Interest rates on U.S. 30-year fixed-rate mortgages fell below 5 percent on Friday, a significant psychological level that should help the hard-hit U.S. housing market to recover, according to real estate website Zillow.com.
The 30-year fixed-rate mortgage, the most widely used home loan, fell to 4.94 percent on Friday after hovering between 5 percent and 5.10 percent on Thursday and around 5.05 percent a week earlier, according to Zillow Mortgage Marketplace.
May was the last time mortgage rates were consistently below 5 percent, Zillow said.
"Many observers didn't expect rates to fall below five percent again after their brief flirtation in the sub-five percent range earlier this summer," said Stan Humphries, chief economist at Zillow.com in Seattle, Washington.
"This should definitely create another uptick in refinance activity," he said.
The lower rates reflect a fall in yields on U.S. government bonds, which are linked to the mortgage market.
Mortgage rates have gyrated over the past few months after spending a good part of the year moving downward.
Attractive rates are a positive for the U.S. housing market, which has been showing some signs of stabilization, with sales rising and home price declines moderating in many regions of the country.
"It could also be a nice boost to the home purchase mortgage market, arriving just at the time that the most active part of the 2009 home shopping season begins to wind down," Humphries said.
"For buyers with secure jobs, good down payments and seeking to live in their new house for more than five years, it could be an attractive market right now with home prices having been reset several years and financing costs at historic lows," he said.
Saturday 12 September 2009
Friday 11 September 2009
Banks hike mortgage fees for new borrowers
Banks and building societies are increasingly imposing percentage fees on new mortgages, a report has found, causing a headache for borrowers requiring larger loans.
Over the past year, the number of mortgages charging a percentage fee has increased from 43 per cent of the market to 49 per cent, according to the personal finance website MoneyExpert.com.
The average percentage fee comes in at 0.89 per cent. On a typical home loan of £150,000 this equates to a fee of £1,335. However, some charge fees as high as 2.5 per cent adding £3,750 to the typical mortgage.
These fees are particularly onerous for borrowers requiring larger loans. For example, a borrower charged a 2.5 per cent fee on a £500,000 mortgage would be required to to pay £12,500 in set-up fees.Only a small minority (4 per cent) of providers impose a cap on arrangement charges.
A fixed fee is generally better if you have a larger mortgage, but these fees have also increased significantly over the past 12 months. The highest fee has increased from £1,999 to £2,499, with the latter charged by the Bank of Scotland, one of the bailed-out banks.
Richard Morea of L&C Mortgages, a broker, said: “Borrowers need to take the best deal available to them, and this means taking all costs into account, including arrangement fees and valuation costs not just the interest rate on offer.”
It can make sense to favour a deal with a lower fee, even if you will pay a higher interest rate. Alliance & Leicester, for example, offers a two-year deal with a rate of 2.95 per cent and no fee.
HSBC, meanwhile, has introduced a market-leading two year discounted deal with a rate of 1.99 per cent and a fixed fee of £1,199 for up to 60 per cent of the value of a property.
Over ten years, you would be £50 worse off with the HSBC deal on a £100,000 repayment mortgage, according to L&C Mortgages.
Over the past year, the number of mortgages charging a percentage fee has increased from 43 per cent of the market to 49 per cent, according to the personal finance website MoneyExpert.com.
The average percentage fee comes in at 0.89 per cent. On a typical home loan of £150,000 this equates to a fee of £1,335. However, some charge fees as high as 2.5 per cent adding £3,750 to the typical mortgage.
These fees are particularly onerous for borrowers requiring larger loans. For example, a borrower charged a 2.5 per cent fee on a £500,000 mortgage would be required to to pay £12,500 in set-up fees.Only a small minority (4 per cent) of providers impose a cap on arrangement charges.
A fixed fee is generally better if you have a larger mortgage, but these fees have also increased significantly over the past 12 months. The highest fee has increased from £1,999 to £2,499, with the latter charged by the Bank of Scotland, one of the bailed-out banks.
Richard Morea of L&C Mortgages, a broker, said: “Borrowers need to take the best deal available to them, and this means taking all costs into account, including arrangement fees and valuation costs not just the interest rate on offer.”
It can make sense to favour a deal with a lower fee, even if you will pay a higher interest rate. Alliance & Leicester, for example, offers a two-year deal with a rate of 2.95 per cent and no fee.
HSBC, meanwhile, has introduced a market-leading two year discounted deal with a rate of 1.99 per cent and a fixed fee of £1,199 for up to 60 per cent of the value of a property.
Over ten years, you would be £50 worse off with the HSBC deal on a £100,000 repayment mortgage, according to L&C Mortgages.
Wednesday 9 September 2009
Fixed-rate mortgage costs rise
Interest rates on fixed-rate mortgages are rising despite a falling inter-bank rate, according to Bank of England figures.
The cost of borrowing between banks fell in August, but lenders are not passing on the savings to mortgage customers on fixed-rate deals, figures showed today.
Data from the Bank of England showed the average interest rate charged on a five-year fixed-rate mortgage with a loan to value (LTV) of 75% reached an average 5.72% in August, having dipped to below 5% between January and May.
However, five-year swap rates (the bank-to-bank lending costs on which these deals are based) have seen a significant fall from a recent peak of 3.79% on 7 August to 3.34% at the end of the month.
Interest rates on two-year fixed-rate mortgages with a 25% deposit have remained at 4.42% in August, despite two-year swap rates falling from 2.37% to 1.95% during the month.
