by Mark Johnston
Average rates for tracker mortgages have been steadily dropping since the credit crunch started 3 years ago. Tracker follow the Bank of England base rate (which is currently 0.5%), they increase and decrease in line with interest rates. Average tracker rates are now as low as 3.55 percent compared to 6.3 percent back in 2007.
Although trackers are great value at the moment, many borrowers rate still looking for fixed rate mortgages to provide them with the security of a fixed monthly repayments and shelter them from any short term interest rate rises.
Whilst average tracker rates are 3.55 percent, the average five year fixed term mortgage is 5.06 percent. The surprising thing is that even though trackers are much lower, almost half of all new mortgages are still fixed rate whilst tracker mortgages only account for less than one third.
Jonathan Cornell, from First Action Finance, said: “Borrowers are aware that interest rates are not going to stay where they are forever and are opting for the security of a fixed rate. Up until now trackers have been extremely popular, but now there’s a move toward fixed rates and so banks are in a position in reduce tracker rates if they choose to and still make a profit.”
The Halifax recently reported a massive drop in house prices which effectively wiped £6,000 from the value of an average home. Some estate agents have described the UK market as “on a knife edge” whilst others have predicted further losses and a sustained period of turbulence in the market.
Over 40 percent of UK estate agents are predicting further falls in the value of UK homes which is an increase in 2 percent when compared to last month. The Royal Institution of Chartered Surveyors are expecting a fall in the value of homes as new properties flood the market because buyers demand dries up.
A spokesman for the Royal Institution of Chartered Surveyors, said: “The fresh influx of property to the market combined with a lack of buyers remains the key problem affecting the sector. Without sufficient demand property prices continue to slip back. It’s very much a buyers market at the moment.”
A growing number of people are now blaming banks and building societies for the market crash. Lenders have tightened their loan criteria so much that its almost impossible to get an first time buyer mortgage.
Ben Hudson, a member of the Royal Institution of Chartered Surveyors RICS, said: “Concerns over the economy continue. There are increases in the number of properties coming to the market and falls in the number of new buyers. The property market is once again on a knife edge.”
And Edward Waterson, a RICS member from Carter Jonas, said: “Buyers are becoming increasingly nervous of the economic climate.Buyers are also holding back ahead of the coalition’s unveiling of its much-anticipated Comprehensive spending review, next week.”
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