Further to last week’s post, Cheltenham & Gloucester have announced a new product at 90% loan-to-Value and a reduction in their five-year fixed rates at 85% loan-to-value.
The new 5 Year fixed rate at 7.19% doesn’t look particularly appetising on paper; with a £995 arrangement fee, Early repayment charges staggered at 5% in the first two years and: 4,3 & 2% consecutively for the remaining years, a valuation fee of £300 based on a loan of £100K, with APR at 4.8% and a reversion rate currently at 2.5%, but it does reflect the general easing of criteria and willingness to lend at higher loan to value.
Again the reduction of .1% on their five-year fixed rate at 85% loan to value won’t have Mortgage Brokers dancing in the streets, but it is a small step in the right direction.
It now has a five-year fixed rate of 6.89%, a £995 arrangement fee, Early repayment charges staggered at 5% in the first two years and then 4,3 & 2% consecutively for the remaining years, a valuation fee of £300 based on a loan of £100K; APR at 4.6% and a reversion rate currently at 2.5%.
As usual, refer to the Key Facts Illustration before deciding on a Mortgage and seek independent Mortgage Advice to ensure the product is suitable.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
We do not usually charge a fee for mortgage advice, although you may pay up to 1.5% of the loan amount. Some buy-to-let and commercial loans, are not regulated by the Financial Services Authority.
The Bank of England announced yesterday that the bank base rate will remain static at 0.5% for another month, which is good news for the housing market, prospective borrowers and mortgage brokers.
In conjunction with massive falls in the London Interbank Offered rate recently and small falls in swap rates, the stage looks set for continued reduction in mortgage interest rates over the coming months.
HSBC and Lloyds Group announced large rate cuts in the lower loan-to-value range last week, and over the past few days, several lenders have announced changes to rates and criteria higher up the loan-to-value range.
While there has been little change in higher loan-to-value rates in the 80% and upwards category, there is a feeling among the mortgage advice community that things will now start to ease here too. Perhaps for remortgages in the first instance, but potentially for new purchases also.
Whilst it’s unlikely we will see any products at 95% for new purchase soon, things appear to be moving in the right direction, which can only be good news for homeowners and the economy at large.
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.
As a mortgage advisor, you often have to try and combat the expert opinion of “the bloke down the pub” and even apparently knowledgeable sources.
Whilst looking for a table of current standard variable rates recently I came across this quote on fool.co.uk:
“First of all, let’s look at Standard Variable Rate (SVR). This is the standard rate of interest that lenders use, and as it says, it is variable. This is because it is linked to the Bank of England base rate – so whenever that goes up, so will your mortgage rate and thus so will your mortgage payments.
However, SVR Mortgages aren’t just linked to the base rate, they’re usually set at around 1-2% higher. This makes this type of mortgage very expensive.”
Any mortgage broker worth his salt would cringe at the apparent advice that SVRs are linked to the Bank of England Base Rate or “BOE Base Rate”, and will move in line with it.
Any borrower whose SVR is still above 3% is probably more than aware that this is not the case.
In reality, the lender’s SVR is a rate that could move due to many things including; LIBOR, the BOE Base Rate; the need to attract savers and a myriad of other market forces.
That’s why the full extent of the cuts in the BOE Base Rate has not been passed on in full to many borrowers, as banks just need to recapitalise.
What’s the point you ask? When you’re looking to find out what to do with your mortgage, a qualified mortgage advisor has a legal duty of care to you. Something neither a website nor the bloke down the pub; will provide.
People have been asking me recently whether it is the right time to fix their mortgage deal now that rates are increasing.
It is an interesting question without a very straightforward answer, but here are some things to consider.
If you are on a standard variable rate or will be soon; is it below the current fixed rates?
Many banks haven’t passed on the full rate cut and there are SVR’s out there far higher than current fixed deals; if you have a decent amount of equity in your property.
Currently, fixed rates are available around the 3% mark if you have 25-30% equity. If your current rate is above 3% then it’s well worth considering switching to a fixed deal.
If you don’t have a lot of equity or if you have any significant adverse credit, the picture changes considerably; it may be better to wait until rates are about to jump significantly.
It largely depends on how much more a month you will have to pay to fix it now.
But for those with a low standard variable, the big question is when will the Bank of England Base Rate go up, and by how much?
And while Mervin King announced that it definitely wouldn’t go up this year, it’s worth looking at inflation.
You may have noticed petrol prices rising again, and crude oil has bounced back to $70 a barrel.
This could have a sizeable effect on the Retail Prices & Consumer Prices Index, and importantly on swap rates; if you look at other commodities which filter down to consumer prices such as steel and aluminium many are enjoying a boost at the moment too.
Swap rates drive fixed deals, and many lenders have just increased their fixed rates due to changes in swap rates.
Without a crystal ball, it’s hard to know whether swap rates will continue to rise or if they may even fall again; before the bank base rate changes.
The swap rate increases are likely due to inflation concerns and the anticipated rise in base rate; so they may continue to rise moving forward.
Historically speaking a 3-4% interest rate on a mortgage is still low, so this all points to now being a good time to fix for 2-3 years as long as your circumstances suit.
