Newspaper article The Evening Standard (London, England)

Know All the Tricks If You Want to Get Yourself a Fix; Home-Owners Are Scrambling for a Set-Rate Mortgage. but Check out If a Tracker Could Be Better for You

Newspaper article The Evening Standard (London, England)

Know All the Tricks If You Want to Get Yourself a Fix; Home-Owners Are Scrambling for a Set-Rate Mortgage. but Check out If a Tracker Could Be Better for You

Article excerpt

Byline: Lucy Tobin

THE whispers of a house price bubble have turned into roars, and some property experts are now calling on the Bank of England to raise interest rates sooner than the expected increase next spring.

That means households are rushing to remortgage: almost 1500 borrowers are doing so each day amid fears the current low rates are fast disappearing.

And the vast majority are opting for fixed deals broker John Charcol says 85% of its clients have chosen a fixed rate since the start of this year.

"Many are looking to lock into a deal to give them certainty in their mortgage payments," adds David Hollingworth, of London & Country Mortgages.

Since the markets are clearly anticipating the rate rise too, fixed rate mortgages are already creeping up last summer the cheapest five-year fixed rates were just below 2.5%, today they're almost at 3%.

For many homeowners, fearing they may struggle to find new affordable deals, a fix is still worth it. As Nationwide boss Graham Beale has pointed out: "There have been around a million new first-time buyers since rates hit 0.5% in March 2009, so a whole generation of borrowers have never experienced increases in their monthly mortgage payments."

For those looking for certainty, and who have a deposit of at least 15%, or plenty of equity if remortgaging, fiveyear fixed rate deals offer "good value," according to Ray Boulger of John Charcol. "They allow the borrower to lock into current low rates before rates increase. However, for those with only a 5% or 10% deposit, a 2-year fix is more worthy of consideration, because borrowers with a small deposit have to pay such a huge interest rate premium."

Boulger points out opting for a shorter fixed term deal means more time to build up your capital. "The cheapest two-year fixes start at around 5% at 95% loan-to-value, 4% at 90% and 3% at 85% LTV," he says. "Over the first two years of a mortgage about 4% of the capital will be repaid and this, combined with the probability of further house price increases over the next two years, will reduce many borrowers' LTVs by at least 10%, opening the door to the cheaper rates available at lower LTVs. …

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