Market update - 01.10.08

In the past few weeks, banks have hoarded funds, restricting the money available to the market.  Consequently, limited funds on the London InterBank Offer Rates (LIBOR) have pushed rates up sharply.  This raises interest rates from the lenders, and further reduces the options to potential borrowers.

As a result of these concerns, it is the lenders Credit Departments that are now calling the shots, and they are now tightening their criteria to ward off potential bad debt, which can further restrict lending to those who do not manage their day to day affairs.

There are some simple tasks that we can all undertake to ensure that when a lender assesses a risk, it is seen in the best light possible.

• Make sure you are correctly registered on the Voters Roll.  Failure to do so will affect your score.

• Moving house numerous times will restrict the lenders ability to get a good credit track record.

• Standardise the names you use for credit agreements. If your name is William, but use Bill occasionally, it can cause the credit search to provide incorrect data.

• Do not ignore payments on any credit agreement.  One missed payment in the past 12 months can be sufficient to decline an application.

• Excessive use of credit cards or large outstanding balances can also affect score. It gives the appearance the applicant is unable to meet their monthly commitments.

• Cancel dormant credit cards that are no longer used.

• Ensure your documentation is in good order and readily available.  Whilst lenders may not automatically seek bank statements, payslips or Inland Revenue Tax confirmation, they may do so in the future..      

A further concern is the property being offered as security.

Market data from Nationwide suggests house prices have fallen on average by 10% during the past year, with speculation of up to a further 15% fall in the coming 12 months. 

Therefore, if you are thinking of remortgaging in the next 12 – 18 months, you need to ensure your property stands out from the rest, both internally and externally.  A well presented property can make a significant difference to a valuers assessment.  Valuations can be expensive, so for some simple maintenance tasks it may result in an increased value, thus maximising the funds you can achieve in the refinancing exercise.