Mortgage lenders await bank rate decision

Katie Tucker of John Charcol comments, “Following a momentary increase on Friday, swap rates started to fall again on Wednesday, showing that the City is less convinced that the Bank rate will rise more than once again. The jury is still out on whether the Monetary Policy Committee has allowed enough time for the Bank Rate rises thus far to have had an effect, so the market waits with baited breath for their next move. Prudent borrowers should prepare themselves for the eventualities of another rise: those who can afford one potential rise could benefit from any potential subsequent falls by taking one of the competitive trackers or discounts available on the market now. For borrowers who are feeling the pinch and would rather fix now, rates are available below the six percent mark, although they have by no means returned to being as competitive as their tracker or discount counterparts yet.”

What is available for borrowers who need to act soon?

“Halifax is demonstrating a good hold on market needs: they have issued a good value remortgage tracker at 0.36 under base until 30th November 2009, giving a pay rate of 5.39% (overall cost for comparison 7.6% APR). Their fixed rate is 5.79% up to 30th November 2009, Both of these have an arrangement fee of £1,499 and free valuation and legal fees for remortgages (overall cost for comparison 7.7% APR), demonstrating the premium you pay for a lower rate.

“For borrowers who want to wait to see what fixed rates will come available, Saffron’s two year discount with no Early Repayment Charges (ERCs) is 2.14 under their SVR giving an extremely competitive pay rate of 5.45% (overall cost for comparison 7.6% APR). This low start rate comes at a reasonable fee of £899, whist allowing the complete freedom to remortgage away at any time. John Charcol’s exclusive 0.17 over base whole-term tracker with the Woolwich (overall cost for comparison 5.9% APR) has no ERCs, no arrangement fee, and for remortgages no valuation or legal fees, so is ideal for borrowers who want to switch now at minimal cost, as well as those who don’t want to chop and change between rates every few years any more.

“Borrowers looking to raise a lump sum, or overpay with a view to taking money back later for school fees or home improvements, may like Alliance and Leicester’s new fully flexible 5.89% two year fixed rate with a £999 fee (overall cost for comparison 7.8% APR). This product allows overpayments, underpayments, payment holidays and borrow-back, for a sub-six percent rate. Alternatively, for a no frills two year fix Britannia is offering 5.49% available up to 90% LTV with no Higher Lending Charge with a fee of £999. This is by far the best value available out of those with a non-premium fee. With fixed rates or flexibility available at a price, it is clear that different horses will suit different courses, and an advisor will help discuss your own priorities.”

Sub-prime worries?

“Also this week, several sub-prime lenders have pulled their rates as a result of the credit crunch in the US Sub-prime market. Until lenders know whom they will be securitising their lending books to, and for how much, they have pulled out temporarily or set rates at a margin sufficiently high to either price themselves out of the market or to maximise likelihood of a profit when the book is sold on. Platform withdrew rates without announcing new ones, and Unity and Infinity (part of Invesco) have pulled their rates altogether with no intention of returning in the short term. Victoria Mortgages have increased their heaviest rates by 2.5% in some cases, and GMAC moved even their Light adverse fixed rates upwards by an unusually large jump of 0.75%. This means that borrowers needing a sub-prime loan would be wise to take advice and act quickly to secure what few funds are left at a reasonable price.”