Posts with tag: interest rates

Over half of