Mortgages Uncovered

Several banks have already confirmed cuts to their standard variable mortgage rates following the base rate, bringing down repayments for many homeowners.

Mortgage holders on Skipton’s SVR are now seeing monthly payment drop interest drops to 3.5%.
Chief executive, David Cutter, said:

“We have pledged our residential SVR will never be more than three per cent above base rate and, even with this is at its lowest level for 315 years, we will honour our promise.”

Nationwide mortgage customers are getting a 2.50% from April 1st 2009, SVR’s at the Cheshire and Derbyshire dropping rates to 2.50& from the same date.

Andy McQueen, Nationwide savings and mortgages director, said:

“Nationwide’s BMR is already one of the lowest amongst major high street lenders and this move will maintain that position, as well as reducing monthly payments for a borrower with a £150,000 interest only mortgage by £62 a month.”

Royal Bank of Scotland, which also operates NatWest, plans to

“balance the need of borrowers and savers”

with any rate changes. Although customers holding one of the banks’ flexible mortgages will see their rates fall by 0.25 per cent from April 1st, the SVR will remain at four per cent.

Mortgage Advisor says

“Base rate decision means both fixed-rate and ‘capped’ tracker mortgages are likely to provide the long-term value”

Email mortgages has said the Bank’s base rate cut will be the catalyst for an increase in historically low rates, particularly tracker and fixed rate deals which have a cap.

Now at 0.5%, lenders are starting to begin pricing tracker mortgages well above base rate.
Consumers who are sitting on their lender’s SVR’s would probably be better off moving to a fixed rate deal.

Michael White, Chief Executive of Email Mortgages, commented:

“While the Monetary Policy Committee’s decision today moved BBR to 0.5%, we are urging consumers to question where the rate may be in 12 to 18 months. BBR will inevitably begin to increase in that timescale and we must now consider that the floor has been reached. Therefore, consumers must think about locking in to the attractive fixed-rates currently available – the like of which might not be seen for a very long time. While BBR tracker rates may currently offer slightly better value, consumers must remember that ‘normality’ in terms of Base Rate is much more likely to be around the 4-6% mark, not 0.5%. Were BBR to move up relatively quickly, the best tracker products available now are those which contain a maximum interest cap.

Our advice to consumers is to understand the current situation is unique and to consider what they might have to pay should BBR rise to a more ‘normal’ level. Some three and five-year fixed rates are available at around the 4.5% mark, a level which many customers should be taking advantage of. We are already seeing long-term swap rates on the money markets starting to creep up and it is our prediction that this type of fixed-rate value is not going to last forever. Those adopting a wait and see attitude may ultimately wait too long and therefore consumers should seek mortgage advice as soon as possible to fully understand the value that is available with fixes at present. We understand that in this market no one wants to ‘catch a falling knife’, however, it looks likely that in terms of BBR the knife is now very much in the ground. With BBR at a historic low, now is the time for consumers to secure their mortgage payments at medium to long-term rates that quite simply, will not be available in years to come if ever.”

Bank of England’s Monetary Policy Committee has expressed their concerns last week that a low official interest rate may actually reduce the possibility of lending.

MPC is concerned that a successive number of interest rate cuts may prove counterproductive to struggling banks to bring their interest rates on savings accounts high enough to attract new customers. It is essential that banks do keep attracting new savers to balance their financial sheets.

Along with the latest announcement of the cut, the Bank of England said this week that the

“committee also noted that a very low level of Bank rate could have counter-productive effects on the operation of some financial markets and on the lending capacity of the banking system”.

Simon Ward, economist at fund management group New Star,

“Banks have been forced to charge borrowers more in order to keep deposit rates high enough to retain funds,” he said.

Yorkshire Building society expressed “disappointment” at today’s rate cut while Adrian Coles, director general of the Building Societies Association said:

“Lower interest rates reduce the incentive to save, and this limits the flow of funds into the mortgage market. While the decision will be of benefit to some borrowers on variable rate or tracker mortgages, the reduction in repayments that they will see will not outweigh the negative impact that the reduction in mortgage funding will have on the market as a whole,” Coles said.

