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What can mortgage rates tell you about the investment market?

[ Posted February 6th, 2012 ]

To those who are looking for the best mortgage rates in order to refinance their homes, or to get some added security over the next couple of years, the new 3.19% mortgage deal that is good for a five year fixed term may look very enticing. However, there is a great deal of significance behind this rate that is very telling.

This is because when a bank offers a great term that extends significantly into the future it reflects the lenders belief about how interest rates are going to behave in the future. Therefore, if Chelsea is secure enough to offer the low fixed mortgages then this should serve as a signal that they believe interest rates are not going to dramatically increase over the coming years, or at least for the next five years.

For borrowers, this is good news as lower interest rates are always desirable, but for those who are intent on saving some money, or making an investment, this may not be great news since it means that they are not going to see a large return over the next five years either. The first place that many people turn to for investment and savings options are banks or building societies.

A large safety deposit can offer income in the future if placed into a savings account, but it does not always offer capital along with it.  Investors like the idea of knowing they do have funds, but the amount can vary as a result of inflation.  For instance, if one puts down £10,000 with the rate of inflation and an increasing mortgage rate what they would end up paying is a bit under £7,000 which is of course much less.

This is why it is important that investors and savers understand the value of the stock market and equity income because equity in a home will not change as inflation continues to rise.  Therefore, investors often use equity to act as a hedge to prevent inflation from hitting their savings account.

Of course, there is always the risk that with the way house prices are falling and increasing in a steady sideways flow that you may not get back what you expect from your investment.  However, just like any stock market option, there is always a bit of risk involved in any potential yield.

Buy to let market exploding

[ Posted February 6th, 2012 ]

While house prices are falling and many are claiming that the housing market is going to be incredibly unstable as the year progresses, the buy to let market continues to grow as landlords are taking advantage of the current climate to expand their portfolios.

With over 100 deals on the market for landlords to take advantage of, all attached to amazing buy to let mortgage rates, it is hard to deny that now is the time to buy property if you are looking for a solid investment opportunity that will likely pay back twofold.

Of course, the drop in home buyers and increase in rental properties is helping everyone out including those who are looking for a commercial mortgage to let as well, since many business owners are also shy about actually purchasing their property.  Therefore, even commercial landlords are finding that now is the time to act for investments that are continuing to grow in value.

In fact, over the last two years, letting prices have increased in both the private and commercial markets, allowing landlords of all types to reap monthly rewards off of their timely investments.

At the moment, there are 486 buy to let mortgage rates available on the market ready to be taken advantage of; which is an increase of around 100 compared to February of last year.

One of the reasons for the intense increase is lenders competing against each other in order to attract landlords to their lending deals as they are aware of the considerably safe lending prospects. As a result, the actual rate of buy to let mortgage deals is down by about 5% compared to last year, an astounding fact given the fact that other mortgage rates for traditional home purchases are increasing.

Many lenders that used to see buy to let lending as a high risk activity are now increasing their ranges as they are banking on landlords to have a more secure source of income to fund their payments with. Given the high demand for rental properties, most landlords are not having a problem filling their vacancies which to the banks means a secure payment option.

Therefore, if the rental market continues to increase in demand as most housing experts expect, the buy to let rates may drop further as banks chase after lucrative deals with potential landlords.

Falling mortgage rates and house prices may make owning better than renting

[ Posted January 29th, 2012 ]

Those who own a home at the moment save £1,400 a year or even more versus those who rent, according to a study that was released yesterday.  The newest mortgage rates combined with the fall in house prices leave the average mortgage at around £600 per month for a three bedroom home.

On the other hand, the average rent for a three bedroom house is £716 leaving the average home owner ahead by about £116 every month. This is a large contrast to 2008 when the average mortgage came in at about £928 before the credit crisis. Also included in the comparison figures were insurance and maintenance costs.

The gap between owning and renting a home increased a great deal over the course of 2011 and is expected to become even larger as many first time home buyers are unable to raise enough money to meet high LTVs without paying large mortgage rates and thus find they have no other option but to rent. The increased demand for rental properties will no doubt increase the cost of renting, making it even more affordable to buy a home for those with the financial ability to do so.