This was the fourth month in a row that the cost of five-year fixed-rate deals had risen, and by the end of August average rates on loans were at their highest level since the end of last October. At that point the average deal cost 5.88%, but the base rate was 4.5% compared with 0.5% today.
Banks were quick to pass on higher costs to borrowers in June and July this year when swap rates increased sharply, but falling rates have failed to produce more competitive rates.
Fixed-rate mortgages have grown in popularity as borrowers attempt to control their outgoings and shield themselves from possible interest rate rises. In June, 78% of people taking out a mortgage opted for a fixed-rate deal, the highest proportion in two years.
Critics have accused lenders of profiteering by keeping large margins between their own borrowing rates and those passed on to customers. But David Hollingworth of broker London & Country said that while there were profits to be made a lack of enthusiasm for increasing lending books was a bigger problem.
"I think one of the main reasons fixed rates have been staying put or even becoming more expensive is all tied up in the marketplace we are in," he said. "There is a lack of competition and a lack of lenders in the marketplace, which means there is an imbalance between supply and demand."
He added that many lenders had "at least as many customers as they want to attract" and that there was little enthusiasm for increasing competition as banks are "no longer chasing volume" when it comes to mortgage borrowers.
Hollingworth said only three lenders – Newcastle building society, Britannia building society and HSBC – were now offering five-year fixed-rate deals below 5%.
For both Britiannia and HSBC, borrowers need a deposit of at least 40% to get the rate, while Newcastle's deal is open to people with a 25% deposit.
The cost of borrowing between banks fell in August, but lenders are not passing on the savings to mortgage customers on fixed-rate deals, figures showed today.
Data from the Bank of England showed the average interest rate charged on a five-year fixed-rate mortgage with a loan to value (LTV) of 75% reached an average 5.72% in August, having dipped to below 5% between January and May.
However, five-year swap rates (the bank-to-bank lending costs on which these deals are based) have seen a significant fall from a recent peak of 3.79% on 7 August to 3.34% at the end of the month.
Interest rates on two-year fixed-rate mortgages with a 25% deposit have remained at 4.42% in August, despite two-year swap rates falling from 2.37% to 1.95% during the month.
This was the fourth month in a row that the cost of five-year fixed-rate deals had risen, and by the end of August average rates on loans were at their highest level since the end of last October. At that point the average deal cost 5.88%, but the base rate was 4.5% compared with 0.5% today.
Banks were quick to pass on higher costs to borrowers in June and July this year when swap rates increased sharply, but falling rates have failed to produce more competitive rates.
Fixed-rate mortgages have grown in popularity as borrowers attempt to control their outgoings and shield themselves from possible interest rate rises. In June, 78% of people taking out a mortgage opted for a fixed-rate deal, the highest proportion in two years.
Critics have accused lenders of profiteering by keeping large margins between their own borrowing rates and those passed on to customers. But David Hollingworth of broker London & Country said that while there were profits to be made a lack of enthusiasm for increasing lending books was a bigger problem.
"I think one of the main reasons fixed rates have been staying put or even becoming more expensive is all tied up in the marketplace we are in," he said. "There is a lack of competition and a lack of lenders in the marketplace, which means there is an imbalance between supply and demand."
He added that many lenders had "at least as many customers as they want to attract" and that there was little enthusiasm for increasing competition as banks are "no longer chasing volume" when it comes to mortgage borrowers.
Hollingworth said only three lenders – Newcastle building society, Britannia building society and HSBC – were now offering five-year fixed-rate deals below 5%.
For both Britiannia and HSBC, borrowers need a deposit of at least 40% to get the rate, while Newcastle's deal is open to people with a 25% deposit.
Tuesday 8 September 2009
Appetite coming back to the mortgage market, says moneysupermarket.com
Consumers have got a fresh appetite for getting into the mortgage market, according to moneysupermarket.com.
Hannah-Mercedes Skenfield, mortgage spokesperson at the price comparison site, made her comments following the release of figures which showed that the number of people looking for a mortgage on the website has gone up by a fifth since January this year.
She suggested that the public may have decided that house prices had stabilised and that it was now time to get on the property ladder while asking prices and interest rates are low.
But she also noted that not all lenders have dropped their interest rates.
"Although many other lenders have barely recognised the dramatic fall in base rates and have kept their mortgage deals relatively expensive there are some good deals to be had."
The figures released by moneysupermarket.com also showed that remortgage searches on its site had dropped by a third at the end of August.
This week, the company pointed out that First Direct's new mortgage products are not quite as positive as they seem because they are directly linked to the Bank of England's base interest rate.
Hannah-Mercedes Skenfield, mortgage spokesperson at the price comparison site, made her comments following the release of figures which showed that the number of people looking for a mortgage on the website has gone up by a fifth since January this year.
She suggested that the public may have decided that house prices had stabilised and that it was now time to get on the property ladder while asking prices and interest rates are low.
But she also noted that not all lenders have dropped their interest rates.
"Although many other lenders have barely recognised the dramatic fall in base rates and have kept their mortgage deals relatively expensive there are some good deals to be had."
The figures released by moneysupermarket.com also showed that remortgage searches on its site had dropped by a third at the end of August.
This week, the company pointed out that First Direct's new mortgage products are not quite as positive as they seem because they are directly linked to the Bank of England's base interest rate.
New scheme to help home owners struggling with mortgage debt
The Government has launched a national scheme to help home owners falling into debt with their mortgage payments
By providing good advice and assistance, the scheme aims to help mortgage borrowers stay in their home if they encounter problems paying their mortgage.
It may be sensible to use this timely information in conjunction with other debt management advice services and web sites.
