Posts tagged ‘Interest Rates’

Homeowners urged to plan for interest rate rises

Homeowners were today urged to plan ahead for when interest rates start to rise.

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Just over half of people admitted they did not have a financial plan for when the cost of their mortgage increased, with 69 per cent saying their finances were already stretched.

The study by the Money Advice Service found that 84 per cent of mortgage holders thought an increase in interest rates would impact their finances.

But 56 per cent were confident they would be able to find the extra money they needed simply by cutting back on everyday spending.

Just over a third of homeowners said they would use money from their savings to ensure they could meet their mortgage repayments, while 15 per cent said they would get an extra job.

But more seriously, 13 per cent of homeowners admitted they were currently living beyond their means and 19 per cent said they would really struggle to cover any increase in their monthly repayments.

The Bank of England has held interest rates at a record low of 0.5 per cent since 2009.

But the official cost of borrowing is widely expected to start increasing next year, with Bank Governor Mark Carney recently warning that the point at which the Bank Rate would start to rise was “getting closer”.

A 0.25 per cent increase in the Bank Rate would add around £20 a month to repayments on a £150,000 mortgage taken out over 25 years.

The research found that 47 per cent of homeowners thought they would find it difficult to meet an increase of up to £150 a month in their repayments, and 19 per cent admitted they would struggle to meet any rise.

Younger homeowners appeared to be particularly vulnerable to future interest rate rises, with 77 per cent of those aged under 35 saying their finances were already stretched, while 16 per cent were not aware that an interest rate rise was on the cards.

A significant proportion of homeowners also appeared to have little understanding of how a change in interest rates would affect them.

Around 28 per cent of mortgage holders said they did not know what their current rate was, and more than half had not calculated what impact a 1 per cent rise would have on their repayments.

A further 3 per cent admitted they did not even know what their monthly repayments were.

Sue Anderson, head of external affairs at the Council of Mortgage Lenders, said: “Although we don’t know when rates will rise, the monetary authorities have previously flagged that rises will be finely calibrated, so large sudden shocks are unlikely.

“By planning ahead now, mortgage holders can get a clear picture of what a rate rise would mean for their own repayments.

“Taking steps in advance to work out what the effect on your payments might be, and planning ahead, will mean that most borrowers will be able to cope by careful budgeting.”

Homeowners who are worried about interest rate rises could consider taking out a fixed rate mortgage to offer them the security of knowing what their monthly repayments will be.

A number of lenders are currently offering five-year fixed rate loans for less than 3 per cent.

Chelsea Building Society currently has the most competitive deal of 2.85 per cent for people borrowing up to 65 per cent of their property’s value, while Virgin Money has a rate of 2.99 per cent for people with only a 25 per cent equity stake.

The Chelsea deal has a £1,545 arrangement fee, while the Tesco loan has a £1,495 one.

Meanwhile, the Bank’s Financial Policy Committee today said the Government’s controversial Help to Buy scheme had not stoked house price growth, as it accounted for only 5 per cent of mortgages and had been used most in regions where house prices had risen least.

The FPC also asked for new powers to cap the size of mortgages that lenders advanced relative to a borrower’s income and the value of their property.


October 2, 2014 at 11:29 AM Leave a comment

Five-year fixed rate mortgages for less than 3%

The cost of fixed rate mortgage deals is continuing to tumble as lenders compete for business, figures showed today.

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A number of banks and building societies are offering five-year fixed rate loans for less than 3 per cent following a slew of price cuts.

The average cost of a five-year deal now stands at just 4.08 per cent, down from 4.16 per cent at the beginning of September, according to financial information group Moneyfacts.

The fall comes despite the fact that five-year swap rates, upon which the loans are based, have actually increased by seven basis points during the period, in anticipation that the Bank of England will start to hike the official cost of borrowing soon.

Instead, the drop in rates is being driven by lenders competing for business, as they look to fill their annual mortgage quotas before the end of the year.

Chelsea Building Society, Tesco Bank and Yorkshire Building Society all currently have five-year fixed rate mortgages with sub-3 per cent rates.

Chelsea Building Society leads the field with a 2.85 per cent deal for people borrowing up to 65 per cent of their home’s value who pay a £1,545 fee.

For those looking to borrow 75 per cent of their home’s value, Tesco Bank is offering a rate of 2.99 per cent with a £1,495 fee.

Charlotte Nelson, of Moneyfacts, said: “Due to base rate speculation there has been volatility within the fixed mortgage market.

“However with many now predicting a later than first thought base rate rise, some providers have reduced their mortgage rates.