The research was carried out by Halifax, which claims that the drop in home mortgage costs is the result of dramatic falls in the average house prices and in mortgage rates. In 2008, mortgage rates sat at about 5.75% on average and at the same time last year were down to just 3.63% due to the influx of cheap deals that hit the market after the Bank of England dropped its base rate down to the historical low of 0.5%.

Over the same period of time house prices fell by about 11%, reducing mortgage payments even more for first time buyers. However, in the face of the falling mortgage, market rental prices have increase in most areas of the country due to heightened demand for accommodation from those that were wary of purchasing a home in uncertain times and those that simply could not afford the required LTV for a mortgage.

The lack of new construction and development projects throughout the economic recession has always left the number of available rentals lower than expected in comparison to the high demand.

Although mortgage rates are down customers need to be careful of arrangement fees

[ Posted July 1st, 2011 ]

Lenders have been announcing many of the best mortgage rates that they have offered this week, but although the rates may be attractive to many customers’ experts are warning that they need to pay attention to the high arrangement fees that may be attached to them.  According to experts, the mortgage rate alone is not enough to determine if a mortgage is really a good deal or not, because with the standard for arrangement rates varying from as low as zero up to almost £2,000 the total cost may not really be such a great deal.

Instead, experts are stating that it is important that work out what the entire cost of a new home mortgage package will be including mortgage term fees, monthly repayments, arrangement fees, and then the mortgage rateThis is due to the fact that a low mortgage rate may seem attractive at first but over time will actually be more expensive when you add in the other fees that you have to pay.  Due to this fact, getting aid from a mortgage broker or taking the time to investigate all the options on the market available to you may be more beneficial.

For instance, if you look at a new two year fixed mortgage rate that is being offered from First Direct at an overall rate of 3.89% and a 35% deposit that also comes with free legal work and valuation if you sign into the deal as part of a remortgage.  This may seem advisable, but the monthly repayment fee will sit at £783 for the average £1500 mortgage with a  total cost to the mortgage over two years that would add up to cost £18,792.

On the other hand, by shopping around and looking at the same bank where the same deal is offered with a lower mortgage rate of 3.29% if you are willing to pay a £4999 fee you can actually get a better deal over the long term.  This is because over a two year period the monthly repayments would actually only sit at £734 saving you a bit each month on a £150,000 loan and making the total cost to the home owner only £18,115.  Thus, by paying a bit more upfront you actually save £600 over two years which is why careful consideration of all aspects of a mortgage deal is vital to getting a great deal.

Increase in first time buyers is opening the buy to let mortgage market

[ Posted June 4th, 2011 ]

Many experts are now predicting that Britain will become a land of renters, which is good news for those who can afford the current buy to let mortgage rates because the demand for these properties is going to increase as they become solid investments.  As more young people find that they cannot meet the high deposits or credit requirements of a home mortgage the demand for more rental properties will continue to grow making rental mortgages even more attractive to investors with some spare cash and interest in a long term return.

Landlords that already have a great mortgage rate are taking full advantage of the high demand in rentals by increasing their rents driving up the price of renting properties which can hurt the average twenty to thirty year old property seeker.  Due to the fact that purchasing a home is now out the question for many first time home buyers, turning to a rental property with inflated rental prices is not a great option either.  However, Rightmove the property website predicts that so long as pricing power stays with landlords, tenants will need to budget for continual increases.

Tenants themselves are not very hopeful about the shape of the rental market with almost 50% of all tenants predicting that their rents are going to increase over the next year with one in seven fearing that rental inflation will increase by more than ten percent over the next year on year period.  At an average of £700 a month for rental properties, this would mean an additional £70 per month will need to be added to budgets for rent and figures will only increase in higher end city areas.

