The Financial Blog

Abbey launch market leading fixed rate mortgage

Abbey has launched a market leading 4 year fixed rate mortgage at 4.59 per cent and with 75 per cent of people in the UK thinking that the base rate will not fall any more now is surely the time to fix your mortgage rate???

Abbey say the demand for their variable rate mortgages has almost halved since the beginning of the year - In January, 28 per cent of those asked as part of Abbey Mortgages’ Remortgage Index said that if they were remortgaging tomorrow, they would opt for a variable product, in May, this was just 15 per cent.

Finally it seems borrowers are getting the message that now is the time to fix as rates are as low as ever. In May, for the first time since January 2009, the number of people planning to fix their mortgages when they remortgage has increased to 60 per cent up 8 per cent from 52 per cent (2). It’s a step in the right direction as lenders have been urging borrowers to fix now for a while.

While the Bank of England base rate is at an historic low of 0.5 per cent, 73 per cent believe that it has reached the bottom and can only rise in the longer term. This has renewed appetite for homeowners to secure a low fixed rate mortgage whilst they can, with demand rising two per cent since January.

The most popular mortgage choice is a two year fix with 21 per cent opting for this. Demand for longer term fixes is to turn a corner as borrowers look for indicators of when rates will rise again before locking in to a longer term deal. The research also shows 36 per cent of people opted for a fix of between 3 and 10 years, with the most noticeable difference is with 10 year fixes, where demand has doubled since January 2009.

Nici Audhlam-Gardiner, Director of Mortgages at Abbey commented: “Fixed rates are firmly back on the agenda for those looking to remortgage. The last few months of 2008 saw a huge focus on the Bank of England’s Monetary Policy Committee as rates shot downwards each month. As mortgage borrowers realise that variable deals will no longer fall further, it seems that many are now trying to work out when rates will rise again and how long to fix their rate for.

“Borrowers should avoid holding out too long before fixing as rates as low as these won’t last forever. On Wednesday, Abbey is launching two new market-leading 4-year fixes at 4.59 per cent with a £995 fee and 75 per cent LTV for those remortgaging or purchasing a new home. In addition, Abbey offers a range of competitive fixed rate products, our lowest rates in a decade, for those looking to secure their next mortgage deal including a 3-year fixed rate at 4.09 per cent, a 7 year fix at 4.99 per cent and a 15-year fix at 5.38 per cent all with a 75 per cent LTV, a £995 fee and a maximum loan size of £250,000.”

Abbey, Alliance & Leicester (A&L) and Bradford & Bingley savings (B&B) will all become known as Santander by the end of 2010. Abbey and B&B savings will be rebranded from the first quarter of 2010 and A&L will follow later in the year. The move will deliver a significant advantage for customers as they will be able to use any of 1,000 Santander branches from early 2010, rising to 1,300 by the end of 2010.

For more information log on to www.abbey.com, telephone                0800 389 9890         or visit your local branch.

Recovered UK housing market?

Nationwide annouced that house prices have increased recently; a first for many months but can we really rely on what I see as very early indications that the UK housing market is recovering?

Cheif Executive of the National Association of Estate Agents, Peter Bolton said: “It is too early to talk of a recovered housing market, but our own figures certainly demonstrate an upturn in activity over the past few months. The number of people looking for property has soared and last month our members reported an increase in the number of sales they were making - up to 10 per agent, against a low point of around five at points last year.

“The Government now should do all it can to help sustain these positive measures, specifically by reviewing HIPs and stamp duty, both of which we believe dampen activity across the market, particularly for first time buyers.”

I think Mr Bolton is right here, HIPs put me off getting our family property on the market. I’ve recently got to the stage of a valuation and then realised I’d have to spend another £250 - £300 on the HIPs pack before my estate agent could even start marketing the property.

This is a good thing for the housing market because it stops timewasters and by that I mean people who aren’t really sure about moving but put their property on the market anyway. And, I suppose that’s where we were coming from…If we found the right house then we’d move but essentially we were just looking on a ‘what if’ basis.

Still, this is good underlying news from Nationwide and still welcome from the doom and gloom stories we were hearing 6 to 8 months ago. Let hope we can look forward to a more stable housing market with smaller more sustainable anual growth, that would be much better for everyone.

