January 06, 2006

Landlord trickery

My household received a rather unpleasant letter from our landlord yesterday informing us of our 'revised rent' after the lease expires at the end of March. To be fair, we live in a nice four-bedroom house in a pricey area of London, but it's kitted out very cheaply for the rental market - it's a great house with nice big rooms but everything from the toaster to the mattresses is poor quality.

Still, we like it, but at £2,300 for a four-bedroom, two bathroom house (for five people) our owners are earning a nice income for it. So we were a bit unhappy to get a letter telling us our rent was going up by £125 a month after the lease expires on March 31. That's a 5% increase - more than double the 2.3% rate of inflation. Not only that, despite having nearly three months left on the lease, we have to give them an answer about whether we are renewing it within ten days or pay a £45 administration fee.

Estate agents annoy me. When we moved into this house we had to pay around £120 each in fees for 'administration and credit checking', despite them simply printing off a standard lease, which had to be redone three times (because they got our names, address and rental amount wrong - what terrific administration!).

Let me know your solutions for tackling the rip-off tactics of landlords and estate agents by posting a comment below. No need for a URL.

- Sascha, This is Money

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January 04, 2006

Mortgage statements are coming...

It's the time of year for mortgage statements to hit the doormat. Don't ignore them. The statement reminds your of the rate you're paying (if you don't know), how long you've got left on any special deal, and also the amount of capital and interest you've paid in the past year.

Tucked in with the statement will be a sheet of sundry charges, well worth examining. This is where the lender lists a couple of dozen charges for anything from issuing a copy statement (say £25) to closing the mortgage (anything up to £295). Read about the increases in these types of costs here.

Woolwich is the latest and worst of the offenders. Last month it shoved its mortgage closure fee up from £195 to £275.

We don't reckon anyone who's remortgaged or about to remortgage away from Woolwich should pay this extra fee, as the increase is nothing more than the lender's sneaky attempt to bolster profits AFTER the borrower has signed up. So if you're ditching Woolwich for another lender, use our letter of complaint - see here.

And, please, do let us know how you get on....

Richard Dyson

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December 22, 2005

Where next for property and shares?

We've had a lot of 2006 predictions passing over the This is Money newsdesk in the last few days - house prices up, house prices down, blah de blah.

Many of them seem to be plucked out of thin air. Nevertheless, we think you should be in the know on these things so our property man Simon Lambert will give a round-up of these predictions over the Christmas period - pointing out the reliable house price surveys from the duds. Keep checking out Mortgages & Homes.

The stock market predictions are just as interesting. Most amusingly, is the fact that nearly every year in recent years, the average of the predictions from the City's finest is nearly always for a 7% rise (it was higher post-dotcom boom days). Funnily enough, 7% is also the guideline long-term return for the stock market set out by the City regulator. It seems this forecasting lark is easier than it looks.

Keep an eye out for Mike Clarke's 2006 stock market round-up on Investing & Markets.

And for reference, check out some of our stock market prediction archive here...

FTSE to rise 7% in 2004

Brokers predict 2003 rally

- Andrew Oxlade

December 12, 2005

Woolwich wobbles over unfair fee

Talking of re-mortgaging (see Charlotte Beugge, below), the weasley Woolwich has secretly decided to waive £80 of its extortionate new £275 fee for borrowers who switch away to other lenders - provided they complain this month.

Woolwich has briefed mortgage brokers and solicitors that if borrowers complain about its 'account closure fee' before the year-end, they will be charged £195, instead of £275.

The new, increased (and unjustifiable and appallingly unfair) £275 charge was supposed to apply from the beginning of this month - not that Woolwich explicitly told any of its 800,000 borrowers about it. It applies to ALL borrowers who repay their Woolwich mortgage to go elsewhere, and comes on top of any applicable early redemption penalties.

So complain, Woolwich borrowers, complain!

As I've written before - see my other blogs on the subject - I don't reckon any Woolwich borrower should pay this fee regardless of when they decide to object. It doesn't cost £275 to close a mortgage, whatever the weasels say.

- Richard Dyson

It's that r*mortgage again..