Both Lloyds TSB and Skipton Building Society have vowed to pass the BofE interest rate cut on to their mortgage customers.

People with a tracker or variable rate mortgage from Lloyds will benefit from the recent cut as the bank’s SVR which has been 3%, will drop accordingly, the Lloyds TSB tracker has no collar which means that the rate could actually in principle fall to zero.

Since December 2007, C&G and Lloyds variable rate mortgage holders have had their interest rates cut by the whole BofE 4.75%.

According to Lloyds average monthly savings for their customers are more than £420. Another 0.5% cut will save a further £38 a month.

Stephen Noakes, C&G commercial director said:

“There are differing views on what action the Bank of England will take tomorrow and a rate cut is not a dead cert. If base rate does fall, we will pass it on to tracker and variable customers, who are already hundreds of pounds a month better off.”

Commenting on Skipton mortgage’s pledge to pass the cut on through its standard variable rate, chief executive David Cutter said: “We have pledged our residential SVR will never be more than three per cent above base rate and, even with this is at its lowest level for 315 years, we will honour our promise. This means approximately 15,000 Skipton borrowers will have a bit more money to spend as their monthly payments reduce.”

Commenting, analyst at Global Insight, Howard Archer said: “Quantitative easing is poised to come to the forefront in the Bank of England’s ongoing efforts to stimulate the economy and this could very well start in March.”

This year is set to be “another difficult year” for the UK housing market as house prices feel again by 2.3% in February claim Halifax, the UK’s largest lender.

Rising unemployment and a lack of mortgages to choose from in the market will probably continue to suppress the demand for homes over the forthcoming months.

House prices are continuing to plummet at their fastest annual rate ever and have dropped 17.7% since February 2008.

The average UK family home has fallen by around £33,000 from £194,953 to £160,327.

Halifax’s housing economist, Martin Ellis, said

“Continuing pressures on incomes, rising unemployment and the negative impact of the dislocation of the financial markets on the availability of mortgage finance are, however, likely to mean that 2009 will be another difficult year for the housing market,” he said

Howard Archer, chief UK economist at IHS Global Insight, said

“Even if the government’s Northern Rock-led measures to lift mortgage lending increasingly take effect, it will still likely only result in a gradual pickup in mortgages.”The renewed sharp fall in house prices in February reinforces our belief that house prices will fall by a further 15% on the Halifax measure in 2009.”

The Bank of England’s recent quantitative moves have been welcomed by most business leaders, analysts and business economists however; there are some that are quite angry that the BofE have decided to slash interest rates once again to a new historical low of 0.5%.

A number of industry head’s were quoted in last week’s press:

Director General, Michael Coogan at the Council of Mortgage Lenders

CML felt that the rate cuts were an additional a blow to lenders, who are now struggling and have little scope to further cut rates.

“Savings are the lifeblood of mortgage lending, and unless lenders can offer competitive rates to savers their ability to offer new mortgages is restricted. National Savings and Investments this week reported record inflows of savings, sucking more money out of the mortgage market, so today’s cut represents a double whammy for prospective mortgage borrowers.”

The head of economic policy at the EEF, Lee Hopley

Welcomed the recent rate cuts but the manufacturers’ association still warned there were many companies who were struggling to get credit.

“Whilst today’s cut is welcome it will pass many companies by given how low rates are already. Manufacturers are far more concerned with the health of the economy, the financial system and greater access to cheaper credit. While it may be a bold step into the unknown, swift and steady implementation of unconventional measures from the Bank is now the right move.”

Today saw another historical day in business history as The Bank of England cut their interest rates by another half point to 1%, this is the lowest in over 300 years and it is all in aid of dragging Britain out of the recession.

There has been another vote by the monetary policy committee who want to see a further cut in the cost of borrowing as a result of today’s base rate cut.

