Lenders are finally passing on base rate cuts but what is the impact on Chiswick property?
At last, mortgages are beginning to look more competitive as more lenders yield to the pressure to pass on the Bank of England (BOE) 1.5% base rate cut to their standard variable rates.
This has benefited those borrowers who have little equity in their property and are coming to the end of their current mortgage rate. Any mortgage deal over 75% loan-to-value (LTV) is now considered very high. Many people are opting to stay on the standard rate instead of committing to high 90% or 95% LTV mortgages.
There have also been some great fixed rates issued over the weekend according to independent mortgage adviser Hayley Buck: “Some deals are as low as 4.29% and it’s likely there will be more deals to come now that LIBOR - the rate at which the banks lend to each other – has dropped closer to 4%.”
With mortgage providers beginning to offer great deals, this should kick-start the W4 property market in the New Year according to Christian Harper of Chiswick estate agent Oliver Finn: “No one can predict when the market will hit rock bottom but I have a feeling that the market will jump by 10% in January.
"Last week two of my biggest clients agreed on good rental property investments in Chiswick but a continued wave of pessimism means that many people will miss the boat.”
Return of the trackers
Unfortunately lenders have increased the margins they impose on top of the BOE base rate - some as high as 1.99%. This means that if the base rate creeps back up to 5% next year, borrowers could be paying a rate as high as 6.99%.
The best defence is a healthy dose of scepticism and a prudent mortgage broker: “Tracker mortgages may look good value now with another base rate cut expected, but in times of rising interest rates, borrowers may find themselves with an unaffordable mortgage. It may be preferable to lock into a fixed rate deal now whilst rates are low,” says Buck, who has many years experience arranging mortgages on Chiswick properties.
“Once the market improves, brokers should be ready to contact those clients who opted to stay on the standard variable rate. Better rates will follow when the competition between lenders is restored and they have more of an appetite to offer over 75% LTV. We are seeing more lenders issue rates that start off very low but which tie borrowers to a much higher rate once the favourable period has passed,” concludes Buck.
As ever, if it looks too good to be true, it probably is.