I could honestly do without the stress of remortgaging. I started on this hamster's wheel of remortgaging several weeks ago and it isn't over yet. I've photocopied every document several times, sent lord knows how much confidential, valuable documents through the post and been sent quite a few rainforests' worth of stuff to read. And now it's all getting far too frightening for my liking. The remortgage is due to complete on Wednesday 14. My old lender (I'm starting to feel rather sentimental about them, what harm did they ever do me apart from never offer me as good a deal as a new customer?) is due to take this month's payment on the 15th. Hence, when should I cancel my direct debit?

A (nameless) woman at the remortgaging solicitors says I 'should' be alright cancelling now. I'm not happy with the conditional tense. I email. An anonymous man from solicitors phones me and says I can't cancel until completion on 14th 'because if something went wrong then there would be come back on us'. And anyway he says 'If you do pay the mortgage to your old lender then at least you'll get it back sometime' And he laughs. That makes me feel so much better... I am relying on too many institutions all being efficient at the same time. All for the sake of a few quid.

- Charlotte Beugge

December 02, 2005

Woolly logic at Woolwich...

Got a mortgage with Woolwich? Then, from December, if you close your account and move to another lender you'll have to pay a fee of £275 - up from £195. (See my earlier blog and various links there).

Woolwich hasn't yet bothered to explain this daylight robbery, or mention how many tens of millions of extra £s it will net as a result, but in a letter sent to mortgage brokers in the last couple of days it did say something of interest. It wrote:

"The Final Redemption Charge is charged in order to recover the costs
incurred in providing a competitively  priced loan product, which is
subsequently redeemed before its maturity."

Huh? I thought that that's what early redemption penalties were supposed to be for... Surely a charge that is supposed to cover administrative costs of closing a mortgage, can't be used as a penalty AS WELL?

What Weasley is saying is that it is using the fee to claw back the cost of attracting the business in the first place. If so, one has to wonder, how could that cost have gone up AFTER THE EVENT? Surely a bank, even one staffed by weasels, must know how much it cost to attract a customer its already got...  Many of Woolwich's borrowers took out their mortgage years, even decades ago.

How could the cost of getting someone to sign up in, say, 1988, suddenly go up by 41 per cent in 2005?

So here's a little logical puzzle for the weasels who work at Woolwich:

Q: If a weasel paid £x to snare a mortgage borrower in 19yz, how come £x suddenly got bigger in December 2005?

Put your furry thinking caps on, weasels, and post your answers using the comment facility below.*

Meanwhile, calling ALL WOOLWICH BORROWERS, please bookmark this page - more
info and more instructions on how and when to complain will follow shortly.

[*CLUE: the only truthful answer will include the words 'greed', 'more', 'profits', 'contempt', and 'customers' - in that order.]

- Richard Dyson

November 29, 2005

How to win endowment compensation

I met up with an old friend at the weekend. It struck me how the endowment nightmare is not restricted to an older generation. She's my age - 32 - and was sold an endowment as recently as 1998 and is still trying to sort out the mess. I guessed most of the endowment mis-selling was done, dusted and exposed by the late Nineties.

Anyway, she asked what she should do. The answer: simply write a basic letter of complaint to the endowment provider. Some people have been using endowment compensation companies. Don't touch with them a barge pole. Insurers treated all endowment complaints the same but if you use a middleman they will charge you anything from 15% to 40% of any payout - potentially thousands of pounds. And some will charge you upfront - see here.

There's everything you need to know in our special section - www.thisismoney.co.uk/endowments

You should also read the experience of This is Money's Simon Moon. He had very little information from the sale of the policy and still managed to win the full £2,400 from Norwich Union to cover his mortgage shortfall. How I got my money

- Andrew Oxlade

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November 27, 2005

A warning to Woolwich mortgage customers

Woolwich has upped the charge it levies on borrowers who close their mortgages by £80 to £275. Overnight. Wham.

Woolwich borrowers who close their mortgage, because, say, like any reasonable person, they want to get a cheaper one elsewhere, will get hit with the increased fee from December.
Why the hike? Weasley Woolwich will talk about increased costs etc. It will try to pretend that the cost of closing a mortgage account (what, a few phone calls and a couple of letters?) is really £275, even though other lenders seem to manage to do it for less than a third of that.
The truth, of course, is that at a stroke the extra £80 will make lots of dosh for Weasley and its big ugly sister organisation, Barclays Bank.
It'll also give Weasley an unfair advantage over its competitors: borrowers pick mortgages on the basis of rate, and Weasley's rates will look good because it is snitching money from spurious add-ons such as this so-called 'Final Repayment Charge'.

