The MPC met once again today and reduced the base rate, great news for existing borrowers but for those looking for purchase mortgages - the mortgage rates are in limbo and there is no sign yet of anything changing.
Why are mortgage rates in Limbo?
The lenders have been using the base cuts over the last few months to their advantage. Whilst existing borrowers are benefitting from unprecedented mortgage rates, especially those on trackers, the new customers have been paying the price for all the cuts. The banks are lending again and the money is cheaper for them but they have to cover the cost of the existing borrowers and unfortunately, new customers are paying the price with higher mortgage rates.
There is no rush to be top of the league for mortgage lending. High arrangement fees used to pay for decent rates, now they just pay for the norm. It wasn't uncommon even a year ago to pay £1,995 for a below base rate deal or a similar fixed rate near base rate. Now this sort of fee is typical for a 5% deal with the base rate at 0.5%. For 3% rates you will have to pay a percentage arrangement fee which could be as high as £6,000 for a £200,000 loan.
When will we see rates getting better?
No bank, building society or mortgage lender has fully taken hold of the competitive advantage to be gained from the downturn. A few lenders have come out with some good deals, like HSBC or Woolwich, but even these are limited. These are squeaky clean lenders who won't offer much flexibility if your property falls outside the norm. Plus with these lenders experiencing mortgage offer delays of up to 16 weeks, those purchasers who have secured 'a bargain' will almost definitely find themselves missing out.
If you need advice then please give one of our experienced mortgage advisers a call on 0844 357 9582.
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