Interest rate fall to 5.25%?

There is a strong feeling in the current market that interest rates will be cut when the Bank of England meet again this Thursday.

It is widely expected that rates will be cut to stop the countries house prices falling this year, many analysts predict further cuts throughout the year which would be a well received by homeowners who have or will be coming off low fixed rate mortgages.

Many homeowners had a nasty surprise this year when they came of low fixed rate mortgages, many well below 5%, to find that they were likely to pay more than 1% more for the same product due to interest rate increases over the last 2 years.

Unfortunately many of these homeowners, scared of interest rates continuing to increase, fixed them selves into another fixed rate mortgage above 6%.

In September the lowest interest rate you were likely to pay for a fixed rate mortgage was 6% without paying high fees. You can now expect to pay around 5.8% with lower arrangement fees and a likely hood of the fees continuing to fall over the next few months.

Homeowners who signed up for Track Rate Mortgages over the last few months have gained the most and a likely to do well this year.

The concern in the market however is how many times can interest rates be cut before inflation gets out of hand? I predict we will find out towards the back end of 2008.

***Come back tomorrow where I will be discussing the difference between the various types of mortgages on the market and how each one may effect you***

Daniel Morgan
Independent Mortgage Broker

Scottish Property Market Up 39%

It may have seemed all doom and gloom for the UK property market in 2007 however not everyone in the UK has been experiencing a slowing of property prices.
Scotland has seen some amazing property price increases over the last 12 months, the Scottish coastal town of Montrose saw average property prices shoot up from £123,494 to £172,156, a 39% increase in what many property experts are calling a housing recession.
The figures taken from a Halifax report attributed the increases to improved transport links, rising immigration and a strong employments market.
Scotland wasn't the only region in the UK to see property price increases, Winchester came out top in England with average prices up 38% putting the prices at just under £400,000.
Stourbridge in the West Midlands was the only town in the top 10 outside Scotland and the South East. Prices there have risen by 31 per cent to an average £264,130.
The Royal Institution of Chartered Surveyors added that upfront costs are now proving particularly problematic for new buyers as banks have begun to tighten their criteria and asking for bigger deposits with 100% mortgages becoming a thing of the past.
2008 should be a testing year for these kinds of returns and although it is unlikely the the market will continue at this rate, there are still areas such as Nelson in Lancashire where price of a property is £108,320.
Unfortunately the report also stated that first time buyers are at the lowest rate since 1980, which may start having a knock on effect this year.

Daniel Morgan
Independent Mortgage Broker
FruitMortgages.com

UK and US property & finance market

The UK and US property & finance market has been talked about greatly over the last few month, by myself included. I would like to point out however that there are several major differences between the UK housing and mortgage market and than of the US, suggesting that the UK should not feel the same house price and credit crises currently faced by the US.

Fixed Rate Mortgages & Stepped Rate Mortgages
There is a conservative tendency in the UK for homeowners to prefer fixed rate mortgages, as opposed to variable rate products on the market, historically due to the consequences many homeowners felt in the 1990's with interest rates above 12%. More importantly there are few independent mortgage brokers I know of who recommend mortgage products with stepped rates*. Stepped rate mortgages are rare in UK with little popularity due to several factors;

(i) - Rates tend to be extremely low to begin, usually around 3%.
(ii) - Rates will generally increase once per year of around 1% - 2%
(iii) - Homeowners will be fixed for generally 3 - 5 years at which point the interest rate is well above other competitor rates
(iv) - Stepped rates tend to carry severe redemption penalties**
(v) - The interest rates tend to be variable which means calculating what your payments will be in 3 years time near impossible.

These factors have led me to shy away from recommending such products, the product providers have a good concept, create a mortgage for people who are on low incomes to buy their own home and as household income historically increases over time clients will be able to afford higher monthly payments. On paper it makes sense but in reality, as we are now seeing in the US, homeowners simply don't appreciate or think about how they plan to pay for next year or the year after.

Federal Reserve and FSA
The UK's FSA have far more sweeping powers and controls compared to the US self regulated style system, although the self regulated system can have great benefits to competition, marketing flexible lending criteria this can have devastating effects when things go wrong.
The FSA done great work in ensuring customers are treated fairly along with brokers & lenders being accountable for their advice and services.

