Lenders are being accused to encouraging customers to come off standard variable rates, which at present are the best option due to the all time low base rate, and persuading them to opt for the more costly fixed rate mortgage option. This is despite the fact that many industry experts expect the base rate to remain low for quite some time yet.

Banks and building societies are also being accused of trying to get customers that are coming to the end of current deals to switch to more expensive deals rather than allowing them to revert to the standard variable rate.

Some are even being accused of failing to let customers know that they have the option of reverting to the SVR at the end of their current deal, making them think that they have to take out another deal that is more expensive than reverting to the SVR.

One industry expert stated: “Lenders appear to be encouraging borrowers on their cheap SVRs to switch to fixes; it is far from clear that this is the best advice. Borrowers may find that they are buying themselves security when there is little need to do so. When they come to the end of the deal, interest rates may be rising, and they will find themselves on a variable rate looking for another fix, which will inevitably be priced higher.”

There has also been controversy over the failure of banks to explain why it is a good idea for customers to pay a fee to switch to another deal, and an offiial from the Financial Ombudsman Service said: “We expect lenders to fully explain why it would be a good idea to get borrowers to pay a fee to switch deals. It is not enough simply to say ‘we don’t give advice’. If a customer feels that he or she is getting advice and it was not made clear that it was not advice, we will investigate.”

Borrowers being pushed onto costly fixed rates by lenders is a post from: Glitec Loans

The month saw a drop in the number of people looking to remortgage, but there was a return to the market – albeit a gradual one – of first time buyers who helped to keep the sector buoyant.

According to the Council of Mortgage Lenders there was an increase of 29 percent in new mortgage lending in August compared to the same period last year.

One official from the CML said that property purchasing was definitely back on a stronger footing even though recovery of the property market would be a gradual and drawn out process.

He said: “It will be a drawn-out recovery process, with seasonal ups and downs, but house purchase activity is now on a firmer footing.” The CML figures did show that remortgaging acticity remained weak at present.

The reports also showed that many people are now coming to an end of their fixed rate mortgage deals, which many took out for two or three years when interest rates were on the increase in the hope of protecting themselves against soaring repayments. However, interest rates have been at an all time low of just 0.5 percent for seven months, so many will be relieved that these higher rate fixed mortgages are coming to an end.

Industry officials have predicted that those whose fixed rate mortgages are coming to an end will shy away from remortgaging to another fixed rate deal for the moment, as the base rate is so low that they will want to benefit from the savings that are available on standard variable rate mortgages.

However, remortgaging activity may pick up later in the year when there is a greater threat of the base rate increasing again.

Mortgage lending propped up by first time buyers is a post from: Glitec Loans

However, whilst the low base rate has been welcomed by consumers and industry groups many have already predicted that it is only a matter of time before the base rate starts to rapidly rise again, which is expected to happen as the country pulls itself out of recession.

With this is mind some industry officials are now urging homeowners to consider fixing their mortgage rates whilst they are still low, as they could otherwise find that their mortgage interest rate and monthly repayment goes through the roof once interest rates start to rise, which could ultimately mean that they struggle to keep up with repayments and could therefore lost their home.

One mortgage industry official said: “While this latest base rate hold is good news for consumers, the concern is that a degree of complacency has set into the market and homeowners and prospective buyers are starting to believe that interest rates will stay low forever. It was a similar mindset when property prices were rising at a record rate and people started to believe that prices would go up forever. We all know what happened next.”

He added: “Interest rates will rise, maybe not next month or the month after, but they will rise eventually, and the advice to many homeowners could be fix now if you’re on your lender’s Standard Variable Rate (SVR), rather than try to second guess the market.”

Another official said: “I’d suggest that with two-year fixed rates at 3.75 per cent and the best trackers at just below 3 per cent, we’re approaching levels at which fixed rates become an attractive option. And I’d be inclined to avoid SVR linked products – as opposed to trackers directly linked to the base rate – as when the UK base rate starts to rise lender these could prove volatile.”

