Banks are releasing their stranglehold on mortgages at last

QUESTION: Should I believe the media reports that the mortgage and housing market has shifted into more accessible realms for those of us eager to buy? Answer: If you read the papers it would appear we are seeing signs of a returning confidence in the housing market. The Bank of England reported that the number of mortgages approved for house purchases in the UK increased to a three-month high in April.

The mortgage market has once again become competitive, rates are at an all-time low, and the market is as settled as it’s ever going to be. Movers feel more secure in their decision, and mortgages are more accessible if you consider the recently launched Government Help to Buy schemes.

Generally borrowers are seeing a tempting list of new mortgage products to choose from. The lowest rate by far is a two-year tracker mortgage offered by Chelsea Building Society at 1.69 per cent which could potentially drop to 1.49 per cent. Meanwhile, last week the Post Office announced a two-year fixed loan at 1.7 per cent which could drop to 1.5 per cent. Tesco Bank have also recently launched three new fixed rate mortgage products ranging from a two-year mortgage deal at 1.74 per cent, a three-year product at 2.29 per cent, and a five year fix-rate at 2.49 per.

However borrowers must remember to look at the small print and proceed with caution. Non-refundable arrangement fees and high deposits can quickly make a tempting deal expensive.

There are products with lower fees. For example, Norwich and Peterborough has a two-year fixed rate product at 2.24 per cent with a fee of just £295, a free valuation, and free legal work for re-mortgages.

Tesco has also cut rates on its tracker mortgages. The rate on a two-year tracker up to 80 per cent LTV will be 2.25 per cent over the Bank of England base rate, with an £800 product fee, or there is the option of 2.75 per cent on a product with a £195 fee. A non-refundable booking fee of £195 will be charged on both products with an added incentive for Clubcard holders who are being offered one point for every £4 on their monthly mortgage repayments.

Nationwide Building Society recently joined mortgage providers Woolwich, Halifax and NatWest in offering Help to Buy mortgages. The building society is offering three products: a twoyear fixed-rate for up to seven per cent LTV at 2.54 per cent with a £900 arrangement fee – firsttime buyers pay a reduced fee of £400. A fee-less two-year product with an interest rate of 2.94pc, and a three-year product is also available.

Barclays are currently slashing rates and have a number of offers. A 2.09 per cent two-year fixed rate is down from 2.18 per cent, a 70 per cent LTV deal has been cut from 2.33 per cent to 2.23 per cent, while products at 75 per cent and 80 per cent have been cut from 2.49 per cent to 2.43 per cent and 3.15 per cent to 3.13 per cent, respectively. These products all have £999 fees or £499 for loyalty borrowers.

Before getting carried away consider the resources you have available. We can’t ignore things are still tough out there and that day-to-day financial pressures can still have a bearing. If you must have that new car then you are simply lowering your affordability for a mortgage with every purchase you make.

So with all this considered, you could say the market is positive, good products are there, lenders are signing up to the Help to Buy scheme, and the incentives are competitive, but it’s how that relates to the reality of household budgets. As always it is vital to take advice from the professionals and speak to an independent mortgage adviser.

Franz Muehlthaler is a mortgage adviser who works for Holroyd Miller Properties, Wakefield and Dewsbury, in association with Reach 4 Mortgage Solutions.