News/Events

Get advice before you decide on a new mortgage rate [15th October 07]

Choosing your right mortgage deal is always tricky and if only you could change around ‘foresight’ and ‘hindsight’? Have interest rates peaked or should I simply fix so that my interest payments won’t change for the next 3 years?

Well, there are an estimated 200,000 borrowers whose current deals finish before the end of 2007. Since there has been five interest rate rises since August last year, this will result in them having to pay higher monthly repayments. But borrowers chasing damage limitation by simply choosing the lowest interest rate could rue that decision in the future. The recent credit crunch has affected Libor and Swap rates – the money markets that determine pricing – and have forced lenders to move their variable and fixed rates in different directions. On top of all this, the recent sub-prime problems has meant that many lenders are amending their lending criteria and are now much more wary of taking a risk.

Furthermore the competition to attract new borrowers could be falling as the biggest mortgage lender in the UK, HBOS, has said that there has been a sharp reduction in the profitability of mortgages. They have indicated that they may no longer try and price its deals to attract new customers from rival lenders. This lack of competition will bring undoubtedly higher terms.

 At present, discount mortgage deals could be more attractive than trackers with one building society offering a 2 year discounted rate of 4.99% whereas tracker rates are around 5.49%. Fixed rates, however, have fallen slightly over the last couple of weeks with a rate of 5.39% on a 5 year term.

It is important to consult a specialist mortgage broker as it is not just the deal and the headline rate. Lenders charge fees and these can vary greatly and could be as much as £2499 being made by the Principality Building Society for a discounted mortgage down to nil for a variable rate loan from the Woolwich.

A decision has to be made and don’t bury your head in the sand and do nothing as you will end up on the lenders standard variable rate which could prove very costly and you could end up paying more than 3 percentage points than need be!

Borrowers choosing a new home loan now must examine their own position and priorities as remember, your home may be repossessed if you do not keep up repayments on your mortgage. Speak to an IFA who is qualified to advise on mortgages. They will be able to explore your full options for you and clearly explain them to you allowing you to make an informed decision.

This article was written by Langtons - Published in the Western Morning News, This is Money, 15th October 2007