Homeowners urged to fix rate before it is too late is a post from: Glitec Loans

The Bank of England has left its base rate unchanged at 0.5% and this is likely to remain for several months. However, as the recession comes to a close, it is predicted that there will be a steep rise in these rates before the end of the year.

Ray Boulger of the mortgage broker John Charcoal said that “whilst it is difficult to be confident how long bank rate will stay at 0.5%, it is likely than when the MPC starts increasing it it will move up quite quickly, which could be very uncomfortable for anyone still locked into a variable rate mortgage at that time.”

He went on to say, “ Borrowers on variable rate mortgages, especially those with any sort of interest-only mortgage, should therefore be very aware of the risk of a rapid rise in their payments at some stage, even though that may not happen this year. Switching to a fixed rate will be the best way for most people to buy protection from rising rates.”

This same sentiment was echoed by David Hollingworth of the mortgage broker London & Country, who said, “There has been just a little bit of movement in fixed rates, which suggests that rates could start going higher. There seems to be little value in going for a variable rate mortgage now.”

Woolwich recently lowered its fixed rate mortgage interest rate by 0.7%. This lender currently offers two-year mortgages at 3.69% for up to 70% of the purchase price of a home. Homebuyers who want a higher percentage of the purchase price are looking at higher interest rates, such as 4.99% for loans of 80% of the purchase price. A three-year fixed rate mortgage for 70% of the purchase price stands at 3.99%.

Hollingworth also pointed out that HSBC has lowered its interest rates on mortgages as well. Homebuyers wishing to take out a mortgage for 75% of the purchase price of the home can opt for a three-year term at 3.99%. The application fee for such a mortgage is £599. At another lender, the Britannia Building Society, you can borrow up to 60% of the money needed at 4.24% for a three-year term.

First time home buyers can benefit from this low interest on fixed rate mortgages too. They can borrow up to 95% of the money they need at 6.99% from both Clydesdale Bank and Yorkshire Bank. Those who can make a deposit of 10% can benefit from an even lower rate of interest at 5.99% with an application fee of £599.

Deals are even better at the Royal Bank of Scotland where five-year fixed rate mortgages for 90% of the loan value carry an interest rate of 5.99% and there is no application fee.

Homeowners and homebuyers are well advised to take advantage of these offers in order to save money on their mortgages over the coming years.

Lock in Your Mortgage at a Fixed Rate Now is a post from: Glitec Loans

Nationwide recently announced some increases in its mortgage interest rates, and many officials feared that a number of other lenders would quickly follow suit. Many have now also raised their interest rates, and this has spurred speculation that any recovery in the housing market will not be sustained.

Over recent weeks a number of reports have been released showing signs of recovery, and this includes figures showing increased interest from potential buyers in purchasing property.

Increased lending has also resulted in increased confidence in the markets, although many lower income families and first time buyers are still struggling when it comes to getting mortgage finance. The Bank of England base is still at record lows of 0.5 percent, which has also been seen as encouraging.

However, rising mortgage interest rates from lenders recently means that the encouraging data that many hoped would bolster the mortgage market could adversely affect these positive signs. One industry official said that once lenders start to increase mortgage interest rates others will naturally follow, and this has already been seen over recent weeks.

He said: “All the signs suggest fixed-rate mortgage rates are only heading one way – upwards. When a few lenders start raising rates, the rest of the market are quick to follow.”

In April the number of fixed rate mortgage that were taken out was at its highest in around a year according to another recent report, but with fixed rate mortgage rates increasing the level of fixed rate deals being taken out could dwindle over the coming months.

Can recovery in housing market be sustained? is a post from: Glitec Loans

Already, a number of lenders have hiked up their fixed rate deals, and if the trend continues, as it is expected to do, this could create problems for the many homeowners that may have been hoping to lock themselves into a low rate in order to ensure that they can keep up with monthly repayments and enjoy greater financial stability.