Here's the best bit, and I'm anxious for ALL Woolwich borrowers to read this and tell their friends: I don't think you have to pay this extra £80. It's voluntary. Here's why: When Weasley's rival, Alliance & Leicester, introduced a similar hike in its mortgage closure fee from £195 to £295 in August 2004, me and my colleagues at the Mail on Sunday thought it was a wretchedly dishonest way to treat customers. It was perfectly obvious that the increase had nothing to do with the costs associated: it was simply a ruse to make customers pay more after they'd signed up. (Something which snivelling A&L bosses could never bring themselves to admit, though we certainly tried! Read about it here, and here, and here.)

We provided a sample letter to help borrowers complain - and they did. We've no idea how many. But hundreds. And A&L has since confessed that it referred NONE, NOT ONE, of these complaints to the Ombudsman. In other words, ALL complainants got at least the £100 increase knocked off.
Now I reckon weasley Woolwich will have to do likewise.
So if you're a Woolwich customer, keep a close eye on this blog thread: we'll publish clearer instructions on how and when to complain in due course.

Remember, the this new charge applies to ALL Woolwich borrowers (that's about 800,000 homeowners) when they switch away to another lender. As recently as July 2003, the cost of closing a Woolwich mortgage was under £100 - so this new charge is significantly more than most borrowers expected to pay when they signed up. Don't put up with it! And please, please, spread the word.

- Richard Dyson

November 24, 2005

Nightmare lodgers

I have had some great emails and letters from readers about the story that appeared in Wednesday's Mail: 'The true cost of a lodger from hell'.

It seems that there are dozens of you out there who have had terrible experiences with lodgers that would not move out, were inconsiderate, anti-social, and even violent.

As always with readers' letters you get a pattern of common observations. Surprisingly, one of them seems to be to rent out rooms to groups of students, because when they are in a group they tend to be tidier and more hard-working.

Another is that foreigners are always politer.

What also struck me was the number of great ways landlords have for getting rid of nuisance tenants.

Among the best were: 'become a nightmare landlord', 'change the locks', and 'announce the rent is going up next month, that will soon get rid of them.'

I'd love to hear any more tips, fill in below, no email/URL needed......

- James Coney

November 15, 2005

Remortgaging doesn't wash

I'm starting to have doubts about remortgaging. It's not the deal I've got (a base rate tracker) nor the fact it will save me a a few hundred pounds a year.

It's the bureaucracy involved. Because I've got both a married name and a maiden name I've needed to provide copies of my marriage certificate to seemingly the world and his dog. But what worries me more is the amount of original documents I've had to post out.

So far, I've sent out credit card statements, utility bills and most worryingly, bank statements: all in all, a easy to assemble identity package for a fraudster. I'm sure that the only interest my bank statements will elicit from those reading them is one of surprise that anyone could spend that much money at Waitrose, but really, isn't this taking money laundering too far?

November 04, 2005

How to work out the best fixed rate

Grrrr. This gets my goat.

Some research has just crossed my desk (on a fast track from printer to recycling bin) from financial information providers Moneyfacts. It conducted a poll and found that more than half of consumers think they have been misled by an advert offering an amazing headline rate on a savings account or mortgage. The only surprising thing is that it is not more.

Take two two-year fixed-rate mortgages  (and this is a real example) - one at 4.34 per cent and one at 4.39 per cent.  Now which is cheaper for a £100,000 mortgage? You will pay £700 more with the lower rate. And this is all down to fees, more than a grands worth.

We are always being told 'look at the total cost of the mortgage' but it seems that there are plenty of people that ignore this plea. Otherwise banks and building societies would not keep trying to lure us in with these flashy rates.

My colleague Charlotte Beugge was talking about how she will always use a broker for a mortgage, and this is why I agree (personally I would opt for one that does not charge fees). But whichever you chose they should be able to work out which is best for your individual circumstances.....without getting blinded by headline fees.

- James Coney

November 03, 2005

Why I use a mortgage broker

It's taken me years, but I'm just about to remortgage - for the first time ever.

Being a bit set in our ways - as well as being trapped by ludicrous house prices even in the dodgy part of south London we call home - husband and I still live in the first home we bought back in the mid 1990s.