Based around a user friendly web site, the mortgage help scheme offers a step by step guide to how to handle the situation so that struggling borrower can keep his home.
Covering topics such as missed mortgage payments, the threat of repossession and court orders, the web site advises people to face up to their difficulties and contact their mortgage lender as soon as possible.
There are links to local authority resources that may be able to help those close to repossession or a court appearance and detailed information about the processes that may result in the loss of a home.
This information campaign has won the support of the Council for Mortgage lenders. Michael Coogan, the CML’s director general commented
“We welcome this additional initiative by the government to remind borrowers to speak to their lender at the earliest possible opportunity, and preferably as soon as they think they might miss a payment. Avoiding possession is as important to lenders as it is to borrowers, and an early warning will help reduce the risk of this worst-case outcome.
“Most customers who are committed to resolving their problems and working with their lender can successfully manage their way through a period of short-term payment difficulty and avoid possession.”
By providing good advice and assistance, the scheme aims to help mortgage borrowers stay in their home if they encounter problems paying their mortgage.
It may be sensible to use this timely information in conjunction with other debt management advice services and web sites.
Based around a user friendly web site, the mortgage help scheme offers a step by step guide to how to handle the situation so that struggling borrower can keep his home.
Covering topics such as missed mortgage payments, the threat of repossession and court orders, the web site advises people to face up to their difficulties and contact their mortgage lender as soon as possible.
There are links to local authority resources that may be able to help those close to repossession or a court appearance and detailed information about the processes that may result in the loss of a home.
This information campaign has won the support of the Council for Mortgage lenders. Michael Coogan, the CML’s director general commented
“We welcome this additional initiative by the government to remind borrowers to speak to their lender at the earliest possible opportunity, and preferably as soon as they think they might miss a payment. Avoiding possession is as important to lenders as it is to borrowers, and an early warning will help reduce the risk of this worst-case outcome.
“Most customers who are committed to resolving their problems and working with their lender can successfully manage their way through a period of short-term payment difficulty and avoid possession.”
Monday 7 September 2009
Northern Rock launches tracker range
Northern Rock has launched a tracker range, with a two-year flexible base rate tracker available at 3.29% for both purchase and remortgage.
The tracker comes with £995 product fee and a maximum LTV of 65%. and also comes with a fee-free option at a higher rate of 3.89%.
Selected flexible fixed rate mortgages have also been reduced by up to 0.40%. A two-year flexible fixed rate starts from as little as 4.09% with a fee of £995, or from 5.09% with no product fee.
Five-year flexible fixed rates now start from 5.79% with a £995 product fee, or from 6.19% with no product fee.
Standard features and benefits of Northern Rock’s mortgage range include:
• Full flexibility (excluding Lifetime products) offering daily interest calculation, unlimited penalty free overpayments, underpayments, borrow back at the product rate and payment holidays (subject to meeting qualifying criteria).
• A Fee Saver Option available on all residential mortgage products.
• No overhanging Early Repayment Charges on any Northern Rock mortgage product.
• No Higher Lending Charge.
The tracker comes with £995 product fee and a maximum LTV of 65%. and also comes with a fee-free option at a higher rate of 3.89%.
Selected flexible fixed rate mortgages have also been reduced by up to 0.40%. A two-year flexible fixed rate starts from as little as 4.09% with a fee of £995, or from 5.09% with no product fee.
Five-year flexible fixed rates now start from 5.79% with a £995 product fee, or from 6.19% with no product fee.
Standard features and benefits of Northern Rock’s mortgage range include:
• Full flexibility (excluding Lifetime products) offering daily interest calculation, unlimited penalty free overpayments, underpayments, borrow back at the product rate and payment holidays (subject to meeting qualifying criteria).
• A Fee Saver Option available on all residential mortgage products.
• No overhanging Early Repayment Charges on any Northern Rock mortgage product.
• No Higher Lending Charge.
Mortgage rates fall but there are still catches
Banks are introducing record low rates, but borrowers can only get the best deals by switching current accounts
Mortgage rates may be coming down but lenders are still imposing restrictions on their best deals.
HSBC launched a “record-low” mortgage last week at a rate of 1.99%, but borrowers must provide a 40% deposit — or £80,000 on a £200,000 home loan.
HSBC’s decision to offer the mortgage with a high deposit, when most of its other top deals are available with a deposit of only 25%, takes the mortgage out of reach for most first-time buyers — though it will be attractive to existing owners moving home or remortgaging.
However, the rate is a discount of 1.95 percentage points off HSBC’s standard variable rate (SVR), now 3.94%, rather than a Bank rate tracker. That means there is no guarantee the rate will move in line with Bank rate in future.
There is also a relatively high arrangement fee of £1,199 and the maximum loan size is £500,000.
For those with bigger mortgages, private banks are offering the best deals — although borrowers generally have to take out other products to qualify.
Royal Bank of Canada, a private bank, has launched in the UK, offering a deal as low as 1.53% — or 1 percentage point over one-month Libor (the rate at which banks lend to each other), currently 0.53%. However, deals are available only through brokers and to those who deposit £1m cash with the bank.
Meanwhile, First Direct, Abbey, Alliance & Leicester (A&L) and NatWest are among lenders offering their best rates only to borrowers who switch their current account.
First Direct, for example, offers the market-leading two-year fix at 3.49% for borrowers with a 40% deposit, and a lifetime tracker at 2.95%. However, borrowers must make payments from a First Direct current account and deals are also available on a repayment basis only.