One leading mortgage broker has recently spoken out, urging consumers that want to lock themselves into a reasonable fixed rate mortgage to act quickly and start looking around before more and more lenders start hiking up their rates.

It has been reported that the cost of funding for lenders when it comes to fixed rates has gone up over recent weeks, and as a result many have had to increase their fixed rates on mortgages, resulting in higher repayments for customers that want to go onto these deals.

Earlier this month the broker stated: ‘The scale of the increase was large enough to be the straw that breaks the camel’s back and as a result I expect several lenders to increase the cost of at least some of their fixed rate mortgages over the next few days. The message for borrowers wanting to take a fixed rate is clear; get in now or miss out on the current relatively low rates.’

He added: ‘With most borrowers (including around 80% of our clients) currently choosing a fixed rate mortgage, if interest rates continue to rise then the current recovery in the housing market, which is based primarily on much improved affordability as a result of the combination of lower house prices and lower interest rates, may well wobble. The message for borrowers wanting to take a fixed rate is clear; get in now or miss out on the current relatively low rates.’

Fixed rate mortgages will continue to increase is a post from: Glitec Loans

The group added that many of these consumers were keen to take advantage of the fact that the base interest rate is still at its lowest level ever, and in order to secure a good deal were willing to tie themselves in for longer.

The report also claimed that two year fixed rate products and tracker mortgages have become increasingly unpopular in the current economic climate, partly as a result of the ongoing recession.

One official from the group stated: “Two year fixes were always the favourite, or trackers when Bank Rate is widely expected to fall, but this rush to commit long term shows that consumer attitude has turned a corner.”

The group said that it was likely that most consumers thought that over the next year or two the base interest rate will start to go up again, and the current low rate deals that are currently on offer from many lenders will disappear from the shelves. Many are therefore keen to get themselves on to these competitive rates as soon as possible, even if it means tying themselves in for a longer period.

Whilst longer term products are more costly than the shorter term ones, this doesn’t seem to be putting consumers off, according to group officials.

The group official went on to state: “It seems borrowers are willing to pay marginally more for a recession buffer that will tide them over for as long as possible.”

Consumers looking for mortgages over longer terms is a post from: Glitec Loans

With the base rate at an all time low, fixed rate mortgages have also fallen to highly competitive rates, and some industry experts think that homeowners and new property owners should take advantage and bag themselves a low rate fixed rate mortgage before interest rates start to shoot up again, as many have predicted that they will.

Whilst interest rate increases are not expected to come for some months, it is thought that when they do start they will be rapid and steep.

After the May Monetary Policy Committee meeting the Bank of England left the rate unchanged for the second consecutive months, leaving it at 0.5 percent.

One mortgage brokers said that the “decision by the MPC to leave the bank rate unchanged for the second month running is likely to be the precursor for several more months of the same. However, whilst it is difficult to be confident how long bank rate will stay at 0.5%, it is likely than when the MPC starts increasing it it will move up quite quickly, which could be very uncomfortable for anyone still locked into a variable rate mortgage at that time.”

He added: “Borrowers on variable rate mortgages, especially those with any sort of interest-only mortgage, should therefore be very aware of the risk of a rapid rise in their payments at some stage, even though that may not happen this year. Switching to a fixed rate will be the best way for most people to buy protection from rising rates.”

Officials think homeowners should fix interest rates is a post from: Glitec Loans

The recent news from the mortgage market with home sales up 40% in March is positive indeed and offers a glimmer of hope that the current recession is nearing an end. With the end of the recession, though, interest rates will likely be on the rise.

Nationwide is also reporting that the slide in house prices seems to be levelling off somewhat which is good news for those waiting to sell their homes.

Borrowers are still presented with a problem in the stricter lending criteria for mortgages. They have less equity in their homes than they once did and many of them are facing financial difficulties due to the high rates of job losses. First time home buyers are still not in a position to buy.

