Adrian Garside

GDP fell by 0.5% against an expected rise of 0.5%+

That is pretty shocking. Some blame is to do with the snow, but that doesn’t make up the whole story, the economy was worse in the last quarter of last year than we expected.

We need to be a bit cautious about the story though – these figures are preliminary, we won’t really know the proper figures for a month or two yet, and they could vary by 0.5% so it may not be as bad as it looks…but it won’t look good, so what does this mean for interest rates?

Well, there has been upward pressure, and press comment on this has lead to increased demand for long term fixed rates.

The upward pressure on interest rates is reduced now, the Bank of England won’t be forced into an early move this year by these figures.

So, if it were just the money markets controlling fixed rates, rates would stop rising and may settle slightly.

However, demand is another factor, and lender workload is another.

Demand – if people are demanding long term fixed rates, then lenders will put prices up to cash in on the demand.

Workload – if a lender is top of the league table, it will get swamped with business – it could just raise it’s rates to slow down the inflows, if it can’t cope.

I suspect we won’t see a great deal of change in fixed rate pricing. The upward movement will slow, but I don’t expect any serious downward movement back to, say December levels.

I will update as I learn more…

Woolwich are repricing their 5 year fixed rates today, upwards from 4.29% to 4.79%.

This is consistant with a trend since Christmas when all the press was saying ‘Now’s the time to fix’ and so there has been a bit of rush. In times of ‘rush’ the lenders reprice upwards to boost their profits.

This move takes Woolwich out of the market for the time being, there are plenty of products at 4.5% ish and one still at 4.05% if you have enough equity, however, there is a cascading effect happening and the new ‘top of the table’ lender will start to creak at the joints as every broker sends in new clients and once they are full to bursting, they’ll reprice upwards…and so on, until the higher prices dampen enthusiasm.

So, probably no point hoping that they’ll edge back down below 4%…if you want to look at long term fixed rate, it looks like now is a good time, although not as good as 6 weeks ago…

Hmm, disclaimers for the 21st century ‘it’s your fault’ culture.

1. My ‘predicting the future’ skills are just as limited as the next man, this is my ‘opinion’ not my knowledge of future fact.
2. I can’t time travel
3. I am not savant.

Since New Year there have been lots of interest rate changes for Fixed Rate mortgages.

Without exception, every rate change has been to put the interest rate up.

For example, Skipton have just e-mailed me – they have a 5 year fixed rate today at 3.98%.

Tomorrow it will be 4.68%

For a £100,000 mortgage – that is an extra £700pa interest, or, over 5 years an extra £3500.

Their 3 year rates are rising alot too.

If a fixed rate is what you want, act now.

I had a phone call from a prospective client today, she’d been pointed in my direction by a friend of hers.

She had a flat, that was currently rented out and wanted to move in herself, and for that she needed her Buy To Let mortgage to be swapped for a normal residential mortgage.

She had spoken to…X (do I name names? a major state owned bank), who had explained that they offered no advice, just information (very commendable, I feel sure some people try to hide this distinction) and had shown her quoted on a 2 year fixed rate at 5.79% and a tracker, at, I think she said 5.34…

When she called me, she told me about the existing deal on her West Bromwich mortgage which we calculated to be at 2.5%. As an adviser, I can look outside the box at different ideas. My 1st suggestion was that she should try to pursuade West Bromwich to let her live there, and carry on with that product.

There’s no product available anywhere at 2.5% so this conversation, which would work with some lenders, was worth having, even though success would mean me losing a customer…or at least, she’d probably be a loyal customer, but I’d lose the ‘deal’.

Anyway, this afternoon, she called – West Brom weren’t interested at all, so we have to switch her to a residential product.

And, this is the second reason it’s handy to speak to on Independent Adviser about your mortgage – the best 2 year fixed for this lady is at 4.19%, a good £90pm cheaper than the bank’s best offering, and the best tracker is at 3.88%.

It’s not a ‘secret’ product, she’d have found it herself after having meetings with a few more banks or building societies, but that would have taken hours. We had it nailed in 15 minutes or so.

photo credit: Chi King

Just had an e-mail about some fixed rates being released next week, and they look fantastic.

They are available for people moving house and remortgaging and there are options for 2 years, 4 years, 5 years and 7 years.

These days most fixed rates with good interest rates have hideous fees, however these new rates have standard fees so that’s OK.

We are looking at rates from 3.05% for 2 years, 3.75% for 4 years, 5 years from 3.99% and 7 years at 4.8%

All of these will be amongst the market leaders, if not the actual market leader.

This month the Halifax House Price survey suggests that house prices dropped by 3.6%…

How can that be?

Well, it’s a handy headline, but Halifax also say that for the last quarter – Jul/Aug/Sept 2010 house prices fell by only 0.9%. That’s not very headline grabbing and it’s natural for journalists to grab the headline figure with no thought to the (fairly uninteresting)  background figures.

Halifax collect their data from mortgage applications from people buying houses who use Halifax.

Now, this data could be skewed a little by circumstances.

Here’s a couple of examples.

If Halifax have really good 1st time buyer rates and poor large mortgage rates they will have a larger number of smaller properties being mortgaged, than large, making the average seem lower.

Halifax have a better high street presence, with more branches in the North than the South (This partially explains why Nationwide always has different figures to Halifax becuase Nationwide have a bias towards the South). It may be that the ‘North/South’ divide is in action, it often is where house prices are concerned.

What do I think has really happened?

Well, the supply of houses increased a bit in the last quarter with the removal of HIPS, so that probably accounts for the slight fall in values.

I seem to recall that Halifax reported really quite large rises in house prices in Jul and August whereas Nationwide actually said the reverse – small falls. This could be the reverse of my ’1st time buyer’ point in action.

