Posts filed under ‘Finance’

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 But the deal was withdrawn following very strong demand.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

UPDATED: Mortgage approvals drop to lowest level in a year

The number of mortgages approved for people buying a property fell for the second month running in August, figures showed today.

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A total of 10,357 loans were in the pipeline for house purchase during the month, down from 10,703 in July, according to the Bank of England.

It was the lowest monthly figure since September last year, with the exception of April and May, when the market was disrupted by the introduction of tough new lending criteria under the Mortgage Market Review.

The data adds to growing evidence that the booming property market is beginning to cool, as buyers become more cautious in the face of recent strong house price gains and the prospect of future interest rate rises.

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

Total mortgage advances increased slightly during the month, rising to 17.46 billion, up from 17.2 billion in July.

The figures came as the National Association of Estate Agents warned that the younger generation continued to be squeezed out of the property market.

The group said the number buyers aged between 18 and 30 remained at an all-time low of just 3 per cent of sales in August.

There was some good news, with the proportion of sales accounted for by people buying their first home rising to 28 per cent during the month, the first increase since April and up from just 20 per cent in July.

But the majority of people getting onto the property ladder are thought to be aged aged between 31 and 40, with this age group accounting for 45 per cent of all sales, the highest proportion ever recorded for August.

Mark HaywardMark Hayward, managing director of the National Association of Estate Agents, said: “Reports from our NAEA members suggest that the high house prices of the current housing market are still proving a barrier for the younger generation.

“It is evident that first-time buyers are indeed getting older, with the majority of home buyers this month aged 31 to 40, suggesting some correlation between the increase in the first-time buyer market and this age group.”

The number of properties for sale fell slightly during August, dropping to an average of 49 per estate agent branch, down from 51 in July.

There was also a dip in the number of sales agreed, with transactions falling to an average of eight per branch in August, compared with nine the previous month.

But there was an increase in the number of people looking to buy a home, bucking the recent trend, with 372 house hunters registering with estate agents, up from 368.

But nearly 90 per cent of estate agents think the expected increase in interest rates will affect demand for property, with 39 per cent of agents saying they have already seen a cooling.

Meanwhile, the Government has announced plans to extend the Help to Buy scheme to enable more young people to get on to the property ladder.

It said first-time buyers aged under 40 would be offered discounts of 20 per cent on 100,000 new build homes.

The discount will be made possible by releasing brownfield sites to builders and exempting them from certain taxes.


September 29, 2014 at 9:59 AM Leave a comment

Homeowners prepare for interest rate rise

Homeowners are prepared to cut back on spending to ensure their mortgage repayments remain affordable when interest rates start to rise, research showed today.


Around 39 per cent of people said they would reign in their spending on non-essential items, such as holidays, eating out and buying gadgets, if their mortgage rate increased.

A further 20 per cent admitted they may have to make cuts on essential spending, such as food and clothes, according to a report by the Building Societies Association and the Money Advice Trust.

But 30 per cent of people said they would not need to make any changes in order to meet their mortgage repayments.

The Bank of England is widely expected to start raising interest rates from their record low of 0.5 per cent in the first quarter of next year.

Many homeowners have financial strategies planned to ensure a hike in mortgage rates does not come as a shock.

One in five people said they would remortgage on to a cheaper deal, while 12 per cent said they would work more hours and 10 per cent said they would pay off a lump sum of their mortgage to reduce monthly repayments.

Around 19 per cent of people said they would put major spending plans, such as home improvements, buying a new car or trading up the property ladder, on hold while they adjusted to a higher interest rate environment.

A further 6 per cent of people said they would consider downsizing to a cheaper property.

Overall, just 7 per cent of homeowners said they would be in serious financial trouble if interest rates change as they expect during the coming three years, while 20 per cent said they may be in slight trouble.

Just over half of people said they thought the Bank Rate would still be only 2 per cent or less by 2017.

But Bank Governor  has indicated that the official cost of borrowing is likely to rise to around 3 per cent in the long-term, although he has stressed that any rate hikes will be gradual.

Paul BroadheadPaul Broadhead, head of mortgage policy at the Building Societies Association, said: “Our advice to those concerned about interest rate rises is to start thinking about how they will manage the increased costs.

“This could include creating a household budget, to taking a look at mortgage calculators and rescheduling unsecured loans such as credit cards.”

For homeowners who want to remortgage, there are some highly competitive rates available as lenders look to fill their mortgage quotas before the end of the year.

Norwich & Peterborough Building Society has the best two-year fixed rate loan available at 1.89 per cent for people borrowing up to 65 per cent of their home’s value who pay a £195 fee.

Yorkshire Building Society leads the way for those wanting to fix for five years, with rate of 2.89 per cent, although borrowers will need a 35 per cent deposit and will have to pay a fee of £975.

September 24, 2014 at 11:06 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

Cost of divorce rises to £44,000 as experts reveal financial survival plan

If you’re mulling over a potential split from your partner, you might want to check how deep your pockets are first as new figures suggest it could cost almost £44,000.


The cost of splitting from a former loved one has rocketed by 57 per cent during the past eight years, according to insurers Aviva.

The last time it carried out the survey, the cost was £28,000 per couple.

The study takes into account the core costs in a divorce as well as added extras that many people treat themselves to following a separation, such as post-split holiday and a new gym membership.

One in eight people said they took a holiday to celebrate their newly-single status at a typical cost of £1,925.

Four out of 10 said they were financially worse off following the separation and more than half of couples said the process took more than two years.

Financial experts urged separating couples to keep a close eye on their money as lenders will be examining their outgoings with a fine tooth comb if they need a mortgage to fund a new home.

Jonathan HarrisJonathan Harris, of mortgage brokers Anderson Harris, said: “Divorce can be an expensive business but if you need to get a mortgage afterwards, lenders will want to see evidence that you can afford it.

“Reduce or remove any unnecessary expenditure as lenders will closely scrutinise all your outgoings.

“Pay down any debt where you can as this will also affect how much you can borrow.

“The biggest problem is being able to split the mortgage liability. Lenders will not release one party until they are happy that the mortgage can continue to be serviced, so seek independent mortgage advice from a broker. If this can’t be done, it could be immensely frustrating to the splitting couple as they cannot be free of their situation until the loan is repaid or other arrangements are made.”

The survey found the hidden cost of divorce to be £21,979 per person or £43,958 per couple, with the typical age when the split took place being 38 years and two months.

Those who took part in the survey were with their partner for an average of 10 years and eight months before separating. although one in 10 were together for less than two years.

Aviva’s Louise Colley said: “Two thirds of couples who are married or co-habiting have some shared finances, so these arrangements can take some time to unravel if a relationship unfortunately breaks down. Beginning again following a separation can be a daunting time, not to mention a busy one, but it’s crucial that newly-single people review money matters when their circumstances change.

Louise Colley

Latest official figures from the Office of National Statistics show 118,140 marriages and 794 civil partnerships ended in England and Wales in 2012.

Meanwhile, 9,700 marriages and 67 civil partnerships ended in Scotland in 2012/13, according to latest figures for Scottish civil law cases.

It equates to 128,701 divorces and dissolutions annually, relating to 257,402 people.


August 19, 2014 at 9:40 AM Leave a comment

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