 |
|
|
|
|
|
|
|
 |
|
|
| EMP Marketing |
|
|
|
| |
|
| |
Homeowners turn their backs on fixed rate deals |
| |
HOME >> NEWS >> Homeowners turn their backs on fixed rate deals |
|
|
 Demand for fixed rate mortgages is falling as borrowers anticipate further interest rate cuts. However, analysts recommend that anyone looking for a variable rate deal, opts for a tracker rather than a discount.
Figures released today from the Council of Mortgage Lenders (CML) revealed that the number of people taking out fixed rate mortgages fell for the fifth consecutive month in November: 65% of mortgages were fixed, down from a peak of 77% in June.
The popularity of fixed rates is likely to wane further in the coming months if interest rates fall as expected. The Bank of England’s Monetary Policy Committee meets this week and some economists believe it will vote to cut Bank rate by another quarter point on Thursday.
In December, the committee reduced interest rates for the first time since August 2005, and the Bank rate fell from 5.75% to 5.5%. Even if it decides to keep rates on hold this month, most economists believe there will be at least one more cut this year and the consensus is that we will see two quarter point reductions, taking Bank rate to 5% by the end of the year.
With interest rates on the way down it is unsurprising that more people are opting for variable rate mortgages. However, industry analysts warn that many will not benefit fully from lower rates.
A number of lenders have not passed on last month’s rate cut to their mortgage customers. Intelligent Finance, has said it is keeping its standard variable rate (SVR) at 7.25%, while other lenders including Skipton and Principality building societies have yet to respond to the rate cut. Some of those that have announced their new SVR have not passed on the full quarter point reduction. These include Northern Rock, which only reduced its SVR by 0.15 points, Alliance & Leicester and Scottish Widows Bank. Their SVRs have gone down by 0.2 percentage points.
If we do see further rate cuts this year, the number of institutions failing to pass the reductions on in full to borrowers is likely to increase.
David Hollingworth at L&C Mortgages, a broker, said: “The more cuts there are, the greater the chance there is that lenders will not pass on the full reductions. It is impossible to know who won’t cut in full, so the easiest thing for borrowers to do is go for a tracker if they are wanting a variable rate mortgage.”
Trackers are directly linked to Bank rate, so you are guaranteed to see your mortgage payments fall by the full amount if the MPC does vote for further cuts. Discounted deals on the other hand are linked to the provider’s SVR, and any reduction is therefore at the lender’s discretion.
Co-operative Bank has the best two-year tracker at 5.49%. There is a £999 arrangement fee, but those remortgaging receive a free valuation and free legal work. Anyone wanting a longer-term deal can take advantage of a new five-year tracker from Halifax. Available only through broker, the rate is 0.11 points below Bank rate, giving a current pay rate of 5.39%. This is only available for remortgages, but the fee is relatively low at £499 and applicants receive a free valuation and legal work.
Even though interest rates are falling, the CML figures show that many people still prefer the security a fixed rate mortgage offers. Anyone looking for a fixed rate mortgage, can lock in for two years at 4.99% with First Direct. The fee on this product is £1,498.
Leeds building society is launching a new range of fixed rates on Thursday and it will have the market leading five year fix at 5.29%. The arrangement fee will be £995.
Source: http://business.timesonline.co.uk/ |
| |
|
|
|
International Corporate Governance
This issue explores how governance attributes are directly related to the substantial variation - across both countries and companies - in ownership, investment and valuation. |
|
|
|
|
|
|
|
|
|
|
|
|
|