And, boringly enough, we're still with the same mortgage lender (for the moment, know as the Big Northern Building Society in case something goes horribly wrong while the remortgage is ticking slowly through).

So yes, I'm the idiot on the standard variable rate homeloan, the one paying well over the odds and therefore subsidising all those super deals aimed at getting new customers in.

But when your mortgage is as titchy as ours, really it's hard to be bothered to go through all the hassle to save what seems like a few pounds a month. Which is pretty silly really, as I've at long last realised.

And of course, the answer is to get a nice, no fees charging mortgage broker to do the hard work for you, and that's just what I've done. But am I being sensible in going for a flexible, base-rate tracking, offseting home loan? It sounds like a great covering-all-bases deal for the terminally indecisive ... but then's there's the worry that maybe I should go for a ultra cheap fixed rate? Or a super discount with added cashbacks? Sometimes, it seems there is just too much choice...

- Charlotte Beugge

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Pay off the mortgage - or do something else with the cash?

Blog reader M Pawson asked about the pros and cons of paying off paying off a mortgage early – see ‘Reasons for repossessions’, below.

M Pawson is in the enviable position of being able to clear his mortgage, but doesn’t know whether it makes sense to.

We’re always getting questions about this – increasingly from borrowers who are thinking of interest-only mortgages, where they don’t make any repayments at all, but try to do something better with the cash elsewhere.

It’s all about expectations of returns. Oh yes - and risk....

Take a £200,000 mortgage and for simplicity’s sake say the rate, for the duration of the 25 year term, is 4.5 per cent.

Borrower Jill goes the repayment route and her bills are £1,112 per month. The total cost of Jill’s credit, on a repayment basis over 25 years, works out at £133,499. So to own the home outright, including the capital repayment, Jill hands over £333,499.

Borrower Simon goes for interest only. Simon’s monthly bills, just serving the 4.5 per cent interest, will be £750. If Simon pays that every month for 25 years he’ll have parted with a total £225,000 – and yet he still won’t have paid back a jot of the capital borrowed.

But Simon is paying £362 less per month than Jill. Say he shoves that extra cash into a tax-efficient savings scheme, such as a unit or investment trust held inside an Isa (so no capital gains tax).

In theory – excluding tax and costs etc – if his £362 per month compounds up at the same rate as the mortgage, Simon will roughly end up in the same position as Jill in 25 years’ time. He’ll have £200,000 to clear the debt. Try This is Money's calculators.

But if he is investing in equities, he could reasonably hope to get more than the rate he was paying on his mortgage, over time. Say his savings compound up at a modest five per cent per year: then, his £362 per month would grow to a total £217,693.

That would pay off his house entirely and leave him an extra £17,000-odd. If the equities compounded up at an average six per cent, he’d get an extra £53,000, and at seven per cent, he’d get an extra £94,000…

All that sounds ominously like the sales patter used by companies flogging endowments as mortgage repayment vehicles back in the eighties and nineties. No reminders needed about what happened there.

And that’s the risk. M Pawson’s no-risk strategy would be to pay the mortgage off right now. Or he decides to try and do something more clever with the cash – and risks getting it wrong.

- Richard Dyson

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October 17, 2005

Sipps and house prices

I met today with one of the high-fliers from the world of buy-to-let. Lee Grandin, aged 34, runs Landlord Mortgages, the 'UK's largest specialist buy-to-let broker'.

While most people in the mortgage game are talking up the forthcoming changes to Sipps in the so-called A-Day revolution (Archive search: 'Sipps'), Grandin is going against the grain.

Upmarket lender Savills says Sipps will pump £6bn into the property market. Grandin says it will barely have an impact on house prices because buy-to-let investors prefer to borrow heavily on properties to ratchet gains higher. The Sipps rules make this tricky. He also says investors would face a captial gains tax bill for selling a property if they try and put it in a Sipp.

We'll see who is right come post-A-Day (1 April 2006).

By the way, Landlord Mortgages is also due to publish the latest figures on profits from property and the early signs are that it won't be good news. You can read it first before anywhere else in the next few days on our special section www.thisismoney.co.uk/buytolet.

- Andrew Oxlade

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Andrew Oxlade Richard Dyson James Coney Charlotte Beugge This is Money team