War of the Mortgages

by Mark Johnston

Low mortgage rates are here for the foreseeable future as banks and building societies fight to pull in a larger share of the mortgage market. One thing to look out for amongst all the headline grabbing rates is the fees that are associated with some of these deals.

After about four years of lenders slamming the door shut on mortgage deals, there appears to be a serious fight on to get customers back through those once closed doors. As the market begins to rise, banks and building societies are scrapping to claim their share of the market.

The money released into the FirstBuy programme will be interest free for up to five years and the interest will be charged at 1.75 per cent in the sixth year and after that interest would be charged at inflation rate plus 1 per cent.

According to Moneyfacts “Earlier this year the market expected a rise in bank base rate, that saw mortgage rates start to rise,”

“An imminent rise in bank base rate now appears unlikely, and the cost of funding on the swap rate market has reduced.”

“Lenders appear to be applying cuts equally across all loan-to-value (LTV) tiers, which is good news for first-time buyers, as previously cuts were only being applied to the lower LTV bands,”

The Bank of England Monetary Policy Committee is looking less and less likely to raise rates in the near future and Sir Mervyn King said “The reason we would raise interest rates would be in the context of a much stronger economy with unemployment falling rather than rising.” He noted further that those deals that tracked the base rate would see significant increases in their monthly outgoings but that this would be slightly delayed. “It should also be the case that the interest rates that borrowers face should not rise as fast as the rise in bank rate,” he said. For over two years, the Bank of England’s base rates has remained at a record low at 0.5 per cent.

Brokers London And Country said that “A drop in anticipation of base rate climbing imminently has led to money market rates falling, giving lenders the opportunity to sharpen their pencils and cut rates.”

If you have a 25 per cent deposit then you can apply for a 2.99 per cent two year fixed deal from Hinckley and Rugby building society, a good deal but be warned that there is a £990 fee associated. Northern Rock is back in the game cutting its rates by 0.17 per cent with Leeds building society following this lead and cutting their deals by 0.65 per cent too. GE Money is next with a rate but of 0.9 per cent with the Yorkshire building society ditching fees all together. There are some really good deals coming out and with house prices being at a year low, now is a good time to get into the market.

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