OPINION
Mortgages in 2011 – David Carmichael takes an independent view on the options available to homebuyers.
U
ndoubtedly the 2011 mortgage market will be a year of continued ‘transition’ and ‘change’. Many lenders will bring in the New Year
with their ears still ringing from year end meetings with the Chancellor, as they try to explain some highly dubious policy decisions and some fairly serious underperformance in terms of their ‘promised’ lending figures. As a response to these ‘festive greetings’
from the Government, UK borrowers can expect lenders to continue seeking market share in the New Year, but unfortunately they will continue to a degree, to do so on their own terms. The main topical areas of the marketplace in 2011 will be the purchase market, remortgages, debt consolidation, Buy To Let and First-Time Buyers. Each of these sectors will carry challenges and their success will fundamentally shape next year’s mortgage and property market.
Purchasers There are many excellent mortgages available for purchasing a new home in 2011. The New Year will bring increased choice at 80 - 85 per cent, and sub 75 per cent borrowing offers highly attractive rates, particularly ‘fixed rate’ options. However, a solid personal and financial
strategy is the key ingredient for a successful purchase as we move forward. Buying, then selling will remain a risky approach, reliant on a robust client status, an ability to pay two debts short term, and a firm reliance on an experienced advisor who can structure the short term requirements, while also planning for the longer term mortgage commitment. For many people, 2011 may bring a three step approach of selling, renting, then
28 JANUARY 2011 PROPERTYdrum
Industry experts believe 2011 is the year that clients should reduce risk and fix rates.’
buying. This allows borrowers to avoid the risk of owning two homes and permits their mortgage advisor to calculate their future borrowing capacity based on an accurate deposit figure from sale proceeds. Viewing property while renting allows purchasers to take their time and avoid rushing into a panic purchase. For those borrowers taking advantage
of an existing lender rate and ‘porting’ it to a new home with a refund of early repayment charges, be aware that more and more lenders in 2011 will have ‘timeline’ restrictions on these features and your advisor will check if their criteria can accommodate a period of rental sandwiched between selling and buying. A certain amount of upheaval may be necessary in 2011 for buyers to secure ‘safe passage’ to a new home in the present marketplace, but such a ‘strategy’ will ensure peace of mind and attractive and affordable borrowing terms.
re-mortgagors 2011 will bring a renewed debate over whether clients should remain on their lender’s ‘Standard variable rate (SVR) or secure a fixed rate. Much depends on which lender a borrower holds debt with in the New Year. For example Woolwich, HSBC and many regional lenders have higher SVRs, while Lloyds/C&G have very low SVRs. By the third quarter of 2011 as many as
40 per cent of Lloyds borrowers will be on an SVR of 2.5 per cent. Will this be better or worse that a five-year fixed rate at 3.75 per cent for example? Time will tell, but many industry experts believe 2011 is the year that many clients should reduce risk and fix. If rates rise and property values drop, some clients will have missed a chance to book a lower fixed rate, or worse if their property drops significantly in value, they may lose eligibility to re-mortgage at all and become a ‘captive’ borrower with
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68