A&L, which offers the best “flexible” tracker allowing overpayments at 2.95% with no fee, requires borrowers to pay at least £500 a month into the bank’s current account.
Aaron Strutt of Trinity Financial, a broker, said: “Banks have always been fond of cross-selling products — acquiring current account customers means they can sell on profitable products such as insurance.
“If customers later switch their savings and salary it gives the added benefit of boosting the cash side of their balance sheets.
“However, borrowers need to be sure they really need the products — there could be better deals around for those who don’t want to switch.”
We look at what it takes to get the best deals.
TRY A PRIVATE BANK
If you have need to borrow more than £500,000, private banks are offering by far the best deals and they will often lend up to 80% of the property’s value — although you may have to transfer millions of pounds in cash or investments to qualify.
Coutts, part of Royal Bank of Scotland, is offering two-year trackers from 2.99% with fees of around 0.5%.
However, borrowers can only apply through mortgage brokers and are assessed on a “case-by-case basis”.
Coutts generally requires you to put down one-third of the amount you borrow on deposit with the bank.
RBS Wealth, which includes Coutts, more than doubled its share of the overall group’s lending to nearly 10% in the 12 months to June, advancing £400m in loans, according to previously unpublished figures.
Meanwhile, HSBC Private Bank will now lend up to 70% of a property’s value on loans of more than £2m and is offering trackers at 2.7%, while Kleinwort Benson recently lent £1m at a rate of just 2% to a client of Largemortgageloans, the broker.
Ian Gray of the broker said: “He had a house in Primrose Hill, north London, and a buy-to-let flat without a mortgage and was interested in raising a loan where he could draw down funds in the future when certain business opportunities came up.
“The high street wouldn’t have done it as he didn’t have a traditional salary income. We were able to raise a revolving facility with Kleinwort Benson where he can draw down and repay over the years as he needs funds, and it’s at a rate of only 2%.
“As a general rule, private banks usually start to take notice if you offer up at least a third of the lending on deposit, so it really depends on how much we want to borrow.
“This is particularly helpful for those whose cash is tied up in a share portfolio they don’t want to liquidate at the moment, or in offshore funds which can be brought under management with the bank but kept offshore.”
SWITCH ACCOUNTS
If you want a fixed rate, other banks are offering better deals than HSBC’s 3.99% over two years — but again there are restrictions.
NatWest has a standard two-year fix at 3.69% but this is reduced to 3.59% for those who take out an Advantage Private current account, which costs £20 a month, pays 0.5% interest on credit balances and has an overdraft rate of 13.5%. It will lend up to £2m compared with £1m for high street customers.
Someone with a £1m loan would save £1,568 a year by moving their current account compared with the standard deal, including the £20 for the current account.
Gray said: “We find clients with £2m loans are usually content to switch to a paid-for current account as it shaves a few thousand pounds off their loan.”
You need a minimum salary of £75,000, joint income of £100,000 or £50,000 to invest to be eligible. The account offers annual travel insurance, breakdown cover, 25% savings on concert and theatre tickets and a personal “relationship manager”.
However, you could get an even better deal if you moved your current account to First Direct, which has a two-year fix at 3.49% and where current accounts are free. As this is an “offset” deal, borrowers can reduce monthly payments by using the balance in the linked current account.
Alternatively, the best two-year fix where you do not have to move your current account is from Royal Bank of Scotland, at 3.69% with a fee of £798 for those with a 25% deposit. This would cost you just £300 more than the First Direct deal over the two-year term — without the bother of moving your current account.
Strutt said: “Borrowers may be content to pay the extra £300 if it means they don’t have the hassle of switching their direct debits.”
Enjoying the perks
SELINA GOH, 33, an investment banker and her partner, Brett McCulley, 34, a solicitor, remortgaged their two-bedroom flat in Islington, north London, on a two-year fix from Royal Bank of Scotland last month.
The deal, at 3.89%, was 0.10 percentage points less than the high street deal on offer from RBS because the couple opened the bank’s Royalties Private current account, which costs £18 a month and is available to those who have a salary of at least £75,000.
Despite the account fee, the couple will save about £600 in repayments over two years compared with the high street deal. Goh said: “When we came to remortgage, fixed-rate deals were starting to go up and I was worried. Our existing deal from Halifax was 5.19% so I was surprised to get 3.89%.
“The RBS current account gives us perks. We travel a lot so things such as the airport lounge access are a real bonus.
In the end the benefits of the account outweighed the inconvenience of opening a new account and the cost.”
Mortgage rates may be coming down but lenders are still imposing restrictions on their best deals.
HSBC launched a “record-low” mortgage last week at a rate of 1.99%, but borrowers must provide a 40% deposit — or £80,000 on a £200,000 home loan.
HSBC’s decision to offer the mortgage with a high deposit, when most of its other top deals are available with a deposit of only 25%, takes the mortgage out of reach for most first-time buyers — though it will be attractive to existing owners moving home or remortgaging.
However, the rate is a discount of 1.95 percentage points off HSBC’s standard variable rate (SVR), now 3.94%, rather than a Bank rate tracker. That means there is no guarantee the rate will move in line with Bank rate in future.
There is also a relatively high arrangement fee of £1,199 and the maximum loan size is £500,000.
For those with bigger mortgages, private banks are offering the best deals — although borrowers generally have to take out other products to qualify.
Royal Bank of Canada, a private bank, has launched in the UK, offering a deal as low as 1.53% — or 1 percentage point over one-month Libor (the rate at which banks lend to each other), currently 0.53%. However, deals are available only through brokers and to those who deposit £1m cash with the bank.
