Blog Archives

Are interest rates on their way up?

26.06.2017

Interest rates are back in the news – and whether they should rise from 0.25 per cent sooner rather than later. The Bank of England’s chief economist Andy Haldane said last week that he could soon change his position on the rate setting committee from hold to rise. His comments came just a day after Governor Mark Carney warned that now is not the time to raise rates.

So what should borrowers think and what should they do? We still think an interest rate rise remains some way away. There is still too much uncertainty around, both politically and otherwise. The housing market is soft, particularly at the top end.

However, borrowers should always be cautious about over-stretching themselves, particularly in a market where the only way is up when it comes to interest rates. Someone with a £300,000 mortgage on a variable rate of 1.18 per cent would pay an extra £1,396 per year if interest rates were to rise by 2 per cent. If you are really concerned about budgeting, then a fixed-rate mortgage makes a lot of sense.

While the low interest rate environment cannot last forever and you should always factor in some form of stress test to ensure you are not overcommitted, any rise in rates is likely to be phased and slow so there is no need to panic. The big question is what will the new ‘normal’ look like? It will be a long time until we are back up to base rate at 5 per cent again, with a more likely level around the 1 per cent mark.

As always, it is worth seeking advice as to what to do with your mortgage. With a third of borrowers currently on their lender’s standard variable rate, that is a lot of people who will be paying more when interest rates start to rise.

Adrian Anderson
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Adrian Anderson

Post-general election calm on the mortgage front

15.06.2017

A hung parliament wasn’t the outcome most of us were expecting from the general election but now that the surprise has subsided it’s clear that the mortgage market hasn’t been rattled by the result.

It really is business as usual. Swap rates – the rate lenders pay to borrow from each other – barely moved in response to the outcome. Lenders remain keen to lend and there continue to be some exceptional mortgage rates to choose from as they compete for business.

With a lack of urgency among buyers to purchase property, lenders are concentrating on the remortgage market, with some excellent rates available with the valuation and legal fees paid by the lender. Given that we may be close to the bottom of the market in terms of rates and near the top of the market with regard to property values, it is a good time to consider remortgaging, particularly if you are sat on your lender’s standard variable rate (SVR).

Jonathan Harris
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Jonathan Harris

Why joint borrower sole proprietor mortgages are becoming more popular

02.06.2017

Incomes cannot keep pace with house prices, creating a problem for first-time buyers desperate to purchase their own home. Consequently, more first-time buyers are clubbing together with partners, friends, siblings and parents to buy, with two deposits and incomes helping bridge the gap between salaries and property prices.

However, since the government introduced a 3 per cent stamp duty surcharge on second homes last year, this has created a potential problem. The first-time buyer who is purchasing jointly with a parent who already owns a property, for example, will have to pay an extra 3 per cent stamp duty. On a £500,000 property, this means a stamp duty bill of £30,000, as opposed to £15,000. At a time when first-time buyers will be scraping around for every penny they have to put towards the deposit, buying furniture and other moving costs, this is an unwelcome extra expense.

The good news is that there is a solution, which is where the joint borrower sole proprietor mortgage comes in. A limited number of lenders offer these, allowing two borrowers to combine their borrowing capacity to maximise mortgage lending but with only one of the applicants listed on the deeds. So parents who already own their home can help a son or daughter onto the property ladder: the child can take advantage of the parent’s additional income and get a bigger mortgage, while retaining sole ownership of the property so legitimately avoiding the 3 per cent stamp duty surcharge.

We expect more lenders to offer joint borrower sole proprietor mortgages in answer to increased demand. Please get in touch for further information.

Adrian Anderson
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Adrian Anderson