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| Lower rates on offer from mortgage lenders, but keep an eye on your SVR |
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The Halifax house price index reported its sixth consecutive monthly increase, with the average property now said to be worth a shade over £169,000 an improvement of 9.4% on the 2009 low point we saw last April. With the economic uncertainty and future supply of houses for sale making price predictions difficult, providers are certainly doing their bit to stimulate the market in an effort to keep the momentum going. The two year fixed rate market has been the focus of lender activity with Cumberland Building Society trimming an already market leading rate to 3.49% with a fee of £995 for loans to 60% LTV. Mansfield Building Society also revealed a strong appetite for new business with a two year fix at 3.59% and £999 fee available up to a more generous 75% LTV. The third in a trio of new deals from the mutual sector comes courtesy of Coventry Building Society at 3.75% fixed for two years to 70% LTV with a fee of £800. Away from fixed rates, ING Direct is now a clear front runner in the two year tracker market with a 2.54% rate and £795 fee to 60% loan to value. Unfortunately it’s not all positive news, with more lenders choosing to increase the rate charged on their Standard Variable Rate (SVR). The low interest rate environment has lead to some smaller building societies increasing the rate on their SVR over the last few months and in some instances these now stand as high as 5.99%. Some people will be comfortable to remain on their lenders SVR whereas others may be biding their time before switching to the security of a new fixed rate product. However, for those who purchased a property 10 or 15 years ago when the average price according to the Nationwide BS house price index was £77,968 or £51,084 respectively, some borrowers will be in the fortunate position of having a relatively small balance outstanding in comparison to typical loan requirements of today. If for example you have a balance of £40,000 with 10 years remaining on the term you’ll be paying around £443 per month at a 5.99% SVR. But when you look at the rate and fee combinations available on fixed rate deals, there’s not really much of a financial incentive to move to a new deal if you have a loan of this size. However if you look at a larger balance, say £70,000 then it does make financial sense to switch, with savings of up to £960 possible over 2 years or up to £1570 over 5 years just by switching to a competitive new fixed rate product. By Andrew Hagger
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| Last Updated ( Wednesday, 03 February 2010 17:12 ) |
