It's a good time to buy

by Ed Bowsher on 26 October 2009  |  0 comments
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The base rate is going to stay low. There's a mortgage war going on with rate cuts from Northern Rock leading the way. Now is good time to buy - even if house prices may fall some more next year.

Friday's economic numbers were rotten. Our economy still looks weak and that means that the base rate is very likely to stay low in 2010. It may not even rise from 0.5% at all. 

The economic stats weren't the only interesting bit of news on Friday. We also learned that the mortgage war is hotting up still further with some cracking new mortgage rates from Northern Rock. 

If you're a purchaser with a 30% deposit, Northern Rock is now offering a 2-year tracker at 2.69% (base rate plus 2.19%.) That's a great rate, and the only risk is that the base rate might soar and you could get caught out. But with the economy suffering, a big rate rise in 2010 looks more and more unlikely. 

And Northern Rock isn't the only lender offering attractive variable rates. Woolwich has a lifetime tracker for 30% purchasers at 2.79%. The nice thing about Woolwich's deal is that it's a lifetime tracker, so if the base rate stays low for a long time, you could stay on Woolwich's tracker. And if the base rate did unexpectedly soar next year, you could bail out from Woolwich and only pay a 1% exit fee. 

But what about house prices? 

I've said more than once there's a good chance that property prices will fall next year. I still think modest falls are a strong possibility. So if you buy now, you may not be buying at the bottom of the market. But you probably won't be far off the lows, and you can benefit from a nice variable rate now. 

What's more, I could be wrong about house prices. If the base rate doesn't rise, house prices could carry on going up. If you buy now, you know you've not bought at the height of the boom, and you can start paying down your mortgage immediately. 

So I think now is a good time to buy. If I felt the need to move, I'd start looking.

 > Read why Neil Faulkner is thinking the same way.

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