Our Mortgage Update

17th March 2010

A full year has now passed with Bank Base Rate remaining at the historically low level of just 0.50% and there is still no immediate sign of movement on the horizon.

How is this affecting the UK Housing/Mortgage Market?

Well, it seemed in the latter part of 2009 that positive signs were appearing with both strong transaction and volume numbers in evidence. Nationwide Building Society continued to report month on month house price rises, albeit at fairly minimal levels. Then came January, a sharp drop of 17% in loan approvals from December with only just over 42,000 loans granted, a reduction of over £3 billion pounds. A suggested price fall by Nationwide followed, the first for ten months.

Why would this have happened?

Well, most likely it was down to the re-introduction of Stamp Duty which had previously been partially suspended by the Chancellor. This concentrated the minds of those looking to buy, at the lower end of the market and “compressed” transactions in order to beat the 31st December deadline. Added to this, the atrocious weather we have all suffered, hit hard in January and would hardly encourage potential Sellers or Buyers to venture out. In the background, Political uncertainty rumbles on and worsening inflationary and unemployment levels were reported. On a much more positive note, those people lucky enough not to be directly affected by these factors have had more disposable income derived from the low Mortgage Rates and the majority of Buy to Let returns remaining very healthy.

Higher Loan to Value’s available

Since Christmas, Lenders have started to look for more business pushing their loan to value ratios higher, i.e. reducing their Client deposit requirements. The very best rated deals however, continue to be made available at the lowest risk to the Lender though, usually where at least a margin of 30% equity or deposit is available. Wholesale Funding has eased somewhat and at long last Fixed Rate loans are starting to look more competitive although they still show a premium when compared to their Tracker type counterparts.

That leads to the “age old” question, Fixed or Variable?

Well, it depends on personal circumstances of course but as a rule, if you are in any way fearful of future rate rises, are already near the top of your budget, are unlikely to see a payrise of any significance this year, then Fixing, even if at an initially higher rate than a variable equivalent, looks safest option. However, if you feel very comfortable with your level of outgoings, maybe you are already overpaying to discharge your loan sooner and think you can cope with a likely rate rise at some stage in the future, then taking advantage of a Tracker could well prove the better bet. Add on an “Offsetting” facility to the Tracker option, (if you have accessible savings earning negligible returns available) and you could end up saving a significant amount of interest in the long term.

A few notable Rate Options

5 Year Fixed Rate at 4.99%, (Purchase only) with £995 Fee or 5.15% (Re-Mortgage option with free transfer to lender). Both to 70% LTV. Cheaper Fixed Rates are available for shorter periods. Lifetime Offsetting Tracker at 2.89% payable, (Purchase or Re-Mortgage), Min loan of £200k, max to 60% LTV. Free Transfer in Re-Mortgaging and unlimited overpayments. £1,495 Fee. Cheaper short term Trackers are available without Offset facility.

Our Suggestion to you

If you are on a Standard Variable Rate with your current Lender, check it's effectiveness. Some are not competitive and there can be a significant difference between Lenders, particularly on fairly new loans.

Please contact our Independent Mortgage Adviser, David Bentley, via email or 07872 117335 for any personalised advice.

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