The Mortgage Clinic: 'Should we wait for a better fixed-rate deal?'
Wednesday 06 August 2008
'Our two-year fix with A&L at 4.6 per cent ends in November and we've taken steps to fix a rate in advance. However, I've noticed that fixed rates seem to be falling. Are we foolish to book a fix now – we were quoted 7.07 per cent with one bank last week! – or should we wait? We think our LTV is roughly 85 per cent to 80 per cent.' SJ, by email
The storm clouds hanging over the British housing market continue to leave borrowers in the gloom, and the recent changes that you've noticed – mortgage rates creeping back down again – are just the latest twist in a febrile lending climate.
Blink and you'd have missed it last week: after months of inching upwards to an eye-watering 7.08 per cent – the highest for 10 years – the average cost of a two-year fix dipped to 6.96 per cent, according to financial analyst Moneyfacts.
Melanie Bien, of broker Savills Private Finance, says that swap rates – the rate at which banks lend to each other on the money markets – are dropping in anticipation of lower long-term interest rates. "Several lenders, including Nationwide, Halifax, Cheltenham & Gloucester and Abbey, have begun to lower their rates."
Last week, borrowers with an LTV of 80 per cent could get a two-year fix for 5.98 per cent with First Direct – albeit for a whopping £1,998 arrangement fee – but this still makes your 7.07 per cent two-year offer look horribly overpriced.
Your strategy, then, could be to apply to book a rate today at no cost and be ready to switch to a cheaper deal nearer the time if the circumstances stay more propitious, says Richard Morea of London & Country.
"You won't have to pay an upfront fee for the remortgage if, as many do, the lender offers either the option to add the fee to your overall loan, or for you to pay it at completion of the remortgage deal."
That way, you can ditch today's pricier deal for a cheaper future one at no cost; and if, by October, interest rates have gone back up again, you'll at least have a decent deal tucked away.
Where mortgage rates will be by then is anybody's guess, however. "I doubt that you will get anything much cheaper over the next two months, so I would advise playing safe and submitting an application now," says Ray Boulger of John Charcol.
In fact, if you're prepared to take a risk on rate, base-rate trackers offer better value at present, says Andrew Montlake at Cobalt Capital. "These are between 0.5 per cent to 1 per cent cheaper than fixed rates and – in the current market conditions – it's unlikely that rates will increase dramatically in the short- to medium-term."
Send us your questions and you could receive £50 to spend at Amazon
Foxed by jargon? Worried by the credit crunch? Email a question to email@example.com. We will not reveal your identity, and we cannot give specific advice. If your question is printed, you'll receive a £50 voucher from Amazon.co.uk, so you can kit out your home with anything from a lawnmower to an espresso machine. www.amazon.co.uk/homeandgarden
Independent Partners: Get fee-free expert mortgage advice and find the right mortgage deal for you.
Mark Dampier: Don't panic. Canny investors sit tight when the stock market falls
Shareholders can hold a company to account
Derek Pain: Dividends ease the suffering in a moribund stock market
Questions of Cash: Payment woes with Barclays overshadow Cornish holiday
Bank-beating exchange rates on your international payments
- 1 Russell Brand says he will 'probably' give up acting to focus on his revolution
- 2 Watch what happened when food critics were unknowingly served McDonald's
- 3 David Beckham's Haig Club whisky is exactly what’s wrong with the Highlands
- 4 Queen's first tweet: Reply telling Her Majesty to 'f*** off' broadcast on BBC News
- 5 #AskNigelFarage: Twitter starts hilarious Q&A for Ukip leader
Of course, teenage girls need role models – but not like beauty vlogger Zoella
Support for EU membership 'at highest level since 1991' with most Brits wanting to stay 'in'
Tony Blair 'says Ed Miliband will lose 2015 general election'
Thousands with degenerative conditions classified as 'fit to work in future' – despite no possibility of improvement
Putin: The US is to blame for almost all the world's major conflicts
Poppy Appeal 2014: This is why I won't be wearing a red poppy this year
iJobs Money & Business
£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...
£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...
£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...
£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...
Day In a Page
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village