20
Jan
Variable rate mortgages 'are proving popular'
Variable rate mortgages are continuing to prove popular as some
of the UK's biggest lenders cut the cost of deals.
Mortgage broker John Charcol said that 81% of the home loans it
arranged in December were variable rate deals.
Meanwhile, the Woolwich and the Halifax have reduced the cost of
some of their tracker deals in recent days.
The Bank rate has remained at a record low of 0.5% since March
2009 and economists do not expect the central bank to raise rates
in the near term.
This has resulted in many homeowners paying relatively little on
their monthly mortgage bill, which experts have said has fended off
the threat of home repossession for some.
Fix or not?
Low interest rates have led to a squeeze in returns for savers
over the last year, but those on variable rate mortgages have
benefited.
Many homeowners have reverted to cheaper variable rate deals
when their fixed rate term has come to an end. As a result,
remortgaging numbers have remained at low levels.
Now, some have been asking whether they should return to the
security of a fixed rate deal, pre-empting any rise in interest
rates.
"With the average difference between the fixed rates and the
initial rate on the best trackers around 1.5% in favour of
trackers, it will currently take a substantial rise in Bank rate
for a borrower who takes a tracker to be worse off than one who
opts for a fixed rate," said Ray Boulger, of John Charcol.
He said that those who wanted the security of fixed rate
payments should look towards a five-year, rather than two-year term
when considering value for money, although lots of issues should be
considered in each specific case.
Meanwhile, the Council for Mortgage Lenders has suggested that
proposed new rules to protect tenants if landlords fall behind on
their mortgage payments are being rushed through Parliament.
The bill is intended to help a relatively small number of
tenants when a borrower falls into arrears with a residential
mortgage and is letting the property without the lender's knowledge
or consent.
It warned that the new rules could unnecessarily delay
repossession proceedings when they were considered the best option
for a borrower.
source: www.bbc.co.uk/news Wednesday 20th
January 2010