Got a mortgage dilemma?

By Chris Hall, of the Mortgage Advice Bureau in Norwich

The wider UK economy has recently reported a modest return to growth but probably not enough, in my opinion, for interest rates to be raised in the short-term for fear of derailing the economy and tipping it back into negative territory. Most expectations are that rates will have to rise though, probably later this year. The early part of this year saw the major mortgage lenders competing for business and this is evidenced by the rise in the number of mortgage products typically available to intermediaries rising to a 12-month high in February. Not only have the number of products increased quite significantly, but many lenders have been repricing and cutting rates weekly and some twice weekly, demonstrating that they are increasingly looking for business, and this is resulting in some great deals out there for buyers and those looking to refinance their current arrangements. With the Skipton

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Building Society announcing its decision to raise its standard variable rate (SVR) from 3.5pc to 4.95pc in January and several other lenders following close on their heels such as the Norwich and Peterborough (5.35pc), and using the negative press that this generated to deflect their own announcements, many borrowers will now be looking more closely at their remortgage options available to them. The decision by the Skipton and others demonstrates that even though we have had no change in the BBR, lenders have to make commercial decisions concerning interest rates and these can be applied without warning and can prove

costly for borrowers. Last month we have seen a small increase in the proportion of business that is remortgage and we would expect to see this continue for the following reason. Most mortgage borrowers will want to have an element of certainty regarding their monthly repayments. They can do this by fixing their mortgage (generally for a finite period, 2, 3 or 5 years) or by linking their mortgage to an indices like the BBR via a tracker mortgage. In the case of a tracker deal this means that their repayments will change, but only by the amount of increase (or decrease) in the BBR. Several lenders do have SVRs where the rate of interest charged is linked to a specific margin differential over the BBR, as in the case of Cheltenham & Gloucester where its SVR is currently no more than 2pc over and above the BBR. Where a lender’s SVR has no guaranteed linkage to the BBR, borrowers are very much at the mercy of the lender, as demonstrated by the recent Skipton decision, and as a consequence we would expect and encourage more borrowers look to investigate the remortgage options that are potentially open to them. With Nationwide reporting that average house prices have risen by more than 8pc in the last 12 months, many more borrowers will have seen their equity levels restored, allowing them to take advantage of some very competitive remortgage deals now available.

For further information contact the Mortgage Advice Bureau Norwich on 01603 867254.

For further information contact the Mortgage Advice Bureau Norwich on 01603 867254.

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