If you have been considering fixing your mortgage by remortgaging to a new deal, then now might be the prime time to do it.
Fixed-rate mortgages have been dropping steadily for several months with the expectation that interest rates in the UK will remain low in the long term.
However, the downgrading of several major banking groups in the UK by the rating agency Moody’s last week is likely to put pressure on the big UK mortgage lenders to increase the cost of these deals.
It could be a flash in the pan, rates were beginning to rise early this year when the economic outlook was less gloomy, but the effects of the Tsunami in Japan and the subsequent concerns over the Eurozone were enough to revert the trend.
What is certain, though, is that there are fixed-rate mortgages available which are several per cent lower than the average mortgage interest rate paid by borrowers over the last 25 years; so if you are concerned by the possibility of higher rates and don’t have too much to lose by switching to a fixed-rate deal; there have certainly been far worse times to take a fixed rate.
We have recently launched the first of several new mortgage calculators, which aim to provide much more sophisticated systems for borrowers to assess their lending ability online.
The most important of these new calculators is the maximum loan calculator, which models some of the more complex systems for affordability lenders are using to assess customers borrowing potential.
Lenders are increasingly stepping away from using pure income multiples, and the large high street banks and building societies now consider many factors: including credit scoring, the number of financial dependents and overall debt-to-income ratio, to decide on an appropriate borrowing figure.
The calculator is (as far as we are aware) the only one currently available which illustrates how different types of lenders’ calculations vary, taking into account dependents, existing credit commitments and credit scoring.
We have several more new tools in development, soon to be added, so keep an eye out for more coming soon.
It has been a long time since we’ve had significant news about new products; this morning, Kensington Mortgages announced one of the most significant indicators to date; that mortgage lending is returning to normality.
Their new buy-to-let product range is available up to 85% loan-to-value even for first-time landlords; although the arrangement fees on the 85% product are 2.5%, it is still a step forward for buy-to-let landlords.
It is available on up to 3 properties, with an interest rate of 5.99% fixed for two years, and a portfolio maximum of £1 Million or three properties on the product.
Rental coverage requirements are also lower than the competition, with a rental yield requirement of 120% coverage at the pay rate; this should help to ensure that the products are viable.
The range also allows first-time landlords into the market at 80%, and at this loan-to-value, there is a flat fee product option in addition to the 2.5% fee option, which will work well for those borrowers with higher property values.
The products are available for purchase and remortgage; however, they are only available for properties in England and Wales and have a minimum income requirement of £25,000 or £30,000 above 75% loan-to-value.
For more information on these products, please call one of our mortgage advisors on 0345 4594490.
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.
