Big hurry towards saving mortgage deals
Article source: Ellen Kelleher - www.ft.com
Desperate times call for desperate measures, and with the ever rising uncertainty in the mortgage market it seems that the best thing to do, if you anticipate remortgaging within the coming six months, is to get into a stable deal that will leave you protected if lending rates continue to soar and house prices drop even lower.
Borrowers may be able to retain their deals before any of the papers are signed but it is certain that mortgage rates and fees are on the on the rise. This is however a welcome move for if the mortgage rates go down, borrowers will be in a position to move to lenders that will give them a more enticing deal.
For the borrowers whose mortgage rates are expiring, they most definitely need to move fast as major banks and mortgage lenders are continuing to raise their rates. A good example is the Halifax, part of the Halifax Bank of Scotland group, and the largest mortgage lender, raising its fees by 0.1% on average. Others who have done the same include Nationwide Building Society, Britannia and the nationalised Northern Rock; they all increased their rates by between 0.2 and 0.5 percent.
The probable move by the Bank of England to reduce interest rates by the end of the year may not help to instigate a recovery in the mortgage market; it follows that many city analysts believe that mortgage rates will continue to rise and house prices will continue to fall, for the time being anyway. This emphasises the importance of any borrowers who are on Standard Variable Rate deals or coming to the end of their fixed rate deal to go and find a better option before the end of the year. Ray Boulger, technical manager at the mortgage broker John Charcol says that moving in quick to secure a fixed rate is the most ideal thing to do. He adds that a reduction in the value of your property could far outweigh the rate reduction and as he points out, even getting a cheaper fixed rate in 3 months may still mean you loose out in the end. Still, borrowers may not be able to access good loan-to-value (LTV) ratio if the value of their property should continue to fall.
Ray Boulger also advices that any borrowers in such a situation should move quickly and have a serious talk with their mortgage broker, especially if they are close to hitting the 90 percent LTV barrier. In the current situation it is becoming apparent that those requiring more than 90 percent of the value of their property in a remortgage are not likely to get a preferential rate any time soon.
Brokers are warning those who are signing up for two-year trackers deals and who then hope to switch to fixed rate deal to avoid paying high rates against that option.
For those bold enough to take the risk of rates not falling so fast, they have the option of signing up for a tracker mortgage with no tie in period and then switching to fixed rates if the lending rates continue to rise. Analysts are warning that borrowers should be more cautious and they should be inclined towards fixed-rate deals. For access to a better selection of mortgage products, and more friendly rates, Melanie Bien of Savills Private Finance advises borrowers to use their savings to reduce their Loan to Value ratio.
Little equity with your home means that lenders will charge you a higher lending fee, with there currently being a premium charged for those borrowers wanting more than 75% of the total cost of their home.
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