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Options for first-time buyers


Research out this week shows that the number of mortgages available to first-time buyers has dwindled. The number of 95 per cent loan-to-value (LTV) mortgages has reduced, according to Moneyfacts, with a 16 per cent drop over the past five months.

Why is this happening? Lenders may be concerned that property prices will fall following Brexit although it seems rather early to be making this call and the lack of supply suggests that even if there is a dip, they will recover over time. However, lenders can get twitchy about high LTV mortgages when there is uncertainty and it may be that they are reining them in for now.

Less choice for first-time buyers is unwelcome and could make it harder to get a mortgage. But it is important not to panic: seek independent advice from a broker such as Anderson Harris to ensure you are getting the right mortgage for your circumstances and make sure you don’t overstretch yourself in the first instance.

Anyone buying now at a high LTV doesn’t need to panic, however. As long as you aren’t paying over the odds for the property, can afford it and are prepared to stay in the property for a few years, even if prices dip and you find yourself in negative equity, prices should recover over time.

Jonathan Harris
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Jonathan Harris

Repossessions decline to lowest level on record


The number of mortgages in arrears continued to fall in the second quarter to its lowest level since records began more than 20 years ago, according to the Council of Mortgage Lenders.

This is excellent news, reflecting rock-bottom interest rates and improving employment figures, as well as lenders prepared to be flexible and show forbearance. This month’s interest rate cut should provide further relief to those on variable rates, assuming lenders pass the reduction on in full.

However, there is no room for complacency. There are still many homeowners being repossessed or finding themselves in arrears on their mortgage each year, which begs the question: what will happen when interest rates move the other way and start to rise? How will people cope? We suspect that when it comes to their finances there are many people teetering on a knife edge and rate rises could easily push them over.

While it looks highly unlikely that interest rates will rise anytime soon, borrowers should still plan ahead and consider how they would cope with higher mortgage rates. For those who would struggle to pay their mortgage were interest rates to rise, a fixed rate makes a lot of sense, and there are some incredibly cheap deals available.

It is vital that borrowers keep their lender in the loop if they are struggling with their mortgage payments. It is much easier and less stressful to come up with solutions early on than further down the line when the options may be much more limited.

Jonathan Harris
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Jonathan Harris

Bank of England cuts interest rates to 0.25 per cent


The Bank of England has cut the base rate to 0.25 per cent and will also boost quantitative easing by £60 billion.

It comes as a surprise that the Bank is cutting base rate in August rather than keeping its powder dry until the autumn. There is no real market for purchases and sales at present, with many people on holiday so it is hard to see how much of an impact this will make.

With rates already at historic lows, there is not much room for manoeuvre in terms of reductions so the Bank needs to make them as effectively as possible.

Today’s rate reduction will have little impact on the mortgage market. A rate cut will be a bonus for those on variable-rate trackers and it will help encourage people to remortgage. However, many borrowers are on fixed-rate mortgages after Mark Carney, the Governor of the Bank of England, warned earlier this year that the next move in rates could be upwards.

Banks already have very tight margins and may want to focus on savers who are struggling to earn a decent return, rather than cutting rates further for borrowers. However, it is worth checking whether you are on the most competitive rate or whether there is a better deal out there for you.

Adrian Anderson
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Adrian Anderson