Keeping interest rates on hold at 5.75 per cent means that finally a degree of stability can return to the mortgage market. Whilst some within the industry firmly believe rates will soar over 6 per cent, a view supported by a recent Bank of England report which hinted that a further rate rise is needed to knock inflation on the head, others are hoping that this is indeed the peak.
All of this has lead borrowers to start thinking outside of the fixed rate box. The old adage that what goes up must come down is moving to the forefront of a lot of homeowners minds and to lock themselves into a two or more year fixed rate at this stage could see them losing out when rates start to decline again once the level of inflation becomes more manageable.
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Drew Wotherspoon certainly agrees that borrowers should take their mortgage blinkers off: At this point, if you do not need the absolute security that a fixed rate provides, it looks like trackers will provide better value over the term of a 2-year mortgage.
With the imminent Premiership kick-off in mind, he continues: The current Manchester United of the mortgage world is undoubtedly a 2 year discount from Saffron BS, with a current rate of 5.45 per cent. The key to this deal, as well as having a market-leading rate, is that it has no early Repayment Charges (ERCs) at any time.
For remortgages it also has free legals and a free valuation, however it is only available for loans up to £250,000. Therefore, for those who need to borrow more, the current Chelsea of the mortgage world is a 2-year tracker from Halifax with an initial rate of 5.39 per cent. This has a minimum loan size of £500,000 about what Frank Lampard earns in a month and is fully flexible.
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The biggest threat for relegation has to come from 25-year mortgages for first time buyers. Much has been said on this recently but there is virtually no case for a first time buyer to take such a long-term loan.
The chances of someone staying in their first property are very slim, so many of these products are effectively lining up first timers for big penalties when they try and redeem their mortgage. There are plenty of more sensible suggestions for first time buyers who would be wise to seek advice on their specific situation.
And finally, news this week that HSBC has removed fees from all new mortgages until the end of September, but has increased the interest rate to 6.69 per cent for a standard 2-year fix, would seem to be something of an own-goal. Borrowers shouldnt be swayed by seasonal propaganda there are much better deals out there to be had.
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