What next for interest rates?

In the last 2 years the Bank of England's Base rate has risen from 3.5% to 5.75%, with products like mortgages & loans being linked to it.

The main reason for the rise was to control inflation and partly tot try to control the housing market.

Things have taken an unexpected twist recently with the sub prime mortgage problems in the US. To deal with this the US Federal reserve (the equivalent of the Bank of England) has lowered the rate at which it lends money to banks.

What does this mean for the UK, financial advisers & their clients in Swindon?

The rise in interest rates [& the forecasedt end of the world :)] is likely to stop for the time being. Tracker /discounted mortgages could become more attractive again as arrangement fees for Fixed Rate mortgages are now rather high.

14 000 homes repossessed in last 3 months

Repossessions have risen by 30% since last year according to the Council Of Mortgage lenders (CML). 14 000 alone in the last 3 months

Additionally 125 000 borrowers have mortgage arrears.

Things can only get worse as around 1.5 million borrowers will experience a 2% rise in interest rates in the next 6 months when their fixed interest deals end.

Abbey, HSBC: No arrangement fees....Misleading & Nothing New

Both Abbey & HSBC are advertising mortgages with no arrangement fee. All lenders offer such a deal, it's called the Standard Variable Rate.

When remortgaging, it's normal to look for a deal with no arrangement, legal or valuation fees. In fact I've just done one for a client today.

Interested? Give me call on Tel :01793 524806.

What is a Sub Prime Mortgage? Exist in Swindon?

During the stock market correction in February, there was much talk of sub prime mortgages in the US.

It raises the question...what is a sub prime mortgage?
Do they exist in places like Swindon?...Yes

It is a mortgage for somebody who can't get a mortgage in the normal ways
The person could

1 be self employed & doesn't have a long term track record
2 have had some debt problems (IVAs, bankruptcies).

The rates & arrangement fees are higher as the lender is taking a bigger risk and more people default (don't pay the money back).

Financial Advisers slam "cheap" mortgages from Abbey

Financial Advisers have slammed cheap "stepped" mortgages. Abbey recently introduced a product where rates start at 2.99%, then shoot up to 6.2% then 6.35% over 5 years.

There is also a £799 arrangement fee.
People might be able to afford the payment in year 1 but the the huge increases mean first time buyers face a huge payment shock. You're locked into using the product for 5 years, if you try to get out, you will face a redemption penalty

Avoid

Mortgage Advisers in Swindon

Like any town, in Swindon you have a choice of people who can help you buy your Home.

Independent Financial Advisers (IFA): Whole of Market advice on mortgages & insurance, think of them as Mortgage Advisers offering a greater range of services.

Estate Agents: Typically a panel of 10-15 lenders. Not whole of Market Insurance, tied to one company. Sold to you by a youth with gelled hair & a large knot in his tie.

Mortgage Broker: Check if independent, whole of market. Offers insurance from one insurer or limited range

Banks/Building Society: only offer their own limited range of products for mortgages and insurance.

Hope the differences betweeen various kinds of mortgage advisers is clearer.