Moving mortgage could save money
October 4, 2007 by admin
Filed under News, News-Mortgages
Mortgage-payers are often forking out over the odds for their home loans and should consider re-mortgaging, according to one industry publication.
Moneywise magazine says a general apathy about changing providers, leaves people, in some cases, paying hundreds of pounds more than need be the case.
Rachel Williams, editor of Moneywise, said: “If you are paying your lender’s standard variable rate, you could be paying more than two per cent more than you need to.”
There are fears that, in the light of the recent Northern Rock debacle, homeowners are wary of changing providers, but Ms Williams said that savings could still be had even if they keep the same lender and switch product instead.
“The easiest way is remortgaging with your existing lender, because then it’s just a case of signing a few forms and being transferred,” she said.
Various factors would determine the viability of switching, such as arrangement fees, early redemption charges and tie-in periods, but even so significant savings can be had.
On an interest only £100,000 mortgage, at a rate of 7.75 per cent (SVR) comma you could save £166 per month if you switched to a scheme on 5.75per cent.
Various products are available including standard variable, fixed, and tracker – which typically tracks the Bank of England base rate.
Mortgage Reality About To Bite
September 25, 2007 by admin
Filed under News, News-Mortgages
The next three months will see many thousands of homeowners come face to face with reality as their cheap fixed rate deals come to an end.
The deals were taken out in August and September 2005 when the Bank’s base rate had fallen to 4.5%. At that time you could get a two-year fixed rate mortgage with an interest rate as low as 4.24%.
If borrowers do nothing and let their mortgage slip onto the lender’s standard variable rate (SVR) then if they’re on an average £130,000 mortgage they will see their repayments go up by up to £290 a month.
Looking for a new fixed rate deal is not going to make them feel any better as the lowest fixed rates are now at around 5.6% and come with huge arrangement fees attached. Even those, therefore, could add £110 to the repayments from a 4.24% rate.
When you switch providers you will have to pay an exit fee to your previous lender, together with valuation and legal fees concerning your new mortgage. These could easily get near to £1,000 on a £130,000 loan, but this will still work out much cheaper than sliding onto the SVR.
One of the most attractive products due to end soon is Halifax’s two-year fixed deal at 4.29%, which expires on 30 September. There are about 30,000 customers on this deal. If they don’t take any action they will end up on the bank’s SVR of 7.75%. On a £130,000 loan monthly payments will go up from £707 a month to £981 – an increase of £274. Another popular one is Alliance & Leicester’s 4.28%, ending on 31 October. A&L’s SVR is under review, but is likely to go up to 7.89% before then. Repayments will go up from £706 a month to £993 – up £287. A&L also has a rate of 4.24%, ending at the same time. In this case the repayment rise will be £290.
Experts suggest that anyone with a mortgage deal ending in the next few months should start looking around for a new deal now, but should steel themselves in the expectation of paying a lot more than they are now.
There are other good two-year old deals that are ending soon, such as Northern Rock’s 4.69% on 31 August, Cheltenham & Gloucester’s 4.39% on 30 September and Abbey’s 4.59% on 2 November.
Halifax is offering a range of remortgages only to existing customers. One is a two-year fix at 5.89%. Anyone moving onto it from 4.29% will see their repayments rise to £829 a month from £707 on a £130,000 loan, and will still have to pay the £849 arrangement fee.
Britannia has a good looking two-year deal at 5.69%, accompanied by a fee of £999. That’s £813 a month on a £130,000 loan and costs £20,511 over the two years. If an A&L borrower on 4.28% were to switch to the Britannia deal they would save £180 a month and £2,500 over two years rather than stay on the A&L SVR.
Tom Smith
25th September 2007
Variable rate borrowers could be heading for a fall
July 7, 2007 by admin
Filed under News, News-Mortgages
Industry professionals are warning consumers that they could be heading for a fall if they have high levels of variable rate debts, from mortgages and secured loans to credit cards.
With four interest rate rises over the past year the Bank of England base rate has gone from 4.5 percent to 5.5 percent between last August and this May, and further interest rate rises have been predicted by experts before the year is out.
Many borrowers with variable rate loans and cards have seen their interest rates rise, and for many this has resulted in real financial difficulties when it comes to making repayments. Many consumers seem to have been banking on interest rates remaining stable in order to comfortably afford repayments on their borrowing, and the four interest rate rises since last August have really taken their toll.
The Governor of the Bank of England stated: ‘Anyone who borrows at a variable rate should recognise that the interest rate they will pay in the future may vary. It is unwise to borrow so much that the repayments are affordable only if interest rates remain at their initial levels.’
To many, this is something of a warning that further interest rates are indeed on the way, and those planning to take on more debt should be very careful as they may not be able to afford repayments should the interest rates continue to rise.
One economist stated: ‘Rates are going to go higher. A base rate of 6% is not necessarily the top. Borrowers should brace themselves for another increase. I would be surprised if base rate hit 7%, but not if it reached 6.5%.’
An official from the London School of Economics stated: ‘Base rate will peak towards the end of the year at or close to 6%. As long as inflation is under control, it could come down in a couple of years.’
Tom Smith
7th July 2007
