do not end up in a worse financial situation after the holiday. With house prices expected to fall further in the next 12 months, this could just push homeowners over the edge into negative equity making it really difficult to remortgage."

Mortgage misery

Despite the Government's promise to defer interest payments on mortgages for up to two years, 729,054 people in fear of redundancy are taking matters into their own hands by considering or applying for a mortgage payment holiday

• Over one million (33%) people are thinking about or have already frozen mortgage payments to keep up with the cost of living - one in five (19%) to cover holiday costs
• A 12 month payment holiday on £150,000 will increase the total interest by more than £10,000 and monthly repayments will go up by £80 after the break

With house prices predicted to fall by up to 15% next year from an average of £158,442 to £134,675, the cost of a payment holiday could push consumers closer to negative equity

Payment holiday

Over 800,000 consumers (7%) have already taken a payment holiday, these people have seen their total interest increase by £2.8 billion and monthly repayments shoot up by £21 million

Following a 12 month holiday, a mortgage for £150,000 will increase by more than £10,000 and the monthly repayments will go up by £80 - this means that consumers with low levels of equity in their homes could find themselves struggling if they need to remortgage.

This may provide a quick fix for these consumers, but with banking experts predicting further house price falls of up to 15% in 2009, this will bring the average house price down from £158,442 to £134,675. For consumers that have anything less than 25% equity in their property, the costs incurred from the payment holiday coupled with falling property prices could push them into negative equity.

Historically, this facility has been used by consumers embarking on a life changing project such as a wedding, a new baby or an extended overseas trip. Unfortunately, today's financial climate is pushing three million more consumers down this road just to keep up with the cost of living (1,046,034) or to cover holiday costs (602,262). However, 1.4 million consumers think that the interest is frozen during this holiday and 6% think it's completely free so it's unlikely these people will fully understand the long term financial implications of this decision.

Every mortgage customer has to 'apply' for a payment holiday and most providers stipulate that the customer must have successfully paid the mortgage for a specific period of time. With some flexible mortgage customers already being asked to make a lump sum payment to their provider as the value of their property value has dropped below 90% of the mortgage amount, people could find themselves in hot water if they don't fully understand the financial implications of a payment holiday.

Four month holiday

Already, 7% (821,800) of mortgage holders have taken a payment holiday and 2% are in the process of applying. With the average holiday at around four months, these consumers have already seen their monthly repayments increase by £26 and their overall mortgage go up by £3,436. Collectively, these consumers will be paying £21 million more on their monthly repayments and their total interest will have gone up by £2.8 billion.

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Remortgage cash 'for necessities'

Most homeowners who remortgaged while house prices were going up did not blow the cash they raised but used it for the necessities of life, according to new research.

Housing expert Prof Susan Smith said the credit crunch will now affect similar families who will not be able to use any equity in their homes to raise finance.

The Durham University expert said remortgaging was more popular than previously thought, and acted as a safety net for struggling families, rather than a way of funding big holidays or a new car.

Researchers looked at the borrowing patterns of more than 8,000 households in the UK from 2001-2005 and found that in any one year, two in five homeowners ended up with higher mortgages than in the previous year, even though they had not moved home.

Instead they had remortgaged or extended their home loan and, on average, these households borrowed an additional £5,000 to £7,500 in a given year.

Some of them tapped into as much as three quarters of their home equity in this way, they found.

Prof Smith said: "The credit crunch is a welfare disaster for struggling households who have previously relied on the option to borrow up against the value of their home.

"In the early years of this century we saw a form of self-administered welfare payment develop where homeowners cash in on their homes, in boom times - to support children, smooth over a fall in income, or meet the costs of relationship breakdown."

She added: "This suggests that the credit crunch is not just precipitating a crisis in the finance community; it could produce a crisis of welfare too. Without the option to use mortgages to channel housing wealth into spending money, families under pressure lose access to their most significant asset base for welfare and are forced to look at other ways of getting by.

"The figures show that housing equity withdrawal has provided a lifeline for struggling families but the credit crunch threatens what has become a new form of self-administered welfare."

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Remortgaging now could avoid future mortgage debt

Press Release Summary: Financial solutions company Think Money have said that remortgaging in the near future could help homeowners to reduce their outgoings and avoid falling into mortgage arrears – an increasing problem for British households – and added that mortgage rates could become even lower if the Bank of England lower the base rate further, as predicted.

Press Release Body: Financial solutions company Think Money have advised existing homeowners that now is a good time to remortgage, following the recent Bank of England base rate cut to 2% that has prompted some mortgage lenders to act more competitively with regard to mortgage rates.

