Monday, May 17, 2010

Rising mortgage rates encourage borrowers to fix their rate now.

Mortgage brokers say that the cost of these loans has fallen to the lowest level and the mortgage borrowers should consider fixing their rate now as these mortgage rates will rise.
In August last year the cost of an average two year fixed rate was 5.21 percent and has now fallen to 4.63 percent. “I think you can certainly make a better case for buying a five-year fixed-rate today than you’ve been able to do for a year now,” said Ray Boulger of John Charcol, the broker.

The election outcome of either a hung parliament or a small overall majority will lead to a spike in gift yields and will end up causing a rise in fixed-mortgage rates as the fixed term rates are priced in line with the price of the government bonds by the lenders. “We are getting more people inquiring about fixed rates now, fuelled in main by the uncertainty of what will happen after the election, whatever the result,” said Nigel Bedford of

Since interest rates are expected to go up in the near future, brokers do not recommend opting for a short term fix. “A two-year fix doesn’t make any sense to me. Rates are likely to be higher in two years, just when you come off the deal,” said Boulger.

“Longer-term fixed deals provide a prolonged period of security but come at a higher rate than shorter- term products, so there will be a hike in payment to take that additional protection,” said David Hollingworth of London & Country. Less Flexibility is another is another downside that comes with longer term fixed rates as they have early repayment charges throughout the fixed-rate period.

According to Bredford, Wealthy borrowers should consider approaching a private bank if they want a fixed-rate deal.

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Previous Post:Santander Bank beat first quarter profits

Santander Bank beat first quarter profits

Spain’s economy to post an expectations - beating 6 percent rise in first-quarter profits shrugged off by Banco Santander. UK profits surged by 15 per cent to £426m, and the bank, which has 13.4 per cent of Britain's existing mortgage stock, again outperformed, accounting for one in five home loans in Britain in the first three months of 2010.

Lending in its home market was what Santander was cautious with. In Spain total loans were down 5 per cent on the year.Addressing the issue of Spain's sovereign debt – downgraded by the ratings agencies amid fears that it could be one of the dominos to fall in the wake of the Greek debt crisis. Because of its location the company does pay a premium of between 10 and 30 basis points when seeking funding compared to what banks rated AA plus by the credit ratings agencies typically pay. However, a Santander spokesman yesterday pointed out that the company's deposits are increasing meaning that it is becoming progressively less reliant on wholesale funding to fuel its lending.

The bank said it opened 276,000 new current accounts and 340,000 Individual Savings Accounts during the cross-tax year campaign while it increased investment sales by 5 per cent. The average loan to value (LTV) on new business completions stood at 63 per cent. Provisions came in at £204m, against £189m the previous year, but unchanged from the previous quarter.

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