Roy's Blog
The Director of Mortgage Beaters, Roy Bookman, knows what's going on in the ever-changing world of mortgages. So what's new, Roy?
“A week is now a long time in mortgage broking”
Wednesday, 23 January 2008
They say a week is a long time in politics. They should try mortgage broking.
A rollercaster ride hardly begins to describe the events of last Monday when lenders were pulling their products left right and centre and we brokers, as usual, were left to explain to our customers just why the product we recommended in the morning was suddenly no longer available in the evening!
Thankfully given the economic problems the entire world is now facing our customers didn’t vent their spleen on us.
We obviously need a deep cut in interest rates to restore confidence and we need it now, but if you think that we are going to get anything like the 75 basis points reduction they had in the States yesterday then think again.
Minutes just released by the Bank of England's rate-setting Monetary Policy Committee (MPC) show that it voted 8-1 to keep interest rates on hold in January and whilst it is widely anticipated that it will reduce rates to 5.25% from 5.5% next month, the minutes also showed that more aggressive cuts are unlikely.
The reason for this is because the MPC believe that inflationary pressures are increasing.
I know that the Bank of England’s remit is to keep inflation on or under the 2% level per annum, but desperate times require desperate measures and a cut of 25 basis points will hardly soothe the nerves of homeowners increasingly worried about meeting their mortgage payments.
If you are unfortunate enough to be in this position what can you do?
First, you should talk to your lender and see if you can switch from a repayment mortgage to an interest only one. They will probably charge you £50 to do this, but it could save you thousands of pounds a year in outgoings. This can only be viewed as a short term measure, because failing to pay off the capital means that you risk not being able to pay the loan off in its entirety at the end of the term.
Something else worth considering is to extend the term of your mortgage. If, for example you have a mortgage over 25 years you could possibly extend this to 35 years. On a mortgage of £150,000 at an interest rate of 6% you could save over £100 a month.
Finally, you could consider remortgaging to release some equity in your property. Despite everything you’ve read in the papers, there are some lenders out there who are offering free legals and free valuations and if you talk to your friendly independent broker they will soon tell you if you would qualify for one of these deals.
A rollercaster ride hardly begins to describe the events of last Monday when lenders were pulling their products left right and centre and we brokers, as usual, were left to explain to our customers just why the product we recommended in the morning was suddenly no longer available in the evening!
Thankfully given the economic problems the entire world is now facing our customers didn’t vent their spleen on us.
We obviously need a deep cut in interest rates to restore confidence and we need it now, but if you think that we are going to get anything like the 75 basis points reduction they had in the States yesterday then think again.
Minutes just released by the Bank of England's rate-setting Monetary Policy Committee (MPC) show that it voted 8-1 to keep interest rates on hold in January and whilst it is widely anticipated that it will reduce rates to 5.25% from 5.5% next month, the minutes also showed that more aggressive cuts are unlikely.
The reason for this is because the MPC believe that inflationary pressures are increasing.
I know that the Bank of England’s remit is to keep inflation on or under the 2% level per annum, but desperate times require desperate measures and a cut of 25 basis points will hardly soothe the nerves of homeowners increasingly worried about meeting their mortgage payments.
If you are unfortunate enough to be in this position what can you do?
First, you should talk to your lender and see if you can switch from a repayment mortgage to an interest only one. They will probably charge you £50 to do this, but it could save you thousands of pounds a year in outgoings. This can only be viewed as a short term measure, because failing to pay off the capital means that you risk not being able to pay the loan off in its entirety at the end of the term.
Something else worth considering is to extend the term of your mortgage. If, for example you have a mortgage over 25 years you could possibly extend this to 35 years. On a mortgage of £150,000 at an interest rate of 6% you could save over £100 a month.
Finally, you could consider remortgaging to release some equity in your property. Despite everything you’ve read in the papers, there are some lenders out there who are offering free legals and free valuations and if you talk to your friendly independent broker they will soon tell you if you would qualify for one of these deals.
# posted by Roy Bookman : 13:27
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