“As we are coming close to the end of the year, many banks and building societies are looking closely at their lending targets and the quickest way to get business is to reduce rates.”

The cost of two-year fixed rate mortgages has also fallen, with average rates dropping to 3.51 per cent, down from 3.78 per cent.

Chelsea Building Society also has the best deal for a two-year loan of 1.55 per cent, with a £1,545 fee for loan to value ratios of up to 65 per cent.

It is closely followed by Tesco Bank, which has a rate of 1.69 per cent for an LTV of 60 per cent and a £1,495 fee.

Virgin Money recently became the only lender to offer a six-year fixed rate mortgage, offering a rate of 2.99 per cent. But the deal was withdrawn following very strong demand.

The Bank of England is widely expected to start raising interest rates in the first quarter of next year, although two members of its Monetary Policy Committee have already voted for a hike.

Last week Governor Mark Carney warned that the point at which interest rates would start to rise from their current record low of 0.5 per cent was “getting closer”.

October 1, 2014 at 11:22 AM Leave a comment

House prices continue to rise as Bank of England warns interest rates are ‘to begin to increase’

House prices jumped by 1 per cent in August defying signs that the property market was beginning to slow down, figures showed today.

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The average cost of a home in England and Wales rose to £177,824 during the month, 8.4 per cent higher than in the same month of 2013 and within touching distance of the pre-crisis peak of £181,383.

Strong gains in London continued to drive the rest of the property market, with house prices in the capital soaring by 2.7 per cent to stand at £467,070, 21.6 per cent higher than a year ago, according to the Land Registry.

The housing boom is rippling out from London to other parts of the country, with the South East posting growth of 1.7 per cent, while prices were 1.6 per cent higher in Yorkshire and Humberside and 1.5 per cent up in the East.

But growth remained subdued in other regions, with property values creeping ahead by just 0.1 per cent in both the South West and North West, and by 0.2 per cent in the West Midlands.

Meanwhile, more than 37 properties a day changed hands for more than £1m in June, the latest month for which data is available.

A total of 1,135 homes were sold for at least seven figures during the month.

The Land Registry data comes as Governor of the Bank of England Mark Carney warned that the point at which interest rates would start to rise from their current record low of 0.5 per cent was “getting closer”.

Speaking at a conference, Carney said leaving interest rates low for too long could lead to other risks building up in the economy, with the housing market currently posing the biggest threat.

He said: “Relative to the recent past, the economic outlook is much improved.

“While there is always uncertainty about the future, you can expect interest rates to begin to increase.”

But he added that when rates did start to increase it would gradual, and the Bank Rate was likely to peak at below pre-crisis levels.

Economists expect the first increase in interest rates to be made in early 2015, although two members of the Bank’s Monetary Policy Committee have already voted for an increase.

For homeowners who are keen to lock into low interest rates, there are a number of competitive mortgage deals on the market.

Norwich and Peterborough Building Society has a two-year fixed rate deal at 1.89 per cent for people with a 35 per cent deposit who pay a £195 fee.

Those who want the security of a longer deal can get a five-year fixed rate loan at 2.89 per cent from Yorkshire Building Society, which comes with a £975 fee.

Today’s Land Registry figures contradict growing evidence that the housing market is beginning to slow down, although the Land Registry data, which is based on completed sales, tends to lag other indexes.

Mortgage lender Halifax said property values crept ahead by just 0.1 per cent in August, while the annual rate of growth also slowed.

Data from the British Bankers’ Association also showed a 3 per cent fall in the number of mortgages approved for house purchase in the month, compared with July.

Strong house price gains have left the average British home cost £265,022, according to Zoopla.

September 26, 2014 at 2:25 PM Leave a comment

Remortgaging increases amid fears of interest rate rises

Lending to people remortgaging jumped by 9 per cent in July as homeowners prepared for interest rate rises, research showed today.

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The total value of lending to people remortgaging to a new deal rose to £4.04bn during the month, as borrowers took advantage of the competitive deals that were on offer ahead of an increase to the Bank of England Bank Rate.

There was also an estimated 7 per cent rise in the number of remortgage loans agreed in July at 25,325, according to LMS, which processes 28 per cent of all remortgage transactions.

But the figure was 14 per cent lower than it had been in July 2013, which the group blamed on the impact of new regulations introduced under the Mortgage Market Review in April.

The average amount borrowed by people remortgaging also fell slightly to £159,582, 2 per cent less than during the previous month.

Andy KneeAndy Knee, chief executive of LMS, said:“With two members of the Bank of England’s Monetary Policy Committee already staking a claim for an immediate Bank Rate rise, an increase looms ever closer, having an impact on aspiring and existing homeowners.