Although the outlook is not great for renters, many investors are now investigating the best mortgage rates that they can get with 46% of all new landlords stating that this is their first attempt to invest in property but with the sharp increases in rents the temptation is too hard to avoid.  Rents in London alone are the highest in the UK and have still seen a 6% increase in just six months according to figures from Jones Lang LaSalle.  Head of development and investment for the firm, James Thomas, stated that as the market is undersupplied with rental stock for young people who cannot afford mortgages renting is only expected to increase in popularity as both an option and a profitable investment for those who can.

Property sales finally starting to stabilize

[ Posted May 25th, 2011 ]

Over the month of April property sales have shown some signs of finally starting to stabilize but still the average number of property sales have continued to be well below normal levels.  In fact, according to the NAEA (National Association of Estate Agents), most estate agents sold eight properties per each banking branch which is the same amount of commercial mortgage sales that were completed over the months of March and February.  During the first part of the month as a lead up to Easter there was a bit more activity, but the heightened interest fell again over the bank holiday.

This is disappointing to the many real estate agents who are used to seeing a large pickup in property sales during the months of April and May and the figures for May although not released officially do not seem to be much more promising.  Yet, most were still in a better mood stating that they had seen a bit of an uplift in the commercial mortgage market in terms of interest and expect to see a steady stream of customers returning to their doors even if they are not able to see much of an increase.  Given the market over the past several years, a low steady rate of sales is still better than non-existent sales.

Compared to their market peak in 2007, transaction volumes are still much lower when they were as high as 14 sales for month which can be attributed to the steady economy and the excellent commercial mortgage rates that were available to buyers.  During April more homes were also placed on the market with estate agents seeing about 69 homes on the block per agent compared to the 68 seen in March and the 62 they saw back in April of 2010.

President of NAEA, Michael Jones, stated that in the face of the lull of activity that was expected to occur during the royal wedding festivities, sales still seemed to stay stable which is good news for the housing market in general.  Despite all of this good news, there was still a significant drop in the amount of first time buyers that purchased a home with first time buyers accounting for only 21% of sales in April versus the 23% that they accounted for during March.  Jones added that concessions for first time buyers have not yet seemed to affect the market.

House prices fall again over the month of April

[ Posted May 5th, 2011 ]

House prices continued to fall over the month of April as the property market remained in a volatile state according to new figures released this week from the Nationwide Building Society.  According tot these figures, the average home fell in price and worth by about .2% over the course of April with the average home now costing a total of £165,609.  The fall is a break in a slight increase over the past two months although the six month period still shows more of a decrease in house prices overall as the dominant trend which in return has many apprehensive about investing in buy to let mortgages.

The fact that house prices only increased in three of the last six months shows that the housing market is still largely unsettled with Nationwide’s chief economist Robert Gardner remarking that it is not unusual to see increases and decreases back to back during times when the market is static which is pretty much the best way to describe the housing market since the summer of 2010.  Unfortunately, gardener remarked that due to the threat of the base rate increase and following mortgage rate increase there is not much to suggest that house prices would start to increase over the summer.

Instead, Gardner pointed towards the success of the economic recovery stating that as it started to gain back some momentum budgets should start to be relieved of pressure which would help the housing market as more people will consider taking out fixed mortgages. He also added that if the interest rates stay down longer then the base rate indicates and the labour market continues to improve with a gradual decrease in the amount of unemployment then the housing market may finally begin to look up again.

He added though that even on an idea level if all of the above factors were to occur over the next three month it is unlikely that the housing market will rebound strongly because any recovery efforts are thought to be modest at most compared to historical trends.  He added that those seeking out the best mortgage rates may have to make do with what is available on the market now because there will not be a great deal of change over the summer months that will make waiting of any benefit to potential first time buyers.

Scotland housing market and mortgage rates showing signs of positive improvement

[ Posted February 24th, 2011 ]

Lloyds TSB Scotland reported this month that after watching the housing market of Scotland continue to fall over the last three years the market is starting to stabilize again with a very stable growth pattern observed over the last twelve months of about 5%.  Including the three months prior to January of this year, Lloyds stated that the residential property prices and their attached mortgage rate only dropped by about.3% which is a very marginal drop when compared to the large volatile drops that were seen and observed over the course of the recession.