Only hours after the news came in that house prices had risen by an average 1.9% in January the base rate cut was announced.

If there is enough pressure put on lenders to further pass the new reduction to their borrowers then those with mortgages that are tracking a point below the base rate will end up paying no interest at all.

Today’s decision means gloom for savers though as the savings rates fell to nearly zero.

Nick Parsons, head of markets strategy, nabCapital said. “We could be here at 1% for at least a year and possibly longer, and the next move will be upwards,” said Parsons, who warned that further cuts could force savers to pull their money out of banks and building societies.

Howard Archer, chief UK / European economist for Global Insight things that the rates will fall further to 0.25% by the summer of this year.

“The UK economy clearly remains deep in recession with recovery seeming a distant hope, so it needs all the help that it can get,”

“The half-point cut is seen as good news for the UK, and a sign that the Bank is still prepared to act,” said Richard Turner of IG Index.

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First Direct part of HSBC, have just launched a new mortgage deal to the market which is set to lead offset mortgages at a fixed rate of 2.99%.

An offset mortgage sets savings against the mortgage debt aiming to give the borrower substantial savings and the opportunity of paying off their mortgage much sooner.

Following the fixed mortgage period the rate then reverts back to the First Direct standard variable rate currently set at 3.69%.

An offset deal has been made available to both existing and new customers for either re-mortgaging or new home purchases.

“This product is a market leader and we think it will be very popular particularly as our customers are extremely savvy when it comes to knowing how to make the most of their money,” said Jimmy Kelly, first direct’s mortgage manager. More and more are understanding the huge benefits of offsetting their mortgage,” he said. “Customers would need to receive an interest rate equivalent to 3.80 per cent AER on their savings account for a 20 per cent taxpayer and 5.10 per cent or a 40 per cent taxpayer for them to achieve the same benefit as offsetting any credit balances they have against their mortgage,”

said first direct.

When selling your London home, you have two related aims. You need to make your property attractive to buyers and furthermore, you want to maximise your profit. Small things can make a huge difference in this regard. Whatever your home is deemed to be worth, if you can’t persuade buyers to make an offer, that figure is meaningless.

It’s often a good idea to start with the simple things, such as the presentation of the property. You don’t necessarily need to do major renovations to increase the value of the property, you just need to encourage more offers, so start small.

There are many businesses who offer house cleaning in London and it might be worth taking advantage of these companies’ services to ensure a thorough and professional job. Clean carpets, curtains and furniture can make all the difference when selling a home.

Potential buyers need to be able to picture themselves living in your home, so a nice environment is crucial. If there are signs of dirt, or there are stains on the carpet, many buyers find it to difficult to look past this. People often go off feel and an unclean house will feel wrong. Even if your house is relatively clean anyway, a professional cleaner can make it make it look that bit better and that may be the difference between selling your house or not doing.

There are several different techniques when it comes to increasing the value of your property. These can come under a few major headings, such as house expansion/construction, home improvement (fittings and furnishings) and land improvement.

The thing that will most likely have the most noticeable benefits is home expansion and enhancement. This can be anything from building a garage or converting your loft to expanding rooms. This can have a positive outlook when done professionally.

Another method of improving the value of a house is by refurnishing or decorating rooms within the house. For instance you could consider refitting the bathroom with new bathroom cabinets, a new bath and sink or even fitting a stand-alone shower. This can be done to most rooms in a house, whether fitting a kitchen with a new worktop or installing a brand new fireplace in the living room,  it all helps towards the valuation.

The final step is to improve the actual land the property resides on. If you have a large garden space available, consider a water garden or some other major garden feature, such as a patio or decking. It is also worth considering sacrificing some garden space in larger gardens to make way for structures such as conservatories or sheds.

Just remember, whether its building a whole new section as an extension to the property or simply replacing old bathrooms cabinets, remember to weigh up your budget, the costs and the gains before carrying out any work.