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money


What housing crisis?


Mortgage rates have never been lower, despite the fact that there is supposed to be a housing crisis in Britain at the moment and there is currently a huge surge of competitive 5 year fixed mortgages compared to just five years ago, when buyers would have been hard pushed to find a fixed rate of less than 5%.


By Kathryn Gaw


Sylvia Waycot, editor at Moneyfacts.co.uk, says that over the past five years, the UK mortgage market has changed “beyond recognition”. As the financial crisis was about to hit in 2008, first- time-buyers had the advantage in the mortgage market, with 957 products available to people with a 10% deposit. But within a year, this had dropped dramatically to just 89 products, and today there are only 351 mortgages on the market for 90% LTV.


By contrast, there are more than 500 mortgages available today for people with a 40% deposit, up from 24 in March 2008 which is great new for those who are remortgaging. In January, remortgage lending rose to £2.9 billion, up 6.2% on December’s £2.7 billion. In fact, according to the Council of Mortgage Lenders, remortgages now account for as much as 28% of gross mortgage lending but how do homeowners access the best rates?


There has probably never been a better time to remortgage, so even if you are mid-way through a competitive fixed-term deal, shop around and you may be surprised at the savings you can make.


The latest Halifax Housing Price Index suggests that a slow recovery is under way, with house prices in the UK rising by 0.5% in February, and 1.9% over the year to date. The average house price in England and Wales is now £229,544, just 1% off its previous peak in February 2008.


Meanwhile, if the Bank of England raises the 0.5% base rate or decides to employ quantitative easing, there will be less of an incentive for banks to raise funds by competing on the mortgage market. With fixed mortgage rates hovering around the 2% mark on a regular basis, and homes available for as little as £5,000 in Belfast for example, surely the market can’t get much cheaper?


Why remortgage? Local Mortgage lender Teachers building Society suggests that switching to a new mortgage deal could save you money, particularly if your current deal is coming to an end or your mortgage is already on a lender’s Standard Variable Rate. “In such a


28 Life Begins


low interest rate environment, it makes sense to ensure that you are not paying more in monthly mortgage payments than you need to” said a spokesperson for Teachers Building Society .


Where do you start? First port of call should be your existing lender, to see what they can offer you and also to request a redemption statement so you know exactly how much is required to redeem your existing mortgage. You should also check if there are any fees that may be charged to bring that arrangement to a close. Then, shop around to see what deals are available from other banks and building societies.


A remortgage can be an opportunity to free up some cash for home improvements, so you could consider this when obtaining mortgage quotes.


FINANCIAL DICTIONARY: Base rate


What is it? We all know that the Bank of England’s base rate has been held at 0.5% for a record period of time - but what does that actually mean? Its official name is the “bank rate” and it refers to the interest rate which the central bank (Bank of England) charges banks for holding their funds in its reserves. It has been in existence since the Bank of England was established 1694, hitting 17% at its peak in 1979.


This base rate informs the rate of interest that British-based banks charge on loans such as mortgages, with the idea being that the lower the base rate, the cheaper the loans.


However, to offset these low lending rates, banks may choose to keep the interest rate on savings accounts lower.


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