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.
Showing posts with label fixed-rate. Show all posts
Showing posts with label fixed-rate. Show all posts
Saturday, 12 September 2009
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.
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.”
Saturday, 5 September 2009
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.
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