During 2009 over the same three month period new home purchases dropped by almost 17% which Lloyds TSB said that when compared on a year on year average shows that the market is finally starting to stabilize.  Also starting to stabilize according to the bank was the number of mortgage transactions that were completed which it said were almost at half of the rate they were before the recession occurred.  Overall, when compared year  on year to December of last year new transactions increased by a total of 7% which is very encouraging for those who follow the property market and are looking for the best mortgage rates.

Chief Economist for Lloyds TSB Donald McRae stated that there was not much change during the first quarter of last year but the second quarter showed an improved by a little over one percent followed by another additional .5% of growth during the third quarter.  This is encouraging given that pricing for homes was very volatile for three years in a row along with a large drop in completed sales.  McRae added that now house prices are really starting to stabilize showing that the market is starting to consolidate with encouraging news for those who want to invest again.

The signs of the housing market starting to stabilize prove that the recession may be coming to a close in Scotland making property investment a viable option again, especially for those who want buy to let mortgage rates that are affordable and worth the investment. McRae added the encouraging thought that if the pattern of quarterly growth continues to grow as predicted by the end of the year static house prices and buy to let mortgage rates should continue to grow throughout the rest of the year of 2011.

House prices likely to stay down as mortgage rates go up

[ Posted February 16th, 2011 ]

A new report from the Centre for Economics and Business Research reports that the housing market in the UK will once again stall during 2011 as worried consumers will refrain from moving into a new home and banks continue to restrict their criteria for lending, making it impossible for most home owners to secure the best mortgage rates needed to make a move viable.  The economists from the CEBR also stated that after seeing a yearly growth of 6.4% last year the recovery will drop off with a predicted drop in house prices of about 2% by the close of this year.

First time buyers can capitalize on the drop in house prices if they are able to afford the large down payment or deposit that most lenders now require before they will offer mortgage rates or lending at all that is feasible.  In fact, for those who have saved up, the CEBR believes that affordability will reach an eight year high for first time buyers due to the weakening house prices.  ON the down side, first time buyers will still be making a sacrifice to afford their home as it is predicted that in order to afford their home they will have to budget about 25% of their income on the house payments.

Douglas McWilliams, the chief executive for the CEBR stated that they believe house prices will creep up over the next few years due to the fact that bank lending practices in regards to mortgage rates and lending criteria do not seem to be changing any time soon.  He added that combined with the tight budgets for most householders and the market uncertainty that has made the recovery of the economy unpredictable many people are shying away from making large transactions such as purchasing a home.

The slow growth in pay and jump in unemployment will also keep housing prices low and lessen the housing demand, in particularly for those who live in Northern England with Governor of the Bank of England, Mervyn King warning that families are going to see their spending money drop the most since the Great Depression in the 1920s.

Prime Market Failing

[ Posted October 11th, 2010 ]

Top end homes throughout the country have reportedly been declining in value over recent months, with a year-on-year assessment showing a steady decline as well. Since 2009 prices have reported fallen a total of 1.5% for high-end homes valued at over £1 million throughout the country, with a 2.4% drop in value being registered for prime real estate in London. Wales is facing difficulties in particular with a reported 5.8% drop in its own prime property values over the past year – a major blow to those seeking financial refuge in wealthy realty.

While this may not seen like much of an issue to most individuals keeping an eye on the property market for personal purchases or investments it is an indicator that the economy as a whole is weakening significantly. This is particularly true for London where most have generally considered the top-end property market to be relatively untouchable given the level of overseas property interest in prime London locations. As of late, however, a combination of both declining economic stability as well as higher tax rates along with fluctuating residential and commercial mortgages throughout all of the UK property market have played a major negative role as a whole.

While it may still remain true that the majority of the prime property market will retain significant value and fluctuate less than the general market as a whole it is to be expected that the market will, indeed, face a downturn much like the rest of the country. For those interested in high-end markets London will still be the safest bet, however overall value cannot be expected to be retained in the coming quarters.

 
 
 
 
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