Beware the true cost of a mortgage

Here is some great advice from www.moneynet.co.uk and this is a really simple calculation that anyone can do with a calculator. Read on to find out how you can quickly calculate the true cost of your mortgage over the introductory period, don’t get sucked into fee free mortgages or the lure of a low rate offer…

Because mortgage lenders are now slowly starting to reduce the Loan to Value percentages on most mortgages we’re now seeing a slight lift in the mortgage market and perhaps the market is starting to move again. This means that mortgage lenders are looking for more new business, perhaps from first time buyers or at least from people with smaller deposits - typically 5 to 10 per cent.

With this increase in mortgage market activity there will come a raft of offers like fee free mortgages or low introductory rate mortgages. With house prices at heavily discounted values compared to their 2007 peak, and more interest being shown at Estate Agents, we may well start see an increase in mortgage demand over the coming months.

However, it is vital that would be borrowers, whether first time buyers, remortgagers or movers check the true cost of any deal before signing on the dotted line.

With a range of rate/fee combinations, there is no one deal that fits all, and with fee free and percentage fee deals only adding to borrower confusion, finding the true cost of a mortgage is key unless you want to be needlessly pouring money down the drain

EXAMPLE MORTGAGE OFFERS

£150,000 mortgage assuming 25 year term (75% LTV)

Alliance & Leicester 4.69% FEE FREE Mortgage fixed rate for 3 years = £895.55 per month x 36 months = £30,943.80

HSBC Mortgage 3.99% fixed rate 3 years = £799.30 x 36 months = £28,774.80 plus fee £599 = £29,373.80

In this scenario the HSBC deal is £1,570 cheaper over 3 years. (Equivalent of £43.61 per month)

£100,000 mortgage assuming 25 year term (75% LTV)

Alliance & Leicester Mortgage 4.69% FEE FREE fixed rate mortgage 3 years = £573.03 per month x 36 months = £20,629.08

HSBC Mortgage 3.99% fixed rate 3 years = £532.87 per month x 36 months plus £599 fee = £19782.32

In this scenario the HSBC mortgage deal is £846.76 cheaper over 3 years. (Equivalent of £23.52 per month)

Don’t assume that a low rate or no fee deal is best, it’s essential that borrowers always compare the total cost of the mortgage they are looking at and not be swayed by a low rate or no fee deal.

The best deal for one person may not be the best for another. To find the best mortgage for your particular circumstances, you will need to take into account all of the following details - the mortgage amount, the length of the fixed or discounted term, the interest rate and the fee.

A calculator such as http://www.moneynet.co.uk/Mortgages/Calculators/Cost will help you work out these numbers, but if you’re not comfortable with doing that yourself, make sure you enlist the services of an  IFA or mortgage broker to do the sums for you.

For most people their mortgage is the biggest financial commitment they will undertake so it makes sense to obtain independent whole of market advice from a professional to ensure you don’t end up paying over the odds for your home loan.

www.Moneysupermarket.com comments on CML figures

Following on from my post - increase in mortgage lending for new purchases  Moneysupermarket.com’s Head of mortgages, Louise Cuming comments:

“The key issue in the mortgage market at the moment is the supply of mortgages, not demand. This is especially true at higher loan to values, which is where many customers find themselves but lenders are very wary of operating.

“Whilst the slight increase in lending month on month is good news, the demand for mortgages from customers still outstrips the willingness of lenders to lend.  Although no one wants a return to the borrowing boom of 2007, and the market needed the shift towards risk based lending that we have seen, the pendulum has swung too far now, and the overly tight lending criteria is proving to be a straight jacket for the market.

“There is positive news… Less people are paying stamp duty and that should encourage buyers. However, the Government needs to extend the temporary increase in the stamp duty threshold beyond September 2009 to sustain this much needed support for the market.”

Also, don’t forget that HSBC have now launched their new range of mortgages offering LTV’s of up to 90 per cent - see my post HSBC to launch new 90 per cent LTV mortgages

So I think we are at last starting to see signs that lenders are easing up on the current overly tight lending criteria. If HSBC can start to lend at 90 per cent LTV then other banks must follow suit quickly to keep up.

Mortgage lending for new purchases up

When it comes to new mortgage lending people are switching to fixed rate products and now beginning to ditch tracker mortgages according to the Council of Mortgage Lenders.

Fixed rate mortgages were 8 per cent more popular than in January and tracker mortgages have dropped in popularity by 7 per cent, compared to January.

There has also been a jump in the percentage of house buyers avoiding paying stamp duty, now 57 per cent of house purchases didn’t incur a stamp duty payment, compared to 48 per cent last year.

It looks like this may be the start of borrowers thinking far more seriously about what they can afford to repay when it comes to their mortgage. Fixed rate mortgages are the best way to establish a fixed household budget; borrowers can rely on their fixed mortgage repayments for the specified fixed rate period.

