Would a 0% mortgage tempt you? Be careful...not everyone can benefit
Looking for help to get on the property ladder? A 0% mortgage is likely to prove popular with cash-strapped first-time buyers
There's no such thing as a free loan, but a deal from the Leeds Building Society is close. It's offering a 0 per cent mortgage for three to six months.
The catch? There are one or two, although it's not the first time the mutual has offered a 0 per cent loan, having first launched one as part of its Welcome range last summer. And while there will be no interest charged during the offer period, repayments will have to be made.
The new wrinkle is that the 0 per cent is being offered on Help to Buy mortgages, the Government scheme which allows potential homeowners to buy a new or existing home with a 5 per cent deposit.
The deal has been launched in conjunction with Barratt Developments, meaning you have to buy one of the developer's properties to qualify. However, interestingly, on top of the short-term zero-rate option the society is offering a 10-year fixed rate loan.
Jonathan Harris, of mortgage broker Anderson Harris, said fixing for a decade could be a good option. "A 10-year fixed rate option widens the choice available to those taking advantage of the Government's scheme and gives security for a longer period of time. The rate isn't bad either."
The 10-year fix is available at 5.16 per cent if you choose three months' 0 per cent, or at 5.34 per cent if you go for the six-month option. This week Newcastle Building Society launched its own decade-long fix for those with a 20 per cent deposit, at 4.49 per cent.
However, Mr Harris has a warning for those tempted by the longer fixes: "It's important not to fix for longer than you are absolutely sure about or you will have to pay a redemption penalty to get out of the mortgage before the fixed term ends."
David Hollingworth of London & Country Mortgages is sceptical of decade-long deals. "Long-term fixed rates provide certainty of payment and budgeting security but have always struggled to gain a following," he said. That is partly due to the higher rates and Leeds' latest deal is certainly that at almost twice the rate of its Help to Buy two-year fix, which charges 2.5 per cent.
But people are often also put off because of the need to lock in throughout the fix, which can be too restrictive for many. "It's great to see a lender broaden the product options but the long-term fix may still appeal only to a certain niche," Mr Hollingworth reckoned.
Looking more closely at the 0 per cent offer, Ray Boulger of John Charcol said: "The combination of no payments on 20 per cent of the purchase price as offered through the Help to Buy scheme, plus 0 per cent interest for three or six months on the balance of the mortgage, gives borrowers the option of even lower mortgage payments initially while they kit their new property out."
Mr Harris agreed. "The choice of not paying interest for the first few months will be popular among cash-strapped first-time buyers," he said. "The money that would have gone on the mortgage can be used to buy furniture or replenish savings which have gone towards the deposit, while you know that the mortgage will be paid off in full by the end of the term."
So if you want a brand new Barratt home, should you rush for the deal? Mr Boulger said the rates offered are reasonably competitive, "except the five-year rate, where Santander currently offers 3.44 per cent with no arrangement fee, a free valuation and £250 cashback".
But he warned against choosing a two-year fixed rate under the Help to Buy scheme: "At the moment no lenders are offering viable remortgage options for Help to Buy-type equity share mortgages, unless the purchaser repays the equity share. This means those taking a two-year fix run the risk of having few options at the end of the initial fixed rate."
The mortgage market is full of complications, meaning borrowers should look beyond the headline deals and, ideally, get expert help.
Speak up if you're behind. There's help...
The number of people who complain about the cost of their mortgage is soaring to record levels, but many are leaving it until they get into financial trouble before raising the alarm.
Problems are becoming so bad that lenders have been told this week to "get creative" and do more to help struggling borrowers.
The Financial Ombudsman Service's latest complaints data, which was published on Wednesday, revealed that last year 13,659 people – the highest number recorded – contacted the ombudsman for help with a mortgage or secured loan problem.
Worryingly, a third of these had slipped into arrears before they sought help. And, of the remaining cases, a large number of those struggling to make ends meet felt unable to say that they were facing significant financial problems.
The chief ombudsman, Tony Boorman, said: "Mortgages are the most significant purchase most of us will make in our lives, so we understand why people might be reluctant to say that they're struggling to pay for their home.
"Many of the cases where people face losing their home have been heartbreaking to deal with – but could potentially have been avoided. So if money is tight, you should never be afraid to ask for help or guidance. Speak up sooner rather than later; there's a lot that can be done to help before things get out of hand."
The ombudsman has been alerting lenders that they're expected to get creative when helping people get back on track – especially before payments get missed. And though early signs suggest that this is having an impact, there's still more that they should do to help, Mr Boorman said.
Typical areas of complaint taken to the ombudsman relating to financial difficulties include arrears handling, charges, repossession, post-repossession problems and recovery of shortfalls.
Other problems mentioned by people in arrears included sales and advice, mortgage administration, upfront fees charged where no mortgage is offered and declined offers.
There have also been disputes over valuations and allegations of misrepresentation, suitability or misleading literature. "Consumers and lenders have a responsibility to work together when problems arise," Mr Boorman said.
There was positive news last week when the Council of Mortgage Lenders said the number and the proportion of mortgages in arrears fell during the first quarter of 2014.
CML's director general, Paul Smee, said: "The downward trend in the number of mortgages in arrears is welcome. Repossession is the last resort – the aim is to keep people in their homes and get their finances back on track whenever possible.
"Lenders recognise that, behind the numbers, these are real households, with differing circumstances. Lenders are improving their practices to try to achieve the best outcomes when payment problems occur," he added.
But the Money Charity revealed last week that average household debt, including mortgage, was £54,546 in March, up from £54,434 in February. The UK is experiencing the biggest increase in loans and overdrafts for individuals since February 2008.
Michelle Highman of the Money Charity, said: "Borrowing money when it's done in an affordable way, can make things happen that would otherwise seem impossible.
"However, if you don't have a plan to pay the money back, things can quickly spiral into more difficult, unmanageable debt."
Independent Partners: Get fee-free expert mortgage advice and find the right mortgage deal for you.
- 1 Raif Badawi, the Saudi Arabian blogger sentenced to 1,000 lashes, may now face death penalty
- 2 PornHub turns masturbation into energy in bid to save the planet
- 3 Robert Mugabe eats a zoo for 'obscene' 91st birthday party
- 5 The jihadi girls who went to Syria weren't just radicalised by Isis — they were groomed
New theory could prove how life began and disprove God
This is what it's like to be dead, according to a guy who died for a bit
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Ukip would cut billions from Scottish budget to fund English tax cuts
Russia's roadmap for annexing eastern Ukraine 'leaked from Vladimir Putin's office'
Ukraine crisis: Top Chinese diplomat backs Putin and says West should 'abandon zero-sum mentality'
iJobs Money & Business
£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...
£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...
£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...
£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...
Day In a Page
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads