Mortgage rates have come down but beware of future pitfalls.
Following a year of relentless bad news for homeowners, there is a little seasonal cheer for homeowners and buyers, just in time for Christmas.
The Bank of England’s twice-cut interest rates didn’t kick start the property market as hoped but mortgage rates have come down - especially fixed rates - now that LIBOR (rate at which banks lend to each other) has reduced considerably.
Independent mortgage adviser Hayley Buck: “Lenders standard variable rates (SVRs) are very low now. Many clients are choosing to stick with them in the short term especially since another base rate cut is anticipated in the New Year
“Margins on top of tracker deals remain relatively high, from 1.99% upwards in most cases,” says Buck, who has arranged mortgages on Chiswick properties for many years. “This means when the base rate returns to the average of 5%, some borrowers could be paying as high as 6.99%. My advice is to be wary of deals that look very low now but have the potential to be extremely high over the next two years.”
Nationwide and Halifax did not impose their *collar on their tracker deals in the last base rate. However every lender reserves the right to introduce a collar should market conditions worsen.
"Buy to let (BTL) deals remain relatively high or have huge percentage arrangement fees, but good news for landlords on SVRs is that many are seeing their BTL rates go down to around 3.75%. Who can blame them for choosing to stay on their SVR for a while?" says Buck.
“First time buyers – with mortgage payments in some cases being lower than rental payments my advice if they have at least 15% deposit, is to look at buying instead. For example, anyone paying £1000 a month in rent is wasting £12000 a year on someone else’s mortgage.”
*Collar is a term for a minimum rate the lenders will allow the base rate to reduce to on their tracker deals.