Meanwhile, First Direct, Abbey, Alliance & Leicester (A&L) and NatWest are among lenders offering their best rates only to borrowers who switch their current account.
First Direct, for example, offers the market-leading two-year fix at 3.49% for borrowers with a 40% deposit, and a lifetime tracker at 2.95%. However, borrowers must make payments from a First Direct current account and deals are also available on a repayment basis only.
A&L, which offers the best “flexible” tracker allowing overpayments at 2.95% with no fee, requires borrowers to pay at least £500 a month into the bank’s current account.
Aaron Strutt of Trinity Financial, a broker, said: “Banks have always been fond of cross-selling products — acquiring current account customers means they can sell on profitable products such as insurance.
“If customers later switch their savings and salary it gives the added benefit of boosting the cash side of their balance sheets.
“However, borrowers need to be sure they really need the products — there could be better deals around for those who don’t want to switch.”
We look at what it takes to get the best deals.
TRY A PRIVATE BANK
If you have need to borrow more than £500,000, private banks are offering by far the best deals and they will often lend up to 80% of the property’s value — although you may have to transfer millions of pounds in cash or investments to qualify.
Coutts, part of Royal Bank of Scotland, is offering two-year trackers from 2.99% with fees of around 0.5%.
However, borrowers can only apply through mortgage brokers and are assessed on a “case-by-case basis”.
Coutts generally requires you to put down one-third of the amount you borrow on deposit with the bank.
RBS Wealth, which includes Coutts, more than doubled its share of the overall group’s lending to nearly 10% in the 12 months to June, advancing £400m in loans, according to previously unpublished figures.
Meanwhile, HSBC Private Bank will now lend up to 70% of a property’s value on loans of more than £2m and is offering trackers at 2.7%, while Kleinwort Benson recently lent £1m at a rate of just 2% to a client of Largemortgageloans, the broker.
Ian Gray of the broker said: “He had a house in Primrose Hill, north London, and a buy-to-let flat without a mortgage and was interested in raising a loan where he could draw down funds in the future when certain business opportunities came up.
“The high street wouldn’t have done it as he didn’t have a traditional salary income. We were able to raise a revolving facility with Kleinwort Benson where he can draw down and repay over the years as he needs funds, and it’s at a rate of only 2%.
“As a general rule, private banks usually start to take notice if you offer up at least a third of the lending on deposit, so it really depends on how much we want to borrow.
“This is particularly helpful for those whose cash is tied up in a share portfolio they don’t want to liquidate at the moment, or in offshore funds which can be brought under management with the bank but kept offshore.”
SWITCH ACCOUNTS
If you want a fixed rate, other banks are offering better deals than HSBC’s 3.99% over two years — but again there are restrictions.
NatWest has a standard two-year fix at 3.69% but this is reduced to 3.59% for those who take out an Advantage Private current account, which costs £20 a month, pays 0.5% interest on credit balances and has an overdraft rate of 13.5%. It will lend up to £2m compared with £1m for high street customers.
Someone with a £1m loan would save £1,568 a year by moving their current account compared with the standard deal, including the £20 for the current account.
Gray said: “We find clients with £2m loans are usually content to switch to a paid-for current account as it shaves a few thousand pounds off their loan.”
You need a minimum salary of £75,000, joint income of £100,000 or £50,000 to invest to be eligible. The account offers annual travel insurance, breakdown cover, 25% savings on concert and theatre tickets and a personal “relationship manager”.
However, you could get an even better deal if you moved your current account to First Direct, which has a two-year fix at 3.49% and where current accounts are free. As this is an “offset” deal, borrowers can reduce monthly payments by using the balance in the linked current account.
Alternatively, the best two-year fix where you do not have to move your current account is from Royal Bank of Scotland, at 3.69% with a fee of £798 for those with a 25% deposit. This would cost you just £300 more than the First Direct deal over the two-year term — without the bother of moving your current account.
Strutt said: “Borrowers may be content to pay the extra £300 if it means they don’t have the hassle of switching their direct debits.”
Enjoying the perks
SELINA GOH, 33, an investment banker and her partner, Brett McCulley, 34, a solicitor, remortgaged their two-bedroom flat in Islington, north London, on a two-year fix from Royal Bank of Scotland last month.
The deal, at 3.89%, was 0.10 percentage points less than the high street deal on offer from RBS because the couple opened the bank’s Royalties Private current account, which costs £18 a month and is available to those who have a salary of at least £75,000.
Despite the account fee, the couple will save about £600 in repayments over two years compared with the high street deal. Goh said: “When we came to remortgage, fixed-rate deals were starting to go up and I was worried. Our existing deal from Halifax was 5.19% so I was surprised to get 3.89%.
“The RBS current account gives us perks. We travel a lot so things such as the airport lounge access are a real bonus.
In the end the benefits of the account outweighed the inconvenience of opening a new account and the cost.”
HSBC low interest rate mortgage explained
Q. HSBC is offering a new, low interest rate, mortgage. What can you tell me about it? Is it for me?
A. HSBC has just launched a new mortgage product, with a headline rate of just 1.99%.
But while it looks good news, it is not relevant for most home buyers or home owners. It is only available for new house purchases — not for remortgages. And only people raising 40% of the property value from their own resources are eligible.
The offer from HSBC should come with warnings. Although the headline rate is 1.99%, this is not a fixed rate — but is based on a discount on its standard variable rate. This means that if HSBC raises its SVR, the rate on this mortgage rises too.
The discount only applies for two years, at which time borrowers should look again for the best deal.