Anyway, if Halifax said 2 rises and then a fall, whereas Nationwide report a slight fall both months,  it seems to me that September’s Halifax figures are just correcting the last 2 months and although Halifax and Nationwide report different figures, over the quarter they will probably be close to each other.

Should you be worried?

I don’t know, but I’m not.

I’ve just had an e-mail from Santander that Alliance and Leicester finally cease to exist on 15th October.

A & L were never one of my favourite lenders, however, it is sad that another familier brand has fallen by the wayside…

photo credit: markhillary

photo credit: quinn.anya

For mortgage customers these are interesting times and it is very difficult to predict the future of interest rates. I have just the minutes of the Bank of England Monetary Policy commitee meeting for this month – I like to perform a heroic feat every day before 7am.

The minutes were pretty vague this month and didn’t really suggest anything new. The vote to keep interest rates at 0.5% was still 8:1.

So, what has happened in ‘real life’?

Well, this past month fixed rate mortgages have become cheaper. 2 year fixed rates are available below 3% and 4 year fixed rates are available below 4% with 5 years just above 4%.

I’ve seen and spoken to alot of existing customers over the past few weeks and while these rates are fantastic  for those paying below 2% as an interest rate now,  it is still too difficult to make the decision. I understand that difficulty and if you are on a ‘super low’ interest rate I suspect you just have to stay on it and deal with any consequences later.

However, there are some for whom a switch to a fixed rate would be well worth considering.

There are quite a few people paying the “standard rate” on their mortgage. We have some people lucky enough to be paying, well, I saw a guy last night paying 0.79% on his mortgage, but others will be paying a standard rate of 4%.

If you are paying 4% anyway, the option to fixed for 4 or 5 years at a similar rate isn’t such a hard choice.

If that’s you, give me a call.

Disclaimer : A long term fix isn’t for everyone, so this article isn’t ‘advice’. Advice is tailored to suit each individual.

photo credit: deanoakley

One of the most common searches on google, outside those for ‘adult content’ is for “Mortgage Calculator”.

I often wonder about this. What are people really searching for?

Mortgage Calculator number one will simply work out the cost of a repayment mortgage if you type in the mortgage amount, term and interest rate, which is OK if you know the details you want to investigate, and these are everywhere…actually, everywhere but here, maybe I’ll add one.

Mortgage Calculator number 2 is an Affordability Calculator. These are specific to each lender – so you input your details and it will work out how much they are happy to lend you, assuming credit and survey are both OK. You may think ‘just multiply your salary by 3 (or 4, or 5) but many lenders have a more sophisticated approach, factoring in children, couples and even earnings matter – a family of 4 with a parent earning £30k may get 3.5 x salary, a family of 4 with a parent earning £75k may get 5 time salary. Simply because they have more spare income after family expenses.

Mortgage Calculator number 3 is the one I pay a subscription for. Simple versions are available on many websites – other mortgage broker sites and comparison sites such as Moneysupermarket. To a certain extent they work, but they don’t answer questions, simply because the answers these days are so complicated, but they do give you a starting point to answer questions. Mine takes into account income multiples and other criteria, down to blips on credit records, state benefits etc.

Mine also has a very handy function – lets say we are looking for a 3 year fixed rate. Say 200 products come up to choose from, and some have lower rates with big fees and some have higher rates with low fees. Some have free surveys, some have free solicitors fees and some have little cashbacks. Which is best?

Well, you can get handy with a calculator (a normal calculator, not a mortgage calculator) and add up 36 payments (for your 3 year fixed rate)  and any fees and create a little spreadsheet. Of course, there is a risk -  it may well be out of date tomorrow, I update my software twice a day!

Or, you can find an IFA with the software that does the calculation for every product, at the press of a button. Cheapest may not be best, but the best will be amongst the cheapest and it gives you some solid facts to work from.

“Simples”, as they say…

photo credit: Keith Williamson

One of the trends for mortgage over the last 10 years has been the rise and rise of booking fees.

Northern Rock started it. Throughout the 1990′s the rule of thumb was that variable rate products had no booking fee and fixed rate products did, usually £250 or £300.

Then Northern Rock took their fee up to £495 and everyone gasped, but they still recieved business, so more lenders copied.

Fees have risen since, and I think it was last year that I found myself saying to a customer ‘Look, this one’s OK, the fee is only £999′

Most mortgages have a £1000 fee these days, some have £1500 fees and there are some with amazingly high fees – I’ve never recommended a mortgage with an amazing large fee – £3k plus isn’t uncommon – but presumably someone does, because the lenders keep releasing them. Or, maybe nobody does, but the rates look good on posters in the lender’s window, drawing in new customers.

Most lenders have 3 ranges of products (sometimes more) – High fee, low interest rate, medium fee, medium interest rate and low/zero fee and high interest rate – usually medium/medium works out as best. On smaller mortgages, say those below £100k, the low fee, products usually win, and on really big mortgages the mortgages with high fees become more interesting.

There have been two new twists on these fees over the past year or two.

The first, I think, is unique to Woolwich – they have a ‘not taken up’ fee – if you apply for a mortgage that they approve, but subsequenty decide not to have it, they charge you £150. I can se how this has emerged, as a mortgage broker myself, if I recommend, say a 2 year fixed rate at 3.25% and then a new one is released at 2.99% I’m going to call my client to discuss it. If the client changes over, lender one is left with funds reserved and expenses but no come back.

The second is that some lenders charge £1000 fee, but ask for the 1st £100 or £200 up front (non refundable).

This week, Northern Rock have announced that they are reducing their fees.

That is ironic, but also most welcome!