They added that there is a strong possibility that the base rate may be cut even further in the coming months – with economists predicting a base rate as low as 0% – meaning tracker mortgages may become a particularly attractive option to homeowners as interest rates fall further.

The Bank of England’s base rate cuts in October and November led to several lenders passing on the full cuts to their variable-rate mortgages. Combined with the September’s base rate cut of 0.5%, that represents savings of £255 per month (£3060 per year) on a typical £150,000 repayment mortgage.

Tracker mortgages, by default, benefited from the base rate cut – and should economists’ predictions of further base rate cuts be true, these homeowners should stand to benefit from even lower mortgage repayments.

A spokesperson for Think Money said: “Existing homeowners could potentially save a lot of money if they remortgage now – and they will be even more pleased to hear that interest rates may fall even further in the coming months.

“Two years ago, typical mortgage rates were around the 6% mark - now we are looking at closer to 4.5% or 5%. A 1.5% fall may not look like a lot on paper, but it represents substantial savings on monthly mortgage payments.

“However, it’s important to take into account the costs of remortgaging – the mortgage arrangement fee, for example – as well as the more limited availability of mortgages and the higher loan-to-value ratio required by a lot of lenders.”

The spokesperson added that while fixed-rate mortgages have seen no widespread interest rate cuts so far, further base rate cuts may encourage lenders to consider their rates.

“Since fixed-rate mortgages represent a long-term decision, lenders have been even more reluctant to commit to lower rates. Nobody can be certain that rates are going to continue to go down, especially when they are as low as they currently are. However, a base rate cut to 1% or 2% might convince more lenders to set more competitive fixed rates on their mortgages.”

Mortgage debt has become an increasing problem amongst homeowners in the midst of the economic crisis, with the Council of Mortgage Lenders estimating that around 45,000 homes will be repossessed in the UK this year, compared with 27,100 last year.

A debt expert for Think Money commented: “The rapid rise in costs of living over the past year has led to a lot of people trying to balance their financial commitments, and in some cases that leads to mortgage arrears.

“It’s especially an issue with people who were offered 100% and 125% mortgages, since their mortgage repayments are higher compared with homeowners who put down a deposit on similarly priced homes.

“The most important thing for homeowners to do if they find themselves falling behind on mortgage payments is to contact their mortgage lenders – it may be that they can come to an alternative agreement, or some kind of payment holiday, in order to allow them to get back on track.

“If the mortgage debt is more serious than that, it may be time to seek professional debt advice. There are a number of debt solutions, such as debt consolidation and debt management plans, that can reduce monthly outgoings – which could be crucial for homeowners who are struggling to meet their commitments.

“As with anything debt-related, if you are looking to do something about your mortgage arrears, it’s always wise to seek professional debt advice beforehand.”

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Homeowners remortgaging to help weather economic storm

Homeowners are carrying out remortgages in order to help fund themselves through the current economic situation, a new study has found.

Researchers at Durham University studied more than 8000 UK households from 2001 to 2005 in a study funded by the Economic and Social Research Council.

In any given year, two-fifths remortgaged or extended their mortgages, borrowing an average of £5000 to £75000 more.

They therefore made their mortgages higher than in the previous year but had not moved.

According to the university's findings, drawing on mortgage equity is "a much more popular and frequent event than previously thought", with households securing loans against their homes for essentials rather than luxuries.

Durham University housing expert Prof Susan Smith warned that a "crisis of welfare" could result.

Recently, the Independent reported a study by Energy Reports and Surveys (ERS) which showed that repossessions are bringing remortgage valuations down.

Paul Staley, managing director, explained that valuers need to consider recent selling prices of three comparable properties and that this now includes forced sales and repossessions.

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Woolwich and PMS launch remortgage exclusives

Premier Mortgage Service has launched four new remortgage exclusives for its directly authorised channel with Woolwich.

They are an extension of the Woolwich generic fixed and tracker hybrid products.

The products are fixed until 31.01.2010 at 3.99% or 4.49% and then track at 1.99% above Barclays Bank Base Rate which is currently 3% with either a free legal service or cashback option.

They are available at 60% and 70% LTV. All have an application fee of £995.

Funds are limited and need to be booked by calling PMS' broker desk.

Martin Reynolds, corporate manager at PMS, says: “We feel these deal are an excellent compliment to the Woolwich core range and we are delighted that they have chosen us as their exclusive DA partner for these products.

"As funds are limited and the products are attractive the intermediary needs to make sure they have booked the funds with our broker desk.”