Council of Mortgages Director, Michael Coogan said: “These figures represent February mortgage completions. Recent mortgage approvals figures published by the Bank of England show some signs of improvement at the beginning of the borrowing process, although activity is at a very low level historically. We are not convinced that underlying trends have shifted sufficiently to change our forecasts for mortgage market activity in 2009, but there are some positive signs for later in the year.

“Some large banks are making more funding available through enhanced lending commitments, which is helpful but will not satisfy consumer borrowing demand on its own. We need further market measures to be introduced by the government around the Budget to encourage a mortgage market where all types of lenders - banks, building societies and specialist lenders, and large and small businesses - are encouraged, and enabled, to commit more funds to the mortgage market if we are to enhance lending activity significantly.”

HSBC to launch new mortgages - offering 90 per cent LTV

At last some really very good news from one of the biggest banks in the mortgage market HSBC. From next week - Tuesday 14th April HSBC will be offering mortgages with loan to values (LTV’s) of up to 90 per cent which is great news for borrowers, at last!

Somehow HSBC now has £15 billion to fund mortgage lending in 2009 which is twice what HSBC lent in 2007. I suppose this time it is down to the bank to make sure the lend the money responsibily to people with good credit ratings.

From next week £1 billion of HSBC’s £15 billion will be put in place to lend on these new range of mortgage products below…

So I was expecting the interest rates to be high because of the LTV on offer of 90 per cent however as you can see the interest rates are competitive and not far beyond the market averages at the moment.

Mortgage   
 
Two year fixed rate
(Home purchase only)   4.99%  LTV 90%    Booking fee £1499
 
Two year fixed rate  5.49%  LTV 90%    Booking fee £199
(Home purchase only)
Lifetime Tracker  4.59%   LTV 90%    Booking fee £999
(Home purchase only)
3 year fixed rate  3.99%   LTV 75%   Booking fee £599

2 year discounted rate  2.49%   LTV 60%   Booking fee £249

I think this is a great move from HSBC and at last restores some confidence in the UK mortgage market.

Joe Garner, group general manager of HSBC’s personal financial services said: “Although house prices have fallen, and continue to fall, they won’t fall forever.  At HSBC we are standing by our customers through thick and thin and these changes mean we can continue to give customers the best possible deal on their mortgage.  This is a one billion pound commitment and it says we appreciate our customers’ loyalty.”
 

With all these new mortgage rates being launched is now the time to fix the interest rate on your mortgage?

My last mortgage related post was about Nationwide’s new range of mortgages - and now I’ve seen that Lloyds TSB launches market leading fixed rate mortgages, available from today.

Interest rates on these Lloyds TSB mortgages start at 3.29 per cent, but be aware that you’ll have to put up a 40 per cent deposit AND pay a 2.5 per cent fee, which will be a fairly substantial sum of money for most people.

The fixed rate periods are for 2 or 5 years but again the best Loan to Value, which determines how much deposit you have to pay, is 75 per cent; so you’ll have to come up with a 25 per cent deposit to take advantage of any of these new Lloyds TSB mortgages….

Personally I think that if you can afford the deposit and fees, then of course fix your mortgage rate for as long as possible but my issue here is that the 5 year fixed rate deals really aren’t all that attractive. With Lloyds TSB you can fix your mortgage rate at 4.89 per cent or 4.99 per cent but both products have an LTV of 60 per cent so you’re going to need a 40 per cent deposit for starters. Then Lloyds TSB apply a fee of £995 on the lower 4.89 per cent mortgage and a fee of £495 on the higher 4.99 per cent mortgage.

If I wasn’t currently tied into my current mortgage deal I’d be happy to ride along with our current all time low interest rates and take out a tracker mortgage; these products usually track the Bank of England base rate plus a few percent. For now and my personal thoughts on this are that the credit crunch / recession aren’t going anywhere soon, so you might as well take some advantage from this current financial situation.

New mortgage deals from Nationwide - from 18/03/09

As Nationwide annouce new mortgage deals I can’t help feeling somewhat annoyed that I chose to stick with a fixed rate mortgage when I remortgaged at the end of 2007.

There are now some great deals to be had but I suppose the problems start because of Loan to Value (LTV’s) lenders are willing to offer. From the looks of this latest batch of Nationwide mortgages the highest LTV is now 85 per cent. The lower the interest rate then the more deposit you’ll have to put down; which makes sense really. It’s just a shame that it’s taken the credit crunch and global recession for the banks to realise 100 per cent mortgages were a bad idea.

