The recession and the decline witnessed across the housing sector, coupled with high tax regime are reasons enough for plummeting fixed-rate home loans. Huge number of homeowners will be rescued from the increasing monthly mortgage charges as lenders try to offer low fixed-rate deals.
“While rates may not fall far enough so that those coming off excellent two-year fixes won’t notice a difference in their repayments if they switch to another two-year deal, it should ease some of the pain of last year’s increases in the base rate.”
In spite of the last week decision of the Bank of England to freeze the base rate, lenders are predominantly reducing their mortgage levels in anticipation of future cuts.
“The value of choosing a fixed-rate deal lies in the security that borrowers gain in knowing what their monthly bills will be. First-time buyers and older homeowners with a fixed income can especially benefit from peace of mind,” is the justified opinion put forward by the Mortgage broker, Ian Giles of Purely Mortgages.
The two-year fixed rate deals gained immense popularity in April, with over 46% of the borrowers opting for the two-year fixes whereas 21% accepted the five years and the longer tenure, with 18% of borrowers going for the three years fixed option.
In the present scenario there prevails stiff “rate“ competition amongst the lenders. One of the largest lender of UK, Halifax reduced rates on its fixed deal (2 years) to 4.99% as against 5.25%.
Leeds and Holbeck launched a ten-year fix at 4.99 percent with an arrangement fee of £495, with annual interest charges, whereas Yorkshire Building Society, instead of fixing an arrangement fee, calculates interest on a daily basis, which works out to be a cheaper option for the borrowers.
“The increasing popularity of short-term fixed rate lending indicates that borrowers are nervous about imminent hikes in interest rates. However they are evidently confident that stability will return in the longer term, as only a small percentage of borrowers are choosing fixed rates for five years and longer,’ says Gladdy.
Just a month ago, the best two-year deal entailed the homeowners with £150,000 loan to pay an extra of £1,500 a year. But in the present arrangement, “Homeowners who switch a £150,000 loan to Newcastle’s 4.49 per cent deal will pay just £89 a month more on their mortgage”, mortgage broker, John Charcol says.
Posted
on : Mon, 23 May 2005 14:20 GMT | Loans News
By : Pippa Fielding
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