Mortgage Market Roundup

With fixed rates having risen in recent weeks and now looking a tad overpriced, especially for longer term fixes, tracker products are booming again due to headline rates with a “1” at the start.

Whilst HSBC have stolen all the headlines with their 1.99% lowest rate ever malarkey, (actually the lowest rate I remember was 0% for 6 months!),  Woolwich have quietly taken up the fight and slipped in a stepped tracker product starting at 1.98% !

This is all very well, but the battleground for lenders offering these products is below 75% Loan-To-Value, so those struggling to come up with a decent deposit have a right to feel slightly hard done by, and leaves many first-time buyers relying on the “Bank of Mum & Dad” for further assistance.

With lenders still maintaining their “flight to quality”, in other words only really interested in lending to those with large deposits, a perfect credit rating and not even remotely stretching their income, you would be forgiven for thinking that the clouds of gloom over the market are here to stay a while longer.

The good news, however is that in recent weeks there have been tentative signs that things are easing slightly. We have seen reports showing that property has not been this affordable for many years, a marked increase in the number of mortgage products available, and house prices stabilising.

The biggest area of movement is in the large mortgage loan arena where properties seem to be moving quickly and many Private Banks who specialise in lending to High Net Worth individuals have taken up the slack from high street lenders.

At this level products such as a 2.99% base rate tracker, a 3.99% 2 year fixed and a 3.25% variable with no penalties offer a superb incentive for those looking to borrow above £1,000,000 to take advantage of lower house prices and not tie up all their available cash. The good news is that these products have a sensible underwriting policy and very competitive fees.

The increased availability of finance in this area is a welcome boost, and we are already seeing many traditional cash buyers deciding to borrow at historically low rates on at least part of the cost rather than tie up all their cash that could be utilised elsewhere.

There are two other products worth noting. First is that current conditions have brought about a  renaissance for the “Offset Mortgage”, which, starting at 2.97%, is now available for a tiny margin above the leading products, but brings with it a wealth of flexibility and advantages standard tracker products can only dream of.

The fact that offset products are now available at levels not seen since before the credit crunch is yet another sign that mortgage lending is easing, albeit slowly.

In simplistic terms, an Offset Mortgage is a way of using what is in your savings and current accounts to reduce the mortgage balance you are charged interest on. Offsetting like this reduces the amount of interest you need to pay the lender each month. So you can either simply pay less each month, or keep payments the same and pay off your mortgage earlier.

Secondly, there is also a marvellous product priced at Bank of England base rate plus 2.58%, with an arrangement fee of £995. In other words you start off paying a mere 3.08% for 2 years. As well as coming with a free valuation and legal fees for remortgages, the real selling point is the ability to switch into a fixed-rate product at any time without further underwriting or cost.

This really does give you the best of both worlds, and allows you to enjoy the benefits of low rates without the worry that you may not be able to fix when more security is needed or when base rate starts to rise again.

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