Probably the biggest mortgage-related question on everyone’s lips is whether to fix their mortgage and at present, it is certainly difficult to predict future interest rates.
I can remember a conversation with a client almost 18 months ago where media coverage suggested interest rates were going to shoot up, and they were worried the tracker product I had recommended might become very expensive.
In my opinion, whether to fix your interest rate or not is a two-part question. Firstly consider your attitude to risk and the severity of that risk.
If you have ample income to afford higher rates, it comes down to your preference of whether to gamble on variable-type products. But, if you cannot afford for your mortgage payments to go above current figures, you should not only be considering a fixed rate but also trying to reduce your borrowing levels asap.
The second part of the answer comes down to the difference between fixed rates and variable products. If the difference between a suitable variable product and fixed deals is relatively low, even if you are a risk taker, it may be worth opting for a fixed rate. However, with bigger differences, it becomes harder to say.
Let us compare a 5-year deal currently on offer with one lender of 6.49% with a 25% deposit to their 2-year fixed and 18month tracker product; this is 3-4% higher, and that means the chances of it being good value for money long term are much lower as it would require average interest rates over the next five years to be over 5% or so.
That is a significant increase from current rates, so I would only recommend a fixed in this scenario to someone on the borderline of what they could afford and needing absolute long-term security.
Many lenders are touting products with an option to switch to a fixed deal at a later date; without early repayment charges. But for those who would be at serious risk of being unable to afford their mortgage if rates went up, this is likely to be a poor option, as the fixed deals available at the time are likely to be higher then as well.
It remains likely that while interest rates must increase at some point, overall market competition will do too, and to some extent, increases in bank base rates are likely to be met with at least some reduction in lenders’ margins.
Current two-year fixed deals come with an average margin of about 3% over the bank base rate, which would have been unthinkable three years ago, so at some point, slowly but surely, these differences must be eroded by competition as the market improves.
There are thousands of concrete construction types in the UK; some of these are difficult, if not impossible, to mortgage.
In general, its properties from the post-war era and a pre-fabricated construction type that could be challenging to mortgage; however, even establishing the type of construction used can be troublesome.
Most properties built after 1984 are likely mortgageable; after this point, Building Regulations are widely considered to have delivered suitable construction methods and control of material standards.
Some concrete construction types, particularly those containing structural iron or steel, built between the early 1900s and 1970s, suffer from concrete corrosion and either require significant work to prevent failure or are unsuitable for a mortgage; whatsoever.
Classed as defective construction types, contaminants in the concrete react with the iron in the steel rotting the concrete and steel beams from the inside out.
Other construction types are classed as defective simply due to being built in large quantities with sub-standard materials; or experimental wall leaves that have performed poorly over time or failed systemically; the Large Panel System or ‘LPS’ being an example that catastrophically failed in the Ronan Point tragedy.
There are, though, common concrete construction types, such as Taylor Wimpey No-Fines, which are not usually a problem to mortgage.
If you are looking at buying a vintage property of a concrete construction type, you should inform your mortgage advisor at the outset.
They should be able to check with local surveyors and try to ascertain whether there are likely to be problems with a mortgage.
If an estate agent is advertising a property as a non-standard construction, requiring cash purchase; it is likely that the property is not typically mortgageable.
But you should not assume that any agent or vendor is aware of a non-standard construction type; this is one reason why having an independent survey, not just a basic-mortgage valuation, is generally prudent when buying a home.
Over the past few weeks new mortgage lenders have been popping up at quite a pace, with Platform Igroup and Kensington all returning to the market after considerable time away there is at last some possibility for clients with less than perfect credit history to obtain new mortgages although loan to value limits are still strict.
These lenders maintain adamantly in the press that they are lending to prime borrowers only however the truth is that they are lending to customers who would have been considered near prime or very light adverse in the days preceding the credit crunch.
To boot this week also saw the announcement that Aldermore mortgages had opened its doors to the main intermediary marketplace for both residential and buy to let loans, as well as Precise Mortgages adding further new options in the Buy to Let mortgage marketplace.
Kensington and Igroup in particular have filled the much needed whole between highly competitive high street residential mortgage rates and ultra high adverse rates offered by the likes of Platform and Cheshire Mortgage Corp. They have rates ranging between the 4-6% mark which are much more palatable than 8% plus offerings from the other two.
For further information on any of the products from these new lenders speak to one of our independent mortgage brokers on 0845 4594490
Just a short post to announce that you can now get live online quotes direct from our main site for Life Insurance, income protection, Mortgage Protection and Critical Illness Insurance direct from the Rightmortgageadvice.co.uk website.
To get an instant quote today follow this link for Life Insurance Quotes.
If you have life insurance cover which was arranged prior to a marriage, or before increasing your mortgage value or mortgage term it may need to be reviewed. It’s crucial to ensure that your protection requirements are reviewed regularly to ensure that it is arranged in the most tax efficient manner and will benefit the people you intended it to.
To discuss protection requirements and products available call one of mortgage protection advisors on 03454594490 for advice.
I wrote recently about the tough decision some people have about whether to fix their mortgage now; or wait on their standard variable rate, exposed to potential rises.
With today’s announcement that the Bank of England Base Rate will stay at 0.5%, the decision hasn’t got easier.
There is, however, a nifty product currently being offered by the Nationwide Building Society (one of the few lenders still vying for new business).
It allows you to take one of their current tracker products now and switch it to a fixed rate whenever you choose; without incurring early repayment charges.
Other providers have similar offerings; however, a key difference sets them apart.
The Nationwide will allow you to switch to a fixed rate based on the Loan-to-Value of the valuation taken when you arranged your tracker, which means that if house values continue to fall, you can still access new deals.
You will have to pay a second arrangement fee, however. And you will be restricted to the fixed rates available when you decide to change, which could be higher than those available now.
But if you are not sure which way to turn, this at least offers a get-out clause which typical tracker products will not.