“However, customers shouldn’t panic as any change is likely to be gradual allowing customers plenty of time to explore the best rates available to them.”

He added that the group expected there to be a surge in remortgaging later in the year as homeowners looked to lock into fixed rate deals before interest rates rose.

Data from the Council of Mortgage Lenders showed that average mortgage rates rose to 3.15 per cent in June – the fifth consecutive monthly rise.

LMS warned that continued rate rises may start to have an impact on affordability, although it stressed that they remained well down on the level seen before the recession of 5.89 per cent in October 2008.

Based on the higher remortgage rate, the percentage of annual income that mortgage repayments account for also increased for the fifth month running to reach 21.7 per cent, only slightly below the 21.9 per cent of pay that mortgage repayments take up for people buying a property.

Knee said: “Affordability remains key to the property market. With the average amount of equity released through remortgaging falling by 4 per cent from last month, it is apparent that more stringent rules and less competitive rates are taking their toll.

“That said, it is still possible for customers to get a good deal if they hunt around – with 60 per cent of those who remortgaged doing so to lower their mortgage rate.”

Beverley Building Society is currently offering the best two year variable loan for people remortgaging, with a rate of 1.95 per cent and no product fee for those borrowing 75 per cent of their home’s value.

For those who want to fix, Norwich & Peterborough Building Society has a two year deal at 2.14 per cent with a £345 fee for loan-to-value ratios of up to 65 per cent, while Cumberland Building Society has a five year fixed rate deal at 3.30 per cent.

August 27, 2014 at 9:05 AM Leave a comment

UPDATED: Highest amount of mortgage cash issued in six years

Mortgage lending jumped to a six-year high in July as the market remained resilient in the face of regulatory change, figures showed today.

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A total of £19.1bn was advanced during the month, 7 per cent more than in June and the highest figure since August 2008, according to the Council of Mortgage Lenders.

The group said mortgage activity appeared to have remained robust, despite the tough new affordability criteria introduced under the Mortgage Market Review earlier this year.

But it cautioned that the eventual impact of the regulatory change remained uncertain.

July was the third consecutive month during which lending levels have increased, following a slight dip in March ahead of the introduction of the MMR.

Caroline Offord, CML market and data analyst, said: “Property transactions in the first half of the year showed a 25 per cent increase compared to the same period a year ago, but we expect that intensifying affordability pressures could start to dampen this upwards trend.”

The figures came as minutes from the Bank of England’s Monetary Policy Committee suggested a hike in interest rates could be closer than previously expected.

The minutes showed that two members of the committee vote to raise the Bank Rate from its current record low of 0.5 per cent to 0.75 per cent in August.

It was the first time that the MPC has been split on what the official cost of borrowing should be since July 2011.

External MPC members Martin Weale and Ian McCafferty argued that although wage growth remained weak, it was a lagging indicator of the amount of slack there was in the economy, and rates should begin rising before that slack had been used up.

News of the vote prompted speculation that interest rates could start rising before the end of the year.

But Samuel Tombs, senior UK economist at Capital Economics, pointed out that data released since the MPC’s meeting showing a fall in inflation to 1.6 per cent in July and slower growth in employment, eased the pressure on the Committee to raise rates quickly.

He said: “We still expect the first hike to come in February 2015.

“But, even if the Committee decides to get on the front foot and raise interest rates before the end of the year, low inflation should ensure that the pace at which they rise is extremely gradual by historical standards.”

A 0.25 per cent increase in interest rates would add just over £20 a month to repayments on a £150,000 variable rate mortgage, which moves up and down in line with changes to the Bank Rate.

Meanwhile, the Bank of England’s Agent’s Summary of Business Conditions, also released today, built on previous indications that the housing market is beginning to slow down.

The report said housing transactions had eased in recent months due to a shortage of homes on the market and the introduction of the MMR, which had lengthened the mortgage application process.

It added that there were also signs of an easing in house price inflation, concentrated in the South, with some prices lower than they had been a year earlier, while there were also fewer cases of sealed bids and offers being made over the asking price.

Strong house price gains have left the typical British property costing £263,705, according to Zoopla.

But recent survey data has pointed to a slowdown in growth as more homes have been put on the market and buyers have started to bulk at high asking prices.

Nationwide Building Society said property values inched ahead by just 0.1 per cent in July, while surveyors questioned by the Royal Institution of Chartered Surveyors predicted prices in London, which has been the driving force of the market recovery, would rise by just 1.9 per cent during the coming 12 months.


August 20, 2014 at 10:37 AM Leave a comment

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