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Britannia makes further cuts to fixed rate mortgages

Britannia has further reduced the cost of some of its fixed-rate mortgages with rates falling by up to 0.60% for borrowers requiring a loan-to-value (LTV) of 80% or less.

From Friday (5 December) the highlights of the Society's range will include:

five-year fixed-rate products with rates of 4.89% (to 60% LTV) and 5.09% (to 80% LTV); and

ten-year products offering rates of 5.29% (to 60% LTV) and 5.49% (to 80% LTV).

All of Britannia's fixed-rate products are fee free, with some options also offering a free standard valuation and free conveyancing for remortgage customers.

Tim Franklin, Managing Director of Member Business, said: "In addition to some great rates, with no upfront arrangement fees, we're also allowing borrowers to choose their rate now and reserve it for up to four months. So even if their existing deal doesn't run out until next year, they can still take advantage of our current mortgage deals."

Borrowers looking for more information about Britannia's mortgage range should visit britannia.co.uk

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You want a mortgage? Why have you come to a bank then?

We asked you, the readers, for details of mortgage applications that had been turned down as we now believe it is criteria and not rates that are strangling the market. So here are the best cases you have come up with, and yes we have included mutual lenders too.

Some of you have asked for your names to be witheld, so we will not publish any, although all were supplied.

Case 1

A wonderful example which fortunately has a happy ending as it should exchange this week was a married couple just about to have their first baby. Mr works for the area’s largest and most secure employer and his wife is on maternity leave. Mr has 3 x p60 all showing £50k salary and his latest payslip is indicating he will make £53,000 this year with a pay rise in January pushing next year even higher. He has a 15% deposit and applied directly to 2 lenders with good rates advertised online. After 2 weeks the first declined him as they had a gap showing on the VR which they were worried about and the second just messed about for another 2 weeks. All he wanted to borrow was 112K a dream case 1 year ago as AAA credit score and all cards are cleared monthly in full and no loans.

I fortunately managed to get it through in a week with Abbey but at 6.44% fixed for 3 years as that is all they have to offer which is disgusting as the rate drops to 4.79 is you have a 25% deposit.

Case 2

I'm a mortgage broker and I'm assisting my wife in buying her mothers home (after probate).

Wife earns in excess of £250,000.

She has a current mortgage in her name alone of £656,000.

She has a couple of loans and credits cards as every normal woman does however she maintains them very well and regularly pays off large sums.

We have applied for a mortgage with Northern Rock as a second home remortgage, they have told her that she has a LOW credit score and therefore can only lend about £20k Both Equifax and Experian have her as a HIGH credit score!!!! We asked for 65% of £115,000 and on the product we were asking for the mortgage payment would have been well below £350pcm.

I should point out that we tried to remortgage the current home with NR but it was declined for the same reason so I elevated it and they approved £500k but we required a minimum of £656,000 to repay the existing loan. I then elevated this to Director level and they approved a remortgage pound for pound. (£656,000)

She had initially asked for 85% of the value £1.1m as on her income regardless of out goings NR affordability calculator would allow for this. (we decided not to continue with them after this)

Her current Mortgage requires an IO payment of £3600 pcm however she is awaiting completion of her HSBC remortgage which will be BBR + 0.69% Lifetime tracker which takes her mortgage under £2,000....

As you can see, affordability is not an issue.....

It seems to me that NR specifically are looking for a reason NOT to lend.

Case 3

I've recently had an application turned down to remortgage a buy to let property for a client, because "there are too many properties in local authority ownership in the area". It was a 75% ltv with rental income coverage of 140%

When I enquired as to how many was too many, they couldn't put a figure on it. They would only say there were too many.

Case 4

Client with BMS has £400k interest only mortgage on property valued £1.36m, plus unsecured debt £36k, UK income approx £75k plus earnings from abroad. Wants to buy new property £230k needs £195k mortgage. Existing mortgage to be converted to self funding BTL with confirmed rental £3600 per month (rental is actually sufficient to cover both BTL and new mortgage). According to BMS he cannot afford the new mortgage! When asked why not, as his mortgage will be 50% of what it is now - all I got was "because he can''t", no calculations or reasoning!. So presumably on that basis BMS will be starting repossession proceedings because if he can''t afford a £195k mortgage he won''t be able to keep paying their existing £400k mortgage!!! Oh well...next lender please....

Case 5

A couple of weeks ago I had the following mortgage case declined by Nationwide - Property value £210,000 - Loan Required £130,000 (62% LTV) - First income £33,000 - Second income £12,500 (Company pension & Incapacity benefit) - Credit histories clear - Loan included £25,000 capital raising to clear credit cards.

Declined "in case they take on more credit cards when we have issued the loan".

