23.12.09 by Andrew Montlake
Goodbye 2009 It's Been Interesting...Bring On 2010
It has been, by all accounts, another extraordinary year, marked by a sense of frustration and confusion for many trying to understand what will happen next, and especially so for those people looking to purchase property.
The old adage that if you ask 10 different economists a question you get 11 different answers has never seemed so true. Some have predicted a double dip phenomenon and are waiting for a second plunge in property values, while others say the worst is over and advise taking advantage of property prices now. On top of this confusion, lenders have made it extremely difficult for the majority of people to take advantage of low mortgage rates and low house prices without a very healthy deposit and a “whiter than white” credit record.
As we edge closer towards 2010, there are however some very positive signs that things are at last starting to move in the right direction.
There has been so much speculation as to when the remortgage market will begin to return. Various questions have been raised such as how low will rates have to be to make moving worthwhile, how many people will actually be able to remortgage given strict new guidelines and lending policies and how long will Bank Base continue to stay stable? Now we have the CBI weighing in with their belief that interest rates will have to rise to around 2% as early as Spring 2010, which could cause some significant hurt to those on variable rates and trackers.
For an increasing number, recent movements by some of the main high street lenders have meant that remortgaging is once again on the agenda.
Product pricing has now come down to the extent that many who were prepared to sit on variable rates of at least 3.5% do not want to take the risk any more of missing out. After all, why sit on a variable rate at 3.5%, which is very unlikely to reduce further, when you can fix for 2 years at 3.59%, or even reduce your payments further to 2.49%?
As the question is when, not if, rates are going to rise further and the fact that when it does happen lenders variable rates could rise by more than the actual Bank Base Rate change, taking advantage of low costs now could make all the difference.
What is more, you can now obtain a 5 year fixed rate at 4.89%. A 5 year fixed rate below 5% has always been a highly prized product in any market, and with rates undoubtedly set to increase over the next 5 years this really does look like terrific value.
With many lenders still offering remortgage incentives such as a free valuation and legal fees, for those with loan-to-values of 75% or less now seems as good a time as any to move your mortgage.
Reflecting the tentative signs of improvement in the market, large loan mortgages continue their somewhat unlikely renaissance with yet another Private Bank actively promoting its latest offering through an exclusive band of mortgage brokers. Private banking institutions have really come to the fore in the past few months, with intelligent criteria aimed at the High Net Worth individual and impressive rates starting at just 1.5% above the cost of funds.
The good news is that these products have a sensible underwriting policy and very competitive fees, which are available both on an onshore or offshore basis. They can also be tailored to lend to offshore companies and trusts, and on short-lease properties in London that offer an excellent rental return.
We are continuing to see many traditional cash buyers deciding to borrow at historically low rates on at least part of the cost rather than tie up all their cash that could be utilised elsewhere.
Also amongst the whispers and tentative movements of lenders we monitor daily, there have been some interesting signs in recent weeks of an increase in activity in the much-maligned buy-to-let market with products available with standard rates as low as 3.29%, whilst lenders such as Paragon are poised to re-enter the market once again.
For those landlords looking to purchase an investment property in need of a little work, The Mortgage Works have come back into the light refurbishment space with a tidy suite of products up to 70% Loan-To-Value. Whilst the Arrangement fees on the lower rates can be 3.5% of the loan amount, for the right property this can easily make financial sense.
There is also a similar product that enables those professional landlords who may be purchasing slightly under value to borrow 85% of purchase price as long as this is no more than 70% of the market value.
With the amount of products available for Buy-to-Let properties increasing, although loan-to-values are likely to stay at the 75% level, it does look as if next year this sector could make an unexpected early recovery, especially on the purchase side.
Monty’s Mortgage Blog
29.07.10
House Prices & Lending To Individuals
The frustration felt by many individuals that banks still do not seem to be lending in sufficient quantities is still evident in the latest Lending To Individuals figures from the Bank of England, which explains the frustration felt by many would-be borrowers.
Coreco
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