Mortgage approvals slow-down supports expectation of rate fall

Katie Tucker of John Charcol comments: “Stability continues in the mortgage market for the third week running with two year swap rates standing at 5.73%. This highlights that the City is standing by its expectation of ongoing stability, and possibly a rate drop in Quarter One of next year. This year’s Bank rate increases are slowing the housing market as intended: Monday’s report from the Bank of England showed a 10% fall in mortgage approvals compared to September last year. This rate stability has allowed lenders to slow down their frantic rate withdrawals and replacements, with more of them now offering a good selection of fixed rates for two, five and ten years. Homeowners, who are due a rate shock when their fixed rate reverts to the lender’s Standard Variable Rate (SVR), can choose between the protection of several competitive fixed rates, or the potentially falling variable rates. The good news is that many of these are available with remortgage freebies.”

What is available for borrowers now?

“Borrowers looking for a two year fixed rate with remortgage freebies could do worse than Nationwide’s 5.88% with £999 fee. As well as a free valuation and legals, the product is flexible, allowing overpayments, underpayments, payment holidays and borrow back. Alternatively, for a very low rate with a premium fee, Lloyds TSB has a 4.98% fixed for two years, again with remortgage freebies, but with a hefty 2.5% fee. Woolwich is currently leading the market for ten year fixes, with their rate of 5.89% for a £995 fee, again with remortgage freebies and full flexibility.

“It is worth noting that many borrowers who have had their flexible mortgages for a while, are making effective use of the facilities now, by using the overpayments balance they have accrued, to allow them to take payment holidays or make underpayments some months.

“Purchasers looking for a low rate with a flat fee and no frills, perhaps for the larger loan, should look at Abbey’s 5.59% fixed for two years with £1,499 fee.

“For those expecting a Bank rate drop, Barnsley has a discount for three years, giving a pay rate of 5.49%, with a fee of £1,250, with free valuation and legals for remortgages. A good product with no Early Repayment Charges, providing the freedom to make unlimited overpayments or leave at any time, is Saffron’s two year discount at 5.19%. The fee is 1.5% of the loan amount, but for remortgages the valuation and legals are free. For a tracker for the whole term, Nationwide’s has only a 5 year tie-in, and a current pay rate of 5.99%, with full flexibility, with a zero arrangement fee.”