Case placed elsewhere with ease!

Case 6

I recently applied for a 70% BTL Mortgage with Bank Of Scotland, for a purchase of a flat valued at 110k, i have my existing main reidence mortgage with them at 520k, and 5 buy to let mortgages with them already, in total around 1 million pounds of borrowing with them, i also own 19 other buy to let flats, and one commercial unit, no missed payments on any of my mortgages.

i was declined, something was mentioned about multiple searches however all the searches were done by BOS, My broker pointed this out to them that this was the case, and was told we know but rules are rules, i make my living from my portfoilio and regard myself as a professional property investor, if they wont lend to me they wont lend to anyone, bottom line is the banks are simply not lending money any more to any one full stop.

My broker run another aplication with the mortgage works at 65% again declined, until this is sorted out values will continue to tumble and repossesions will grow, which they will dump for even less and spiral downwards out of control, the lenders are puting the noose around there own necks, which will be there own down fall, as jobs will go, all caused by there reluctance to lend, even to proffesional property investors.

Case 7

House values £1.2M

Re-mortgage £960K (80% LTV)

City lawyer earning £400K average. This year £400K in first six months.

Answer: No lender interest as LTV too high!!

My comment is that for any mortgages today you need 40% deposit/equity for best rates, and anything over 75% the rates and fees are untenable!

As for B2L re-mortgages........forget above 75% LTV!

Case 8

Scottish Widows bank have just rejected an application as follows:

House value £750k, remortgage on offset required £279k, Clean credit history. Latest net profit c £200k (provable), offsetting the whole £279k but occupation property manager/consultant and they 'won't touch anyone with anything to do with property as very risk averse at the moment' . That decision was by an underwriter, not computer. I fear that when HBOS is tied to LloydsTSB, their lending will fall into line with Scot Wids bank and C and G which will certainly not free up the mortgage market.

Case 9 - This one may be more about overly cautious valuations, has anyone come across valuations where those providing them would appear to be making sure that they might not end up with egg on their faces at some point in the future? Do you think this is an issue too?

I have had 2 recent cases where valuation has stopped everything dead. Client 1 needed to raise £50000 to buy into a small business to keep it running. He tried to raise the funds by remortgaging his property, valued 4 months ago at £410000. (Not unusual in the area.) Valuer put the price at £325000, thereby making the extra money inaccessible. New business goes down the Swannee. Client 2 at the opposite end of the scale, has a 1-bed flat, valued for second charge purposes 3 months ago at £85000, now wants to remortgage instead to take advantage of the better rates. Valuer puts the property at £65000, which also kills the deal. I do not understand why the lenders are downvaluing what are their only assets to such a ludicrous extent, unless it is the CEOs of the lenders making sure that they will get their performance bonuses next year, because none of us will, that's for sure!! Time to get tough with these sharks Mr Brown, and not just talking tough, but action or else tough!

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Royal Bank of Scotland Cuts Fixed Mortgage Rates

Royal Bank of Scotland (RBS) Intermediary Partners has announced reductions on its interest rate on its select two-year fixed rate mortgage deals.

If you have 25 percent deposit or 75 percent Loan to Value (LTV), First Active have reduced their online only product 2-year fixed from 5.55 percent to 5.20 percent with a £999 arrangement fee until January 31, 2011. The long term rate is 4.29 percent.

RBS Intermediary Partners said for a standard residential remortgage it will not charge a valuation fee or basic legal costs. RBS IP also added that the lender would accept up to 10 percent overpayments of the original balance per year, during the initial deal period.

If you have a larger deposit of 40 percent, you could take advantage of the reduction in the RBS IP two-year fixed from 4.99 percent lowered to 4.89 percent, this mortgage product also holds a £999 arrangement fee until January 31 2011.

Source: mortgagestratergy

Looking to re-mortgage?

Many people are reluctant to consider the option of re-mortgaging given the current financial crisis, but it is something that everyone should keep in mind as there can be considerable savings to be made. Here are some thoughts when considering re-mortgaging:

1: Plan ahead – for those on a fixed term deal, keep in mind when your current package comes to an end and begin looking for alternatives a few months in advance. Securing a mortgage can be a lengthy process and making tracks in advance can be advantageous in making sure you get the right deal and at the right time.

2: Shop around for the right deal - The rise of comparison websites allows easy access to view a large number of varying types of mortgages and their specific terms and conditions. Remember that what looks like a very small percentage difference can amount to a very large monetary difference over the term of the loan – make sure all the information is given to you in plain and simple, and easy to understand, terms.

