Mortgages London | Mortgages in London

A recent report has revealed that mortgage rates in London have fallen by 19% since 2008, helping to reduce the overall cost of living in a house in the UK. Although London is the most expensive place in the UK to run a home, an average of £3,000 more per year, residents are still benefitting from cheaper bills, less tax and cheaper maintenance. It has been acknowledged however, that the major factor in cheaper living has been the reduction of interest rates, which are currently at 0.5% for the 15th consecutive month.

The figures have been calculated by a housing economist at Halifax building society, and they clearly show that costs related to housing now use 27% of earnings, compared to 30% just two years ago. The mortgage rates in London have also dropped from an average 5.80% to 3.67%, a difference of 2.13%. As such, homeowners have been able to weather the harsh economic times a little easier than would have otherwise been expected.

For those who have a tracker mortgage, a fall of 2.13% has the potential to free up some much needed cash, but rather than reaping the rewards in the short term, borrowers are being encouraged to make extra payments on their mortgage before interest rates rise again, possibly as early as next year. By making extra payments, the mortgage debt will be lessened through increased equity in the property, and ultimately this means that it will be possible to access more favourable mortgage deals with lower interest rates.

Although this strategy may not see borrowers becoming better off as the interest rates rise, it does mean that the affect will be lessened. If you are considering making overpayments, consult your broker or lender to find out what would be the most effective way to do so. As all mortgage products are different, the way interest and equity is divided in repayments may vary. It is also worth considering using any savings you may have accumulated to make a lump sum payment on a mortgage. Often this is financially more productive that leaving savings in an account accumulating very little interest.

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