There are millions of homeowners in the UK who have a mortgage in place and have benefitted from the lower interest rates. Those with variable mortgages or those that have interest rates that fluctuate with the rates posted by the Bank of England have realized tremendous savings in the past few months in lower mortgage payments. However, financial experts predict that fixed rates will soon start to rise and that now may be the best time to lock in at the low rates.

According to Arieh Zucker of the mortgage brokerage, Windfall Finance, located in West Sussex, “‘Borrowers are enjoying their low tracker or standard variable rate (SVR) mortgages, but they could come to regret their complacency in the not too distant future.”

He goes on to say, “‘Fixed rates may not look so hot in comparison, but it is unlikely they will fall much lower and borrowers stand to lose if they wait too long to act. If property prices continue to slump, borrowers are only making their position weaker for when the time comes to remortgage. This could turn to panic if interest rates suddenly spike up, as happened in the last recession.”

Locking in at a fixed rate for a longer term could pay off for homeowners in the dividends they can earn. Richard Morea of the Bath broker, London and Country Mortgages states, “The difference between two and five-year fixed rates is small. Borrowers who are comfortable locking into a rate for longer should look at five and even ten-year fixes. Most mortgages are portable so it shouldn’t restrict you if you need to move house. A long-term fix provides stability at a time when interest rate changes could be volatile and extreme.”

It is best to shop around to see which lender offers the best fixed interest rate. Many of them do not require you to make the decision immediately and allow you up to three months to decide whether or not you want to take this step.

In order to receive these deals, though, you so have to start planning early because most do require that you reserve the rates three to six months in advance of making a purchase of a home. Take a look at your current mortgage to see when the term ends. If it is within six months, you should start talking to your lender now about locking in at the present rate of interest.

Those homeowners with low tracker rates can afford to wait a little longer. During the time it takes for the interest rates to rise they will realize large savings on their repayments. By continuing to make the higher payment each month that you initially started off with, you will overpay your mortgage and thus pay off the loan sooner than you expected. This is especially true if there is no large exit penalty attached to your mortgage, but you still need to keep a close watch on the interest rates.

Melanie Bien, director at the mortgage broker, Savills, advises, “If you’re not tied into your mortgage rate you could stay on the low variable rate for as long as possible and then move to a fix when you feel rates are going to rise.” She also adds, “Of course, this strategy depends on your attitude to risk. If you can’t afford a significant jump in the base rate it makes sense to fix now. Historically, the base rate at 5% is more likely than the current 0.5%.”

Is it a Good Idea to Lock in Your Mortgage at the Lower Rates Now Available? is a post from: Glitec Loans

It is claimed that as a result of charging more than they should be on fixed rate loans banks and building societies are enjoying additional profits of up to £500 million a year collectively, and it is the customers that are paying for this increased profit by paying more than is justified on their mortgage loan.

The report indicates that the margin between the amount of interest that banks and lenders pay to get finance on the wholesale money markets and the amount that they then charge in interest to customers has increased by around 70 percent in the space of just one year.

For example, the average rate of interest on a two year fixed rate mortgage is around 4.62 percent, but with the lower profit margins seen just twelve months ago the average rate would have been far lower at just 3.63 percent.

One finance industry expert recently stated: ‘Lenders have played this cycle to maximum advantage. Fixed deals, which are growing increasingly popular, have not been cut by nearly as much as the cost of funding has fallen – and once you are in, the lender has you captive.’

She added: ‘The cost of wholesale borrowing is expected to rise, which lenders will soon be forced to pass on to mortgage customers. We appear to be near the bottom of the market and homeowners looking for security would be wise to secure a longer-term fix as soon as possible, preferably for five years.’

Another official said that fixed rate mortgages are likely to start going up soon despite the low base interest rate. He said: ‘It doesn’t look as if fixed rates are going to get much cheaper, even if Bank rate stays at 0.5% until well into next year.’

Fixed rate loans mean profit for banks is a post from: Glitec Loans