The mortgage also comes with an initial £1,199 fee.
A. HSBC has just launched a new mortgage product, with a headline rate of just 1.99%.
But while it looks good news, it is not relevant for most home buyers or home owners. It is only available for new house purchases — not for remortgages. And only people raising 40% of the property value from their own resources are eligible.
The offer from HSBC should come with warnings. Although the headline rate is 1.99%, this is not a fixed rate — but is based on a discount on its standard variable rate. This means that if HSBC raises its SVR, the rate on this mortgage rises too.
The discount only applies for two years, at which time borrowers should look again for the best deal.
The mortgage also comes with an initial £1,199 fee.
Saturday 5 September 2009
Mortgage repayments exceed new borrowing
People paid off mortgage debt faster last month than they took on new debt for the first time since records began in 1993, Bank of England figures showed today, suggesting a real housing market recovery could be some way off.
The Bank said mortgage repayments exceeded new borrowing by £418m in July as people are using a period of ultra-low interest rates to pay off the capital on their mortgages, especially if they have benefitted from being on a tracker mortgage. The wider measure of consumer credit also fell back slightly for the first time since 1993, implying that households are responding to the economic downturn by consolidating their finances, getting rid of debt and shunning new credit.
The figures also showed another small pick-up in new mortgage approvals, to 50,000 last month from 48,000 in June, but they remain way below the 80,000 level consistent with rising house prices.
"The numbers of mortgages approved for house purchase each month by the high street banks have continued to recover from last November's low point, but new lending is largely being offset by repayments," said David Dooks of the British Bankers' Association.
Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said: "The fundamental issue remains the withdrawal of many lenders from the mortgage market over the past year and the reluctance of new participants to play a meaningful role in delivering finance to potential homebuyers."The Building Societies Association reported today that its customers borrowed £2bn in July, the highest monthly figure this year, but they repaid £2.65bn.
BSA director-general Adrian Coles said the mortgage market was likely to remain subdued for the rest of the year. "This is primarily because of the difficulties all lenders face in raising funds for mortgage lending," he said.
Richard McGuire at RBC Capital Markets said: "The fact that consumers are, in aggregate, opting to pay down their debts is reflective both of the dearth of affordable credit and, more fundamentally, a flight to savings that we expect will continue in line with the ongoing slackening of the jobs market.
"Worryingly, the Bank of England figures also showed that bank lending to non-financial companies in July fell by a hefty £8.4bn, or 1.7%, on the month. The three-month annualised rate fell by 7.8%, a number described as "astoundingly weak" by Vicky Redwood at Capital Economics and one which makes a mockery of banks' claims to be lending more to companies to help them through the recession.
The Liberal Democrat economic spokesman, Vince Cable, said: "The figures make it clear that businesses right across the country are continuing to feel the squeeze of the credit crunch."If firms are unable to access credit it is likely we will see even more companies going under, deepening the recession and driving up unemployment.
It is becoming clear that the Bank of England's attempts to boost lending are only having a limited impact as banks continue to hoard money."Separate figures showed the jobless rate in the 16-nation eurozone rose to 9.5% last month, its highest in a decade.
The number of unemployed rose 167,000 in July to just over 15 million people. That rise was, however, a lot smaller than the half million a month seen earlier this year.There were significant differences in individual countries. Spanish joblessness, for example, rose to 18.5% from 18.1% in June and 12.5% a year ago.
In Ireland, the unemployment rate rose to 12.5% from 12.2%.By contrast, the German unemployment rate remained stable at 7.7% for the three months to July and has moved up only 0.6 percentage points between September last year and July 2009
The Bank said mortgage repayments exceeded new borrowing by £418m in July as people are using a period of ultra-low interest rates to pay off the capital on their mortgages, especially if they have benefitted from being on a tracker mortgage. The wider measure of consumer credit also fell back slightly for the first time since 1993, implying that households are responding to the economic downturn by consolidating their finances, getting rid of debt and shunning new credit.
The figures also showed another small pick-up in new mortgage approvals, to 50,000 last month from 48,000 in June, but they remain way below the 80,000 level consistent with rising house prices.
"The numbers of mortgages approved for house purchase each month by the high street banks have continued to recover from last November's low point, but new lending is largely being offset by repayments," said David Dooks of the British Bankers' Association.
Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said: "The fundamental issue remains the withdrawal of many lenders from the mortgage market over the past year and the reluctance of new participants to play a meaningful role in delivering finance to potential homebuyers."The Building Societies Association reported today that its customers borrowed £2bn in July, the highest monthly figure this year, but they repaid £2.65bn.
BSA director-general Adrian Coles said the mortgage market was likely to remain subdued for the rest of the year. "This is primarily because of the difficulties all lenders face in raising funds for mortgage lending," he said.
Richard McGuire at RBC Capital Markets said: "The fact that consumers are, in aggregate, opting to pay down their debts is reflective both of the dearth of affordable credit and, more fundamentally, a flight to savings that we expect will continue in line with the ongoing slackening of the jobs market.
"Worryingly, the Bank of England figures also showed that bank lending to non-financial companies in July fell by a hefty £8.4bn, or 1.7%, on the month. The three-month annualised rate fell by 7.8%, a number described as "astoundingly weak" by Vicky Redwood at Capital Economics and one which makes a mockery of banks' claims to be lending more to companies to help them through the recession.
The Liberal Democrat economic spokesman, Vince Cable, said: "The figures make it clear that businesses right across the country are continuing to feel the squeeze of the credit crunch."If firms are unable to access credit it is likely we will see even more companies going under, deepening the recession and driving up unemployment.
