Mortgages London | Mortgages in London

Posts Tagged ‘Mortgage Rates 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.

Mortgage rates in London have fallen to the lowest levels since December 2009 according to a survey, but applications have fallen too. Average rates as declared by Countrywide fell to 4.73% from 5.33% for the same time last year. Whilst the number of applications has increased compared to May 2009, they have dropped by 8% over the last month, raising concerns over the recovery of the housing market.

Countrywide have based these figures on the activities of hundreds of consultants, and have also identified a shift between tracker and fixed rate mortgages over the last 12 months. This time last year only 3% of applications through Countrywide were for tracker mortgages. This number rose dramatically to 47% by the close of 2009, and has since fallen to 35%. It is thought that the recent change in trends is due to consumer uncertainty over political and economic change in the UK, with borrowers regarding fixed rate deals as a safer option.

Although mortgage rates in London may be at an all time low, there will be an inevitable rise over the coming year, with predictions that mortgage rates will rise by 3.5% by the end of 2011. This has the potential to cause repayment problems for Londoners that have been reaping the benefits of low interest rates over the last 15 months. According to a recent report, some homeowners have not been paying off any of the interest on their London mortgage.

This is only applicable to borrowers who initially took out a tracker mortgage when interest rates were high, and then felt the benefits of consistently lower interest rates. Some Cheltenham and Gloucester customers have in fact found themselves in a position where their tracker mortgage was actually pegged at over 1% lower than the Bank of England’s base rate of 0.5%, resulting in no interest being paid at all since March last year.

Despite the concerns over European debt, London mortgage rates remain attractive as the Bank of England keeps interest rates at 0.5%. This will be the 14th consecutive month that rates have been held so low, and it is predicted that these levels are here to stay; at least until the political unrest within the UK begins to be resolved.

Interest rates have to be kept low, as any rise during the current political and economic climate could send the UK spiralling into a financial black hole that would be incredibly difficult to recover from. As such, whatever the outcome of the hung parliament, the coalition will have to keep interest rates low to prevent further economic decline.

This is good news for anyone interested in London property investment as it appears there has never been a better time to get a mortgage. The current mortgage rates will encourage investment in London properties which will in turn help the economic recovery by providing the foundations for a strengthening housing market.

One of the best products on the market at present is a tracker deal from Market Harborough that has an initial rate of just 2.49% over 2 years, ideal if interest rates remain at their current level. However, in the event that rates rise before the two year initial term is over, anyone that has taken out this loan can switch lenders to take advantage of lower mortgage rates without paying an early repayment charge.

Products such as this are ideal for Londoners who want to invest in a property now. It must be stated however that this product comes with a higher than usual arrangement and booking fee of £1,250 and requires a 25% deposit. It is estimated that the average price for a London property is £368,825, which means that a the minimum deposit would work out to be in excess of £92,000.

Predicting mortgage rates for London properties may seem like a game of chance, and to some degree it is, but news that house price inflation has hit 10.5% could seriously affect the type of deal a borrower can secure in a London mortgage. The rise in house prices puts the average cost of a home up to £167,000, well up from the £150,000 mark. Typically a borrower will need to lay down a deposit of 25% to get a mortgage with reasonable interest rates, but if house prices in the city continue to escalate, this size deposit will be increasingly harder to find.

The difference in mortgage rates between 75% LTV and a 90% LTV can be huge. With a 25% deposit, it is possible to get a fixed rate mortgage with an initial rate of 3.1% or a tracker mortgage at 2.48%, but if the deposit is reduced to just 10%, some borrowers can expect to pay an initial rate up to 6.89%. If these figures are combined with recent news that mortgage rates in London could go up by as much as 10% in the event of a hung parliament, then it makes some shocking figures for borrowers indeed.

With mortgage rates in London currently at an all time low, you would suspect that first time buyers would be clamouring to get a foot on the elusive ladder, but it is in fact Londoners looking to remortgage that are making the most of the current situation. It is thought that homeowners are securing long term fixed rate remortgage deals in anticipation of the forthcoming economic uncertainty; whereas first time buyers are reluctant to take on a mortgage without having a substantial deposit.

The result is that there are an increasing number of new instructions on the market, at a value that has taken the market by surprise. The good news for first time buyers unable to tap into the presently rationed mortgage market is that house prices should level out again later on in the year.

During the recent credit crisis, London lenders decided to reduce risk of bad debt by shying away from certain areas of the mortgage market. This included putting their faith in first time buyers and buy to let ventures, backing a borrower with bad credit with a sub-prime mortgage and handing out large mortgage loans. However, as mortgage applications have been rising and the market is making a slow recovery, some lenders are reverting back to the good old days and offering high net worth customers large loans with lower mortgage rates in London.

The types of loan we are discussing here are understandably well out of the reach of the average Londoner, but for people wanting to buy an abode in Chelsea for example, it could be just the ticket. Cheltenham and Gloucester are now offering a two year fixed rate loan at just 3.99% for mortgages between £1m and £2m with a 40% deposit. This means that the mortgage rates for this type of loan have been lowered by 1.9% from 5.29%.

Whether or not this will cause a flurry of applications for larger loans remains to be seen, but it does mean that lenders are offering big money borrowers similar rates to those who apply for a far smaller mortgage. The trend for handing out large loans appears to be across the board, with Barclays and The Royal Bank of Scotland following suit.

It is thought that the decision to offer high income borrowers lower mortgage rates is a strategy to improve the lot of banks generally. By enticing high earners through the door with low rates, they can then sell their other products and take advantage of hopefully healthy bank accounts; and London is the right area to do this in. Not only does the city have a higher proportion of wealthy workers than elsewhere in the UK, it is also where many multimillion pound townhouses are located.