With effect from 18 March 2009, Nationwide building society is launching a new product range:

For those buying a home:

Two year fixed rate mortgage available from 3.88 per cent, up to 60 per cent Loan to Value (LTV).

New customers can borrow up to 85 per cent LTV
Existing borrowers who are moving home can borrow up to 95 per cent LTV
£995 reservation fee

Three year fixed rate mortgage available from 4.33 per cent, up to 75 per cent Loan to Value

New customers can borrow up to 85 per cent LTV
Existing borrowers who are moving home can borrow up to 95 per cent LTV
£995 reservation fee (£745 for first time buyers)
Three year tracker rate available from 3.78 per cent (up to 60 per cent LTV)

New customers can borrow up to 80 per cent LTV (previous maximum of 75 per cent LTV)
Existing borrowers who are moving home can borrow up to 95 per cent LTV
£995 reservation fee
In addition, a new LTV tier of 75 to 80 per cent has been introduced for those moving home.

For those remortgaging or switching when their mortgage deal ends;

Three year fixed rate mortgage available from 4.38 per cent (up to 60 per cent LTV)

Remortgage customers can borrow up to 85 per cent LTV
Existing borrowers can borrow up to 95 per cent LTV
£299 reservation fee for existing customers switching at end of current deal
£995 reservation fee
Two year tracker rate available from 3.93 per cent (up to 60 per cent LTV)

Remortgage customers can borrow up to 75 per cent LTV
Existing customers can borrow up to 95 per cent LTV
£299 reservation fee for existing customers switching at end of current deal
£995 fee for new customers
Three year tracker rate from 3.78 per cent (up to 60 per cent LTV)

Remortgage customers can borrow up to 75 per cent LTV
Existing customers can borrow up to 95 per cent LTV
£299 reservation fee for existing customers switching at end of current deal
£995 fee for new customers

Don’t forget to check out a few comparison web sites before deciding on your interest rate and mortgage product and if you’re unsure what to do seek professional mortgage advice from a qualified mortgage adviser; in today’s climate you should be able to get a great deal AND a great rate, as long as you have a good deposit.

Returning confidence must be converted into sales

Following publication of January lending figures by the Council of Mortgage Lenders, Peter Bolton King, chief executive of the NAEA, said:

“The NAEA’s own figures revealed that since January, first time buyers are coming back to the market, with enquiries up by about 20 per cent. These are people who want to buy property, are visiting agents and are searching websites like Propertylive.co.uk.

“It is crucial that they are able to translate this returning confidence into completed sales. It may be that these figures reflect the time lag between new enquiries and completions - otherwise it is damning evidence that more must be done to help first time buyers.”

Bank of England cuts base rate to 1 per cent!

The Bank of England’s Monetary Policy Committee decided to cut interest rates today by 0.5 per cent. The official base interest rate now stands at 1 per cent.

This rate cut follows further falls in economic output in the last quarter of 2008. The global banking and finance markets are still weak meaning the supply of credit is limited by many financial institutions.

     Following today’s interest rate cut, Richard Mason, Managing Director of www.Moneyextra.com has made the following comments;

“Today’s further cut in interest rates marks a new low for millions of savers around the country – such small returns on savings is unprecedented and savers need to start looking elsewhere to find a decent return on their investment.

“As prices continue to tumble, investment opportunities within the property market are conversely growing and there are bargains to be had which are unlikely to be around for long. However, while today’s drop in interest rates is good news for borrowers on standard variable rate and tracker rate mortgages, the cuts are not being felt where it’s most needed - in the first time buyers market.

“Rather than encouraging banks to start lending again, the continuing decline in interest rates is decimating the UK mortgage market, as lenders struggle to pass on cuts, choosing instead to withdraw their products. Our data shows the number of available mortgage schemes has this week reached a new low, having fallen by 86% in the last 12 months.

“This leaves first time buyers, Buy To Let investors and anyone without a big deposit struggling to buy a property – of the 1,634 mortgages currently available from prime lenders, almost 90% require a deposit of 20% or more*. 

“Our research on the UK market this week revealed that over 5 million people are looking to buy their first property in the next six months, while more than 675,000 homeowners are looking to downsize, so there’s a huge opportunity here.

“We predict that the first lender to take the plunge and start offering competitive mortgages with smaller deposits is going to be overwhelmed by the response from buyers.”

*1,452 mortgages currently require more than 80% LTV