3: Once you find the right deal, make sure you secure it as the recent turmoil in the financial industry has seen lenders resort to withdrawing deals at very short notice.

4: Use any spare funds to reduce the level of your mortgage, this not only gives lenders the impression of willingness to reduce the debt but reduces the capital that the interest calculation and repayment is based upon. Overpayments can be a very good idea, especially with the mortgage interest rates as they currently stand. This can allow a buffer if difficulties are encountered when making repayments and can also drastically reduce the term of your mortgage.

5: Beware of standard variable rates – otherwise known as SVR – as these can be somewhat higher than a fixed rate offer from the same lender.

6: In the current economic climate it may be worthwhile investigating a tracker mortgage. Many believe that the Bank of England will continue to reduce rates in the coming months, and should this happen a tracker will allow your interest repayment rate to fall with the baseline. This can be very lucrative if played correctly.

7: Speak to brokers and take advice, as people in the industry can have a different angle on the information that you may have been given. Do not be afraid to ask many different sources for advice and make sure that they are suitably qualified orgainisations or individuals.

8: Take into account redemption fees, those which are payable on early completion or changing a mortgage. Different lenders have different fees, and sometimes these can be very high indeed. Be sure to check whether your new mortgage deal is not restricted by a high redemption fee or that you are tying yourself to a deal for longer than you wish.

Looking for a re-mortgage deal can be a sensible move and hope some of above basic points have helped. Seek expert advice whenever you are unsure as this is often free and carries no obligation.

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Who Owns Your Mortgage?

And this new help for the mortgage industry sent mortgage interest rates plummeting to around 5-percent, the lowest in years. But with more and more mortgage lenders struggling or folding ... Concerns around the country and in the stateline are growing about the safety of our mortgages? And who really owns them? You might be surprised.

"Transferring your mortgage from one company to another could be common place in the future."

And as the economic crisis continues....more and more mortgage companies continue to fold.... a new study says over 80 percent of the companies that service loans.. don't actually own them ... So who does? Local mortgage advisor Terry Bloom says chances are.... its not the company you send your check to.

"Especially now more than ever.. you get a mortgage... You refinance or purchase in some cases the servicing company you're with right now sells that loan to another servicing company."

But if your loan is sold.. the company you send your payments to... is legally required to notify you of the switch at least two weeks before your payment in due.... so you know your mortgage is safe.

"The company that is actually selling your mortgage is called a good bye letter.. the company who is taking over has to send you a hello letter .. basically who we are and these are our phone numbers...If you did send it to the wrong mortgage company by accident without noticing where it needed to go, they do offer a 60 day leeway for you to get that straightened out ."

Bloom says you shouldn't be worried if you're mortgage is sold because the terms... Rate... And agreement you have will not *change.

Bloom says the average stateline homeowner owes 140-thousand dollars on their homes. Mortgage giants Freddie Mac and Fannie Mae have announced they will suspend all foreclosures until after the holidays . And if you have any specific economy questions head to wifr-dot-com, and send them to us. We'll check in with some local experts and get back to you.

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Interest rate cut: Home in on the best mortgage deals

Michelle Pughe-Parry recently arranged a new home loan and reports on her experience – as well as offering 10 top tips to ease the process.

Homebuyers keen to benefit from this week's reduction in Bank of England base rates may have to remortgage to do so because not all lenders have cut costs immediately.

But shopping around for the cheapest home loan is not always straightforward because of exit penalties on some fixed-rate, fixed-term deals and hefty arrangement fees imposed on many of the cheapest loans.

These costs can seriously erode savings, as Sean Gardner, a director of the comparison website MoneyExpert.com, pointed out: "When some providers are charging arrangement fees approaching £1,500 borrowers need to consider the total cost of the mortgage and not just the short-term savings available."

When the initial mortgage deal on our two-bedroom flat in Putney, south-west London, came to an end in July we were reluctant to take on another fixed rate as interest rates seemed to be on the way down.

Our broker advised that we move on to our lender's standard variable rate and bide our time. At a whopping 7pc it resulted in an increase of several hundred pounds in our monthly repayment and took a huge chunk out of our disposable income. Still not tempted by any of the deals on offer, we decided to wait for the market to improve.

Then, after two months we could no longer bury our heads in the sand and decided to find a product that was flexible but capped our exposure to market volatility and still allowed us to benefit from further rate cuts. So a tracker seemed best for us. Unfortunately, several lenders then took their tracker products off the market.

Last month, we settled on a two-year tracker with Nationwide. It had a higher arrangement fee than some of the other products we looked at and has a floor, meaning it can't go below a certain rate regardless of how low the Bank of England rate goes, but it gives us the flexibility of being able to change or renegotiate in two years or switch to a fixed rate at any point without penalty.

