Eight Cracking Mortgage Deals
What is the best mortgage deal you can get, following the cut in interest rates? Christina Jordan finds out.
It's not a great time to get a mortgage - any Fool and indeed any fool knows that.
Criteria are tight and rates and fees are high. Margins on trackers for example are five times what they were a year ago - on average, 1.63% above Base Rate compared to 0.3% above, according to some figures.
And although there are some deals available for those with a modest deposit of 5% or 10%, the best rates are available to those with 25% or even 40% upfront. First-time buyers continue to be priced out of the market, but this year by mortgage rates not house prices.
No point price predicting
House prices are of course falling and could fall further, or it could be a great time to grab a bargain. Given the strength of opinion evident from Fool message boards, it is pretty clear that, whatever your opinion on house prices, you will find someone that shares it and someone who doesn't.
More importantly, nobody knows what will happen to property prices, especially this year, as it is impossible to gauge how much of the downturn is caused by a lack of mortgage availability (which could change in a matter of months), and how much is down to a fundamental lack of confidence in the property market -- or indeed other causes.
For the record, I'm think that now is a decent time to get a bargain on the basis that you can negotiate hard. I believe that available competitive finance will start to return within three months and will motivate those buyers that have been waiting on the sidelines to rush (or maybe dawdle) back in.
I believe this because I am one of these people. I fit the average age of a first-time buyer (well I did a year or two ago!) and once I can get an affordable mortgage I really want to buy a house - as do many of my peers.
Why people buy
It's all very well supposing that the wider economy rules our lives but in the real world things like marriage, divorce, babies and job relocation tend to get in the way. Although the number of house purchases in August was at its lowest level since records began according to the Council of Mortgage Lenders, there were still 42,200 house purchase loans made during the month. Why? Are they all mad?
Well, perhaps they have managed to negotiate what they see as a good deal, regardless of what happens next to prices. Or maybe they have every intention of staying put for the next 10 years and believe that this year's problems will be a distant memory by the time they come to sell.
Maybe they just want to get onto the ladder and if prices fall they believe that the next house they go for will have experienced falling prices too.
Or perhaps their rent has risen and they have finally decided that the £800 they are spending a month would be better spent paying off a mortgage, regardless of property prices now, and in the near future.
Another possibility is that they are an existing homeowner expecting a baby and without room in their current abode. Their options would be to sell and rent or to sell and buy and many people in this scenario would go for the latter.
If somebody wants to buy, their reasons are legitimate whatever the market. And there are indeed people who want to buy a property now and need to get a mortgage.
But are there any decent deals for them?
The best of a bad bunch
Deals are changing every day but there are still some competitive products about. Below are some of my favourites based the size of your deposit or equity -- a deciding factor in the current market.
High LTV borrowing - 90% and over
For those with a small deposit of 10%, lifetime trackers are priced most keenly and HSBC and First Direct rule the roost.
Lowest rates are HSBC's 5.44% deal with a £499 fee and First Direct's 5.49% with a £399 fee. For those who don't want to pay any fee HSBC's has a fee-free tracker at 5.74%.
If you must fix you could consider Britannia Building Society's two-year fix at 6.14% with a fee of £999, or HSBC's two-year deal at 6.27% with a £499 fee.
Medium LTV borrowing - 76% to 89%
First Direct's 4.99% tracker at 80% loan to value (20% deposit) with a £999 fee is hard to beat, although the lender also offers a cheap two-year fixed rate at the same LTV at 5.39% (And it's an offset mortgage, but it comes with a hefty £1,998 fee).
Or look at Britannia Building Society again. Its three-year fix is 5.64% with a £999 fee (the rate increases to 5.74% if you only want to fix for two years).
Low LTV borrowing - up to 75%
HSBC's term tracker at 5.29% with a £599 is good rate for those who don't fancy the First Direct deal already mentioned.
In terms of fixed rates Market Harborough's 5.49% two-year deal with a £595 fee is a great deal, and the fee reduces to £295 if you are an existing customer or a local.
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