It is becoming clear that the Bank of England's attempts to boost lending are only having a limited impact as banks continue to hoard money."Separate figures showed the jobless rate in the 16-nation eurozone rose to 9.5% last month, its highest in a decade.
The number of unemployed rose 167,000 in July to just over 15 million people. That rise was, however, a lot smaller than the half million a month seen earlier this year.There were significant differences in individual countries. Spanish joblessness, for example, rose to 18.5% from 18.1% in June and 12.5% a year ago.
In Ireland, the unemployment rate rose to 12.5% from 12.2%.By contrast, the German unemployment rate remained stable at 7.7% for the three months to July and has moved up only 0.6 percentage points between September last year and July 2009
Mortgage complaints double over two years
Mortgage firms received 12,716 complaints in the second half of 2008, according to the Financial Services Authority (FSA).
This figure is double the amount of complaints received in the first half of 2006 when complaints reached 6,837. However, it is below the 15,776 which were recorded in the first half of 2008.
The figures reveal that only 38% of all mortgage complaints were upheld by the FSA in the second half of 2008, down from 48% in the first half of 2006. In terms of the complaints received, there were 71,406 complaints relating to flexible mortgages between the first half of 2006 and the second half of 2008.Building societies have also seen a sharp rise in complaints against them with 79,349 made in the second half of 2008, compared to 38,989 in the first half of 2006.Complaints on flexible mortgages reached a peak of 20,019 complaints in the first half of 2007.
Lifetime mortgages received 2,173 complaints between the first half of 2006 and the second half of 2008, reaching a peak of 404 in the second half of 2007.
Complaints relating to arrears handling more than doubled over the last two years, increasing from 13,784 in the first half of 2006 to 27,697 in the second half of 2008.Self-cert mortgages received 14,029 complaints in the same period, with 3,419 being made in the first half of 2008. There were also a large number of complaints made against general insurance intermediary firms in the second half of 2008 with a total of 115,242 complaints being lodged and 35% of them being upheld.
Dan Waters, director of retail policy and conduct risk at the FSA, said: “We expect firms to treat customers fairly by dealing with complaints promptly and efficiently. We are focusing even more attention, particularly through intensive supervision, on ensuring that firms are dealing with complaints properly.”The FSA plans to publish aggregate data in October which will cover the first half of 2009
This figure is double the amount of complaints received in the first half of 2006 when complaints reached 6,837. However, it is below the 15,776 which were recorded in the first half of 2008.
The figures reveal that only 38% of all mortgage complaints were upheld by the FSA in the second half of 2008, down from 48% in the first half of 2006. In terms of the complaints received, there were 71,406 complaints relating to flexible mortgages between the first half of 2006 and the second half of 2008.Building societies have also seen a sharp rise in complaints against them with 79,349 made in the second half of 2008, compared to 38,989 in the first half of 2006.Complaints on flexible mortgages reached a peak of 20,019 complaints in the first half of 2007.
Lifetime mortgages received 2,173 complaints between the first half of 2006 and the second half of 2008, reaching a peak of 404 in the second half of 2007.
Complaints relating to arrears handling more than doubled over the last two years, increasing from 13,784 in the first half of 2006 to 27,697 in the second half of 2008.Self-cert mortgages received 14,029 complaints in the same period, with 3,419 being made in the first half of 2008. There were also a large number of complaints made against general insurance intermediary firms in the second half of 2008 with a total of 115,242 complaints being lodged and 35% of them being upheld.
Dan Waters, director of retail policy and conduct risk at the FSA, said: “We expect firms to treat customers fairly by dealing with complaints promptly and efficiently. We are focusing even more attention, particularly through intensive supervision, on ensuring that firms are dealing with complaints properly.”The FSA plans to publish aggregate data in October which will cover the first half of 2009
Mortgage approvals rise again
Figures released by the Bank of England have shown that the number of mortgage applications which were successful in July rose on the previous month's figures.
The Bank saw 50,123 home purchase loans taken out over the 31-day period, higher than the 47,891 in June, marking the sixth consecutive month that mortgage approvals have risen.This was a 53 per cent year-on-year increase and the best lending statistics since April 2008.
However, it was also found that repayments outstripped mortgage lending in the month for the first time since records began, with homeowners dishing out £418 million more than banks lent.
Simon Rubinsohn, chief economist at the Royal Institute of Chartered Surveyors, commented on the finding: " Mortgage repayments increased to their highest level (in July) since March implying that existing funds are being recycled rather than new monies being added to the mortgage market .
"A recent Council of Mortgage Lenders study found that £16 billion worth of mortgages were taken out across the UK in July and while this was an increase on June's figures, overall results were down 36 per cent year-on-year.
The Bank saw 50,123 home purchase loans taken out over the 31-day period, higher than the 47,891 in June, marking the sixth consecutive month that mortgage approvals have risen.This was a 53 per cent year-on-year increase and the best lending statistics since April 2008.
However, it was also found that repayments outstripped mortgage lending in the month for the first time since records began, with homeowners dishing out £418 million more than banks lent.
Simon Rubinsohn, chief economist at the Royal Institute of Chartered Surveyors, commented on the finding: " Mortgage repayments increased to their highest level (in July) since March implying that existing funds are being recycled rather than new monies being added to the mortgage market .
"A recent Council of Mortgage Lenders study found that £16 billion worth of mortgages were taken out across the UK in July and while this was an increase on June's figures, overall results were down 36 per cent year-on-year.