Armed with some market savvy and the willingness to grab a good deal when you see one, there is no need for you to be floundering on your lender's standard variable rate, wallowing in wait-and-see sentiment. Here are 10 tips to find the best possible remortgage deal:

1. Leave plenty of time – but act quickly on a good deal when you see one

Melanie Bien, director of independent mortgage broker Savills Private Finance, said homeowners start shopping around for a new mortgage at least three months ahead of their existing mortgage deal ending to avoid a rush decision. Ms Bien noted that some lenders will let you reserve a rate up to six months before you need it.

"When you come to remortgage, if rates have risen you can take out your reserved rate, but if they have fallen you can simply opt for the best deal available at the time. There is no commitment to take out the reserved rate – all it will cost you is the valuation and possibly a booking fee, depending on the lender," she said.

2. Shop around, but don't forget to contact your existing lender

Mike Cullen, of MFS Independent Financial Advisers, said that while the internet has many uses, he did not know of a single public search engine that allowed enough filters to accurately tell anyone what product to apply for.

"If you want to know the cost of a five-year fixed mortgage, then you need to add up all the arrangement fees, legal costs, valuation fees and interest charged over five years and then the leaving fees such as sealing fees," he said.

Nathan Wallis, of Halifax Mortgages, advised homeowners to contact their existing lender first. "Some lenders, including Halifax, offer product transfers to existing customers which are part of their 'retention' product range," he said.

3. Speak to a broker

Ms Bien said it is important to search the whole market to find the right mortgage for your circumstances and an independent mortgage broker will be able to help you do this.

Ray Boulger, of John Charcol, suggests you ask your broker to confirm that they recommend mortgages from the whole market, not just from a panel. "If you don't feel your adviser is being totally honest with you or can't answer your questions to your satisfaction, then find another adviser."

4. Don't forget the loan to value

While interest rates are coming down, criteria remain tight and the best deals are still available to those with significant deposits of at least 25pc – or in other words loans to value (LTV) of less than 75pc.

Ms Bien said: "If you don't have this level of deposit or equity in your home but have savings sat in an account that you don't need for anything else, consider reducing the LTV to gain access to a wider range of cheaper rates."

Katie Moore, of Nationwide, said borrowers also need to look at how their interest is charged. "If the interest rate is the same, deals that have interest charged on a daily basis will be cheaper than those that charge on an annual basis. To compensate for this some lenders charge you a higher rate of interest on daily interest deals. Check how the interest is calculated when comparing it to similar products."

5. Valuation – get it done sooner rather than later

Mr Boulger said: "Mortgage valuers are cautious in this market. If you've had a valuation from an estate agent expect the mortgage valuation to be lower."

One reason for starting to look for a new mortgage at least six months in advance is that as property values are falling and getting the mortgage valuation done early may make the difference between being deemed to have enough equity in your property to qualify for a remortgage or missing out.

6. Track now, fix later – but read the small print

Ms Bien said: "Consider a tracker but watch out for potential problems –- such as floors limiting how rates will go – in the small print."

She added that with some economists predicting interest rates falling as low as 2pc, the only way to take advantage of this is a variable-rate deal. "If you do not need the security of a fixed rate then a tracker is a better option than a discounted variable rate as the latter is linked to the standard variable rate, which is set at their discretion. A tracker is more transparent."

Many lenders, including Halifax, are offering features such as "Rate Guard", which allows homeowners to switch from the trackers to fixed rates with no penalty. Nationwide provides borrowers with the option to "switch and fix" their mortgage. This enables customers to switch from their tracker product before the end of their deal to a fixed-rate product, should their circumstances change, or interest rates rise.

Mr Cullen said that when the Bank of England rate dropped by 0.5pc earlier this year, lenders had no choice but to withdraw a large number of tracker products because interbank lending rates were little changed.

7. Look after your credit history

Mr Boulger warned that lenders are becoming increasingly fussy about blemishes on your credit reference files, such as late payments on a mortgage or even a credit card. These can deter lenders from offering you the most attractive rates because you may be regarded as a high-risk borrower.

He said: "Make sure you have set up direct debits for the mortgage and to at least pay the minimum on any credit cards."

8. Make sure you're on the electoral roll

"One of the most common reasons for creditworthy people getting a lower than expected credit score is that they are not registered to vote anywhere," said Mr Boulger. You may not care which party runs the town hall or Parliament but it worries lenders if there is no record of your existence on the electoral roll.

