moneynet in the press

IFAonline.co.uk – 30th May 2007

CONSOLIDATING DEBT IN MORTGAGE IS ‘EXPENSIVE MISTAKE’

The online firm says homeowners looking to transfer debts racked up on credit cards, bank loans and overdrafts to their mortgage risk getting sucked ever deeper into a debt quagmire.

Richard Brown, Moneynet chief executive, says: “Whilst including the consolidated debt in your mortgage can look attractive, in the long term it could prove to be a very expensive mistake”. Moneynet warns with further Bank of England base rate rises predicted – some commentators suggest climbs to as much as 8% - borrowers could be saddling themselves with a much bigger debt than they can manage.

Brown says monthly repayments of 300 on a personal loan of 15,000 over five years may seem expensive when compared to mortgage payments of 100 if consolidated into a 25-year mortgage. However, he says: “But the reality is that in the long run that will prove to be a more expensive choice. “When consolidated into a mortgage the original debt of 15,000 could spiral to over 33,000 when the interest is added. This compares very unfavourably with the total amount repayable on the personal loan of just over 17,500. “In other words, consolidating the debt into the mortgage means that you are likely to end up paying nearly twice as much.

Mortgage Strategy – 28th May 2007

ADVICE IS CRUCIAL AS DEBT SPIRALS

Most people don’t have a bigger single debt than a mortgage – thankfully. But wider consumer debt is driving the mortgage market’s prospects like never before. Brokers are keeping a wary eye on the reports flooding in about spiralling consumer debt as their role begins to encompass more debt management consultancy than pure mortgage advice.

But when it comes to a possible market collapse, Moneynet.co.uk says interest rates would need to rise to 10% before this happened. Moneynet says in 1987, the typical mortgage advanced by lenders was £25,000 on an average income of £12,272 (according to the Council of Mortgage Lenders). This works out as 2.1 x income. But the average borrower still paid 17.9% of their income on mortgage interest.

And 20 years later, it points out average borrowing has risen to £118,500, but average salaries are now £39,400 – an income multiple of 3.05. With interest rates still low by historical standards despite the recent rises, interest repayments only account for 15.6% of salary.

Back in 1989 with rates nudging 15%, the average borrower was having to allocate virtually a third of their salary to mortgage interest payments, says Richard Brown, chief executive of Moneynet.co.uk.

"This became too onerous for many people. But for the same conditions to prevail today, mortgage interest rates would need to approach 10% before borrowers started to see such a large proportion of their salaries going on mortgage interest, although factors such as other consumer debts and the rising cost of living will obviously play a part as well".

Birmingham Post (Main) – 12th May 2007

CALMING MESSAGE

Despite mortgage rate rises, homeowners have no need to panic – unless mortgages hit 10 per cent, says finance website www.Moneynet.co.uk.

Although the average loan stands at £118,500, says the website, borrowers' salaries average £39,400, which means a typical income multiple is a manageable 3.05.

With mortgage interest repayments still only accounting for 15.6 per cent of salary, homeowners should be able to absorb the pain of a few more rises in rates.

The News (Portsmouth) – 11th May 2007

Despite mortgage rate rises, homeowners have no need to panic – unless mortgages hit 10 per cent, says finance website www.Moneynet.co.uk.

Although the average loan stands at £118,500, says the website, borrowers’ salaries average £39,400, which means a typical income multiple is a manageable 3.05.

With mortgage interest repayments still only accounting for 15.6 per cent of salary, homeowners should be able to absorb the pain of a few more rises in rates.

Hartlepool Mail - 10th May 2007

'NO PRICE CRASH – THIS IS 2007 NOT 1987'

Mortgage rates may need to rise to 10 per cent before any serious threat of a property market collapse becomes a reality, according to a Moneynet.co.uk comparison of current market conditions with those of 20 years ago.

In 1987 a typical mortgage advanced by lenders was £25,000, on an average income of £12,272, working out to a multiple of 2.1 times income. Back then, the average borrower paid 17.9 per cent of income on mortgage interest.

Twenty years later average borrowing has risen to £118.500, while the borrowers salary has leapt to £39,400, meaning an income multiple of 3.05. But because of historically low interest rates, mortgage interest payments still only account for 15.6 per cent of salary.

IFAonline.co.uk – 9th May 2007

RATE RISE 'WILL HAMPER ECONOMY'

The expected interest rate rise tomorrow will hit borrowers and could create economic weakness, experts say. The Bank of England's rate setting committee is expected to increase the base rate of 0.25% to 5.5%. "But the Bank needs to beware of overkill," warns Simon Ward, chief economist as New Star Asset Management.

But mortgage borrowers would feel the most immediate effect of an increase, according to Richard Brown, chief executive of Moneynet.co.uk. He says "A further rate increase to 5.5 per cent is bound to slow the market, and the situation for first-time buyers is looking more precarious".

East Anglian Daily Times (Essex Edition) (Main) – 8th May 2007

ARE FIXED RATES THE SALVATION?

If the Bank of England signals another rise in interest rates on May 10 – the fourth since August – millions of borrowers will face a 22% rise in monthly mortgage repayments in nine months. Another rise is possible before rates peak in the current cycle.

With bank base rate (BBR) widely expected to rise from 5.25% to 5.50% fixed rate mortgages – sometimes for ten years or more – are increasingly seen as a safe port in the storm.

Despite mortgage rate rises, homeowners have no need to panic – unless mortgages hit 10%, says finance website www.Moneynet.co.uk.

Wales on Sunday – 6th May 2007

POUNDNOTES

DON’T PANIC: Despite mortgage rate rises, homeowners have no need to panic – unless mortgages hit 10%, says finance website www.Moneynet.co.uk.

Although the average loan stands at £118.500, says the website, borrowers salaries average £39,400 which means a typical income multiple is a manageable 3.05.

With Mortgage interest repayments still only accounting for 15.6% of salary, homeowners should be able to absorb the pain of a few more rises in rates.

Mortgage Solutions (web) - 4th May 2007

10% MORTGAGE RATE NEEDED TO SPARK COLLAPSE

"While the 20 year comparison figures paint a reasonably harmonious picture, it is when you look at 1989 – the year that the base rate leapt up to 14.875% - that the calamitous problems beset the market," said Moneynet.co.uk chief executive Richard Brown. "Back in 1989 with rates nudging 15%, the average borrower had to allocate virtually a third of their salary to mortgage interest payments and this became just too onerous for many people."