Variable rate mortgages double in popularity
New research by independent mortgage broker John Charcol has shown that variable rate mortgages are gaining headway among customers against fixed-rate alternatives.Some 35 per cent of clients with the firm chose a variable rate deal in July, compared to 17 per cent the previous month, and John Charcol puts this down to recent rises in the cost of fixed-rate mortgages .
A 19-month look at the recent history of fixed-rate deals at the company shows that they peaked in April 2008 then dropped again, followed by an even bigger burst of activity in the same month this year.
Ray Boulger, senior technical manager at John Charcol, said: "This reflects the changing views on how long interest rates will stay low and in particular the actions of the Bank of England this month in the major extension of its Quantitative Easing programme."Writing for This Is Money, Neil Simpson recently advised those coming to the end of their fixed-rate mortgage term this autumn to switch to a standard variable rate deal .
A 19-month look at the recent history of fixed-rate deals at the company shows that they peaked in April 2008 then dropped again, followed by an even bigger burst of activity in the same month this year.
Ray Boulger, senior technical manager at John Charcol, said: "This reflects the changing views on how long interest rates will stay low and in particular the actions of the Bank of England this month in the major extension of its Quantitative Easing programme."Writing for This Is Money, Neil Simpson recently advised those coming to the end of their fixed-rate mortgage term this autumn to switch to a standard variable rate deal .
Tracker mortgages worth considering, expert says
An industry figure has commented on how variable mortgages such as trackers could be a better option than a fixed-rate deal at the moment.Bestinvest head of mortgages Peter O'Donovan was responding to figures from John Charcol, which suggested that more people were taking up variable-rate loans for house purchase or remortgaging purposes.
Mr O'Donovan said he was "not surprised" by the report as it is widely thought that the base rate will remain low maybe until 2010, meaning that interest on tracker mortgages may also stay more attractive to homeowners .
He added: "If you have got the opportunity of paying maybe 2.75 to three per cent [on a tracker mortgage] or paying over five per cent [on a fixed-rate], then at the moment it is well worth considering the difference between the two.
"Mortgageforce recently reported that July saw 37 per cent of its customers taking out a tracker mortgage over a fixed-rate deal.
Mr O'Donovan said he was "not surprised" by the report as it is widely thought that the base rate will remain low maybe until 2010, meaning that interest on tracker mortgages may also stay more attractive to homeowners .
He added: "If you have got the opportunity of paying maybe 2.75 to three per cent [on a tracker mortgage] or paying over five per cent [on a fixed-rate], then at the moment it is well worth considering the difference between the two.
"Mortgageforce recently reported that July saw 37 per cent of its customers taking out a tracker mortgage over a fixed-rate deal.
Mortgage enquiries by first time buyers on the up
A new report has found that there were more first-time buyers looking for a property and a mortgage in July than the previous month.
Conducted by Unbiased.co.uk, the research showed that 43 per cent of all requests put to the website in the month were about mortgages for a new home, which is back up after a lull in June.
David Elms, chief executive of Unbiased.co.uk, said: "These July figures suggest that after a slight drop off last month, there is regained interest from first-time buyers thinking of entering the market .
"The second most popular request was for remortgaging, which took 30 per cent of all enquiries the site received, however this is three per cent down on the previous month's figures.Nationwide recently published figures for house prices in August showing that recent rises have continued in the month, which could affect first-time buyers looking to get a mortgage
Conducted by Unbiased.co.uk, the research showed that 43 per cent of all requests put to the website in the month were about mortgages for a new home, which is back up after a lull in June.
David Elms, chief executive of Unbiased.co.uk, said: "These July figures suggest that after a slight drop off last month, there is regained interest from first-time buyers thinking of entering the market .
"The second most popular request was for remortgaging, which took 30 per cent of all enquiries the site received, however this is three per cent down on the previous month's figures.Nationwide recently published figures for house prices in August showing that recent rises have continued in the month, which could affect first-time buyers looking to get a mortgage
Buy to let mortgages fail to meet demand
New research suggests that the supply of buy-to-let deals on the mortgage market is not enough given the number of people currently searching for them.Conducted by moneysupermarket.com, the report showed interest in buy-to-let mortgages has increased by 50 per cent since August 2008, while lenders have withdrawn 70 per cent of the products off the shelves in the same period.
The recent cuts in the base rate have also meant that mainstream mortgage interest has come down by an average of 1.95 per cent in the past 12 months, but buy-to-let rates have only seen a 1.13 per cent typical drop.
Hannah-Mercedes Skenfield, mortgage channel manager at moneysupermarket.com, said: "New and existing buy-to-let landlords face a difficult task in finding a suitable mortgage. Because banks are targeting safer borrowers for their limited mortgage funds, they have either abandoned or severely restricted their involvement in the buy-to-let market .
"Mortgage broker the Money Centre recently signed a collaborative deal with Smartlandlord.co.uk in order to provide property owners new products for the buy-to-let market
The recent cuts in the base rate have also meant that mainstream mortgage interest has come down by an average of 1.95 per cent in the past 12 months, but buy-to-let rates have only seen a 1.13 per cent typical drop.
Hannah-Mercedes Skenfield, mortgage channel manager at moneysupermarket.com, said: "New and existing buy-to-let landlords face a difficult task in finding a suitable mortgage. Because banks are targeting safer borrowers for their limited mortgage funds, they have either abandoned or severely restricted their involvement in the buy-to-let market .
"Mortgage broker the Money Centre recently signed a collaborative deal with Smartlandlord.co.uk in order to provide property owners new products for the buy-to-let market
Subscribe to:
Posts (Atom)