9. Boost your credit score

Lenders are looking for dependable borrowers more keenly than ever, as they struggle to survive the credit crisis and avoid making bad loans. So, the longer you have lived at your current address, been with the same employer and had your bank account, the better your credit score will be.

Mr Boulger said: "Try not to change your employer just before you need to remortgage. If you have more than one current account, provide details on the mortgage application form of the one you have had the longest."

He added that borrowers usually got more points in their favour if they put a land-line telephone number rather than a mobile on their application form.

10. Overpay or save for a bigger deposit

Savings may increase the choice of mortgage deals available to you and you might qualify for a lower interest rate. Abbey is formally restoring the link between saving and borrowing but many other lenders now recognise savings as an indicator of a reliable borrower.

Similarly, if you can afford to overpay your existing mortgage before seeking a new deal this will increase your equity – the portion of your home you own in excess of any debts – and consequently improve the choice of loans available to you.

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Lower Mortgage Rates Are Not the Answer

On Tuesday, the government announced an $800 billion plan to stimulate the economy by buying $600 billion worth of mortgage-backed assets and $200 billion in consumer-debt securities. The intent is to make it easier for consumers to buy cars, pay for college tuition and get credit cards. Mortgage interest rates fell about a half-percentage point on the news. (See "Fed Aid Sets Off a Rush to Refinance")

Will the effort finally get the economy moving again? Frankly, I doubt it.

Lower mortgage rates can help people buy housing, but only if they feel secure enough in their jobs, and confident enough in their financial future to take the plunge. Given that consumers are drowning in debt -- especially housing debt -- fearful of layoffs, and waiting for housing prices to hit bottom, it's unlikely that they'll react to this initiative with a spending spree.

Consumers don't react to debt like companies, though the government is behaving like they do. Giving companies better access to credit allows them to meet payrolls while they adjust their production and expenses in response to tighter economic condition. But families who can't pay their bills can't lay off a spouse and kids. For them, debt grows from burdensome to monstrous as interest charges accumulate. Eventually, the load becomes overwhelming.

Testifying before the Senate on July 28, Harvard law professor Elizabeth Warren noted that the situation for the middle class has worsened during this decade. She explained that, adjusted for inflation, median household income fell $1,175 from 2000 to 2007, while expenses increased $4,655, pushed primarily by higher costs for mortgages, gas, health insurance and food, in that order. Families with children have borne an additional $3,180 in expenses for day care, after-school care and college tuition. To help cope with these rising costs, families turned to home equity lines of credit and refinancing -- effectively sucking the equity out of their homes -- as well as credit card debt. Nearly 44% of American households now carry a balance on their credit cards, she testified; to retire it, a family earning the median income of $48,201 would have to turn over every paycheck for nearly three months.

Foreclosure or bankruptcy will take a toll on a certain portion of these families, even though, as Ms. Warren points out in her book "The Two-Income Trap" (Basic Books: 2003), that's something most people desperately try to avoid. After studying 2,200 families that had filed for bankruptcy, she found that families that fail financially are most likely to be ones with children, who are struggling to buy and maintain homes in decent school districts, not flippers or status-seekers out to make a quick buck. For every family that officially declares bankruptcy, she writes, there are seven more whose debt loads suggest that they ought to file. But they don't, given the stigma that financial failure still holds in society.

Many Americans are so indebted that a job loss, illness or divorce inevitably pushes them over the financial precipice These days, I'm inundated with pleas for help from readers who were coping with their bills until they were blindsided by bad luck, like the Utah real estate agent who was hit with both diabetes and a falling home-sale market that destroyed her business, or the California man who got behind on mortgage payments after a heart attack, or the Massachusetts woman who lost a high-paying job and took on a lower-paying one that forces her to choose between going without food and heat and paying her mortgage. These readers aren't trying to game the system; they're trying to find ways to hold on to their homes, and failing that, their dignity.

While emergency relief measures and loan modifications may help the hardest cases, there's clearly not enough money in the federal budget to help everyone. Temporary stimulus measures like mortgage rate cuts and easier access to credit are limited, too, since they only work when people feel rich enough to buy something. Ultimately, it will take more permanent solutions, like the proposal recently unveiled by President-elect Barack Obama to boost job growth, to restore confidence enough to get the economy moving again.

In the meantime, expect some relief in the form of more affordable home prices, which continue to fall even with massive government intervention: In the third quarter, they declined a record 16.6% from a year earlier, according to the latest home price index by Standard & Poor's/Case-Shiller. As painful as this deflation is to those who are forced to sell, in the long run, lower home prices will help family budgets to come into balance, and personal debt levels to become more manageable. That will help the economy far more than trying to entice tapped-out consumers to buy bigger houses and more stuff.