The US Sub prime & UK Adverse Credit Market
Going back to the earlier factor on fixed rate mortgages and stepped rate products, due to supply and affordability US mortgage brokers have offered sum prime clients, generally classified as higher risk, a high risk product. In the UK clients with Adverse Credit who are also classified as high risk will be offered several options with the fixed rate being favorable due to the monthly payments remaining the same.

The major problem currently facing the UK mortgage market is money or rather lack of it.
Take northern rock as a prime example, traditionally Northern Rock doesn't lend to clients with adverse credit. On their high LTV products the credit check is of high importance, however they have still found them selves the victim of the current money market.
Although house prices may stay stable in the UK along with few missed mortgage payments, we still have to tackle the issue to bringing new money into the market at a lower cost.
Hopefully the new year will bring a new LIBOR rate***.


Daniel Morgan
Mortgage Broker & Finance Journalist

* A mortgage product which increases interest rates over a specified period
** Penalty fees for redeeming the mortgage before an agreed date.
*** Interest rate at which banks lend to each other

Mortgage and property market in 2008

There is growing concern coming from experts on how the mortgage and property market in 2008 will turn out.

Although not guaranteed house priced are likely to fall in early 2008 by at least 1-2% as first time buyers are unable to enter the market and second time movers are unable to sell their home. There was incredible housing inflation from early 2006 to mid 2007 of up to 100% in some areas such as the North of England and East Wales.

Thankfully, for long term stability, these unsustainable increases have come to an end, this will hopefully lessen the extent to which the UK's slowing economy will be effected in the long term.
Predictions are that house prices will fall flat over the next year with the possibility of another interest rate cut ensuring UK home owners don't face negative equity there are some positive signs that this market correction will ensure stable growth over the next 10 years.

The possible changes in the mortgage market are more people looking at remaining in their current properties for longer which should see an increase in long fixed rate mortgages, a product being purchased by the current government as a way to stabilise the mortgage market.
Long term mortgages are generally fixed for between 5 years to 25 years which could give added security to homeowners fearful of fluctuating interest rates and house prices. The obvious negative being as the products hints, you are fixed for that period. There are several 25 year products which will only penalise you for the first 5 to 10 years, which is still a considerable amount of time, with the other disadvantage being many independent mortgage brokers may see the recommendation of long term fixed rate mortgages as commercial suicide to the lose of custom many are used to.

If you are considering a long term fixed rate mortgage please remember to fully understand the consequences of tying yourself to one lender for such a period. They can be a good choice for some homeowners but without thinking all doom and gloom, what happens if you need to move for family, work or other social reasons?
Many will offer a porting facility, a feature which allows you to take the mortgage to the next home, however what if your new property in overseas or has a lower value?
For more information on long term mortgages you should seek an independent mortgage broker from my mortgage portal site.

Need to re-mortgage your fixed rate mortgage?

Need to re-mortgage your fixed rate mortgage?
Your not the only one, 1000's of homeowners have or will be coming off their fixed rate mortgage this year and early 2008. Many have been on fixed rate mortgages as low as 4.4% and most will be re-mortgaging on a rate over 1% higher in the next few weeks!

Even with the recent interest rate cut by the Bank of England it is thought that homeowners may soon feel the pinch of 4 rate rises whilst they were safe in a fixed rate mortgage.

It doesn't have to be doom and gloom though!
There are several ways in which you could remortgage on a cheap mortgage with similar monthly payments that you've had before.

High Arrangement Fee & Low Interest Rate
This maybe an option if you have a small mortgage and will benefit from the lower interest rates, although the higher arrangement fee may not justify the low interest rate unless its for a long period.

Fee Valuation & Free Legals
Many mortgage lenders now offer free valuations and free legals for people remortgaging, helping reduce the overall cost compared with paying upfront.

Offset Mortgage/Flexible Mortgage
These tend to allow the borrower to over pay their mortgage or offset savings against the mortgage balance. This can significantly reduce the monthly payments or reduce the term of the mortgage. It also gives the flexibility to withdraw money if required.

The one thing to remember is to seek an independent mortgage brokers advice on the best and cheapest mortgage option for you. Most importantly if your coming off your fixed rate mortgage, seek advice sooner rather than later. If your mortgage changes to a Standard Variable Rate before you arrange your re-mortgage you will see a steep increase in your monthly payments.

Don't give the lender a penny more than you need too!

For more information on the 1,000's of different mortgages on the market and to find a local independent mortgage brokers near you then please visit my website FruitMortgages.com