Could now be the time to find the best mort­gage and buy?

Yorkshire Post - Property - - PROPERTY - Franz Muehlthaler

Q: I feel like com­mit­ting to a mort­gage is a bit of a gam­ble. Fix, twist or buy – what is the best? A: The best thing to do de­pends on your per­sonal cir­cum­stances and your fi­nan­cial sit­u­a­tion. How­ever, a broad view of the mort­gage mar­ket may help you reach a de­ci­sion that works for you.

You may have heard the Bank of Eng­land has an­nounced that it is to adopt a pol­icy of for­ward guid­ance on in­ter­est rates. This means that any change in in­ter­est rates will be tied to the un­em­ploy­ment rate and in­ter­est rates will not go up un­til the un­em­ploy­ment rate falls to be­low 7.0 per cent.

The Bank of Eng­land Gov­er­nor, Mark Car­ney, was re­ported as say­ing the cost of bor­row­ing is not go­ing to rise any time soon. I have read that the rate is cur­rently 7.8 per cent and it is not ex­pected to fall to 7.0 per cent un­til 2016. How much more se­cu­rity do we need? Looks like the sig­nal to goa­head, doesn’t it?

There is a caveat. The bank will “knock out” the link be­tween in­ter­est rates and un­em­ploy­ment if the record low in­ter­est rates pose a threat to the UK’s fi­nan­cial sta­bil­ity. To sum­marise, there is no of­fer of se­cu­rity.

Com­mit­ting to a mort­gage wouldn’t be such a bad thing, es­pe­cially if you were able to make a gen­er­ous de­posit and re­duce the LTV rate.

Na­tion­wide Build­ing So­ci­ety has re­cently launched a fixed rate mort­gage for five years at 2.99 per cent switch­ing to Stan­dard Vari­able Rate, which is cur­rently 3.99 per cent for the re­main­ing term of the loan. The rate on of­fer is for 60 per cent LTV and the reser­va­tion fee is £900 with a book­ing fee of £99. The Skip­ton Build­ing So­ci­ety has cut the in­ter­est rates on a range of two, three and five-year fixed mort­gages, two-year track­ers and a range of Buy-to-Let fixes by up to 0.2 per cent with the abil­ity to make over­pay­ments of up to ten per cent per year with­out be­ing pe­nalised.

The West Brom Build­ing So­ci­ety is of­fer­ing a two-year fixed rate mort­gage at 2.39 per cent on a LTV of 80 per cent which re­verts to 3.99 per cent vari­able on the re­main­ing term of the loan. The fees are favourable at £99 for book­ing and £200 for com­ple­tion. With LTV like this you can see your de­posit would work hard for you and save you money.

Vari­able rate deals are low too. HSBC is of­fer­ing a vari­able rate, cur­rently 1.99 per cent for the term of the mort­gage on a LTV of 60 per cent with a book­ing fee of just £99. NatWest is even lower with a 1.79 per cent vari­able rate un­til March 2016 with a book­ing fee of £995. The rate re­verts to a vari­able rate, cur­rently 4.00 per cent, for the re­main­der of the mort­gage term.

You may be think­ing that given the Bank of Eng­land’s for­ward guid­ance pol­icy a vari­able rate would be a much bet­ter prospect. But re­gard­less of in­ter­est rate in­creases or de­creases your lender can al­ter its Stan­dard Vari­able Rate at any time. The rate you pay on an SVR mort­gage will be de­ter­mined by your lender not the Bank of Eng­land. But if you are able to han­dle any vari­a­tion this type of loan could work well for you as in most cases you are free to re­pay the mort­gage with­out penalty and trans­fer to another lender on a fixed rate if you be­come con­cerned about rate spec­u­la­tion.

My rec­om­men­da­tion is be sen­si­ble. There are low-rate deals out there but would they pro­vide you with the se­cu­rity you need? For in­stance, would they give you pay­ment se­cu­rity? If rates fluc­tu­ate where would that leave you fi­nan­cially? Also be­ware of low rates hiding high fees. I men­tion this time and time again but it’s still where con­sumers get caught out. A low rate with ex­tor­tion­ate fees is not a good deal when you con­sider the ac­tu­ally re­pay­ment fig­ure af­ter adding your fees to your loan and the im­pli­ca­tion of the added in­ter­est. As al­ways, speak to a pro­fes­sional in­de­pen­dent mort­gage bro­ker to help you with your en­quiries.

Franz Muehlthaler is a mort­gage ad­vi­sor at Hol­royd Miller, www.hol­roy­d­

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