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Borrowers get gift of lower mortgage rates

Mortgage rates plunged after the Federal Reserve announced that it would buy up to $500 billion of securitized home loans.

Rates on 30-year, fixed-rate, conforming mortgages fell well below 6 percent after the Fed announced Tuesday morning that it would buy up to a half-trillion dollars' worth of mortgage-backed securities over the next year to year-and-a-half. Bankers and brokers say rates will fall as far as 5.25 percent, at least for a while. Last week, the 30-year fixed averaged 6.33 percent in Bankrate's weekly survey.

The rate reduction is exactly what the Fed intended: "This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally," the central bank said in its announcement.

"It's pandemonium around here right now," says Bob Walters, chief economist for Quicken Loans. "This is going to have a major effect on refinancing opportunities and it should absolutely translate into increased home buying."

The Fed's action helps not only buyers, but also homeowners with adjustable-rate mortgages who want to refinance into fixed-rate loans.

The mortgage and real estate industries look upon the announcement as a gift from Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson.

Ryan Kennelly, a mortgage banker for Residential Mortgage Services Inc., of Bedford, N.H., says the Fed's action is huge for two reasons. "First, with lending institutions getting the much-needed support of the U.S. government, (lenders) will ease some of their most restrictive lending rules -- opening the door to more consumers to get loans," he says, adding that more qualified borrowers mean more home sales.

Second, Kennelly says, "This news also couldn't be better for current homeowners who want to stay in their homes but can no longer afford the payments due to their adjustable-rate mortgage increasing. By interest rates coming down, combined with lenders easing some of their qualification requirements, more and more homeowners in this situation will be able to refinance."

The Fed's decision to cut mortgage rates won't help people who can't refinance because they owe more than their houses are worth. And people who already are two or three months behind on their home loans probably won't get much out of it, either, says Dean Baker, economist for the Center for Economic and Policy Research, a Washington think tank.

Baker worries about lack of accountability or transparency: The Fed and the Treasury have not disclosed details about their purchases under the Troubled Asset Relief Program, setting a precedent for secrecy about the Fed's purchases of mortgage debt under the plan announced Tuesday.

"We don't know who they're going to be buying bonds from, or how much they'll pay -- or if they'll overpay," Baker says, adding that if the Fed pays a dollar for a security that's worth 20 cents, "that's the same as handing (the seller) 80 cents."

By buying mortgage-backed securities, the Fed will be taking direct action to reduce mortgage rates.

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Home shoppers rush in as mortgage rates fall

Telephones are ringing — and ringing — at mortgage brokers' offices around the country after this week's sharp drop in mortgage rates.

Average rates on 30-year fixed-rate mortgages fell to 5.97%, down from 6.33% the week before, according to Bankrate.com. Some brokers report rates as low as 5.25%.

Borrowers with a $200,000 loan, for example, would save about $63 a month if their interest rate dropped to 5.5% from 6%.

Credit the Federal Reserve's announcement this week that it will buy $500 billion in mortgage-backed securities held by Fannie Mae and Freddie Mac, helping the two mortgage-finance giants increase the pool of money available to banks and other lenders to make new mortgages.

"It is pretty remarkable stuff," says Bob Walters, the chief economist at Quicken Loans, where applications quadrupled Tuesday from Monday.

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"Some people might be trying to hold out for even lower rates," he says, "but in 30 or 40 years, we haven't seen them go much beneath these levels. They could, but you're betting against history."

Mortgage professionals used to 10 applications a day may have gotten 200 on Tuesday, says Brian Koss, a managing director of Mortgage Network in Danvers, Mass.

"This is really craziness," Koss says. "This news broke the logjam on interest rates that allowed rates to drop significantly."

Koss recommends that borrowers who find an attractive rate move fast to lock it in.

"If the number works, lock it, and lock it in for 60 days. Drop everything you are doing, get the mortgage professional all of the paperwork they need, so you don't run out of time," he says.

Other mortgage professionals say they're seeing an uptick in applications, but the rates should remain low so people can apply when they're ready.

"Any time you have action like that taking place in Washington," said Jim Sahnger, a mortgage broker with Palm Beach Financial Network, "it takes awhile to get to Main Street. As we're going into the holidays, people are more focused on buying turkeys than filling out a mortgage application."

But the customer surge comes to an industry decimated by business failures and job losses. There are fewer people to handle loans and less money to lend. Lending standards are higher, too.

"It's like someone saying, 'Hey there is free food around the corner!' You don't realize it is free food for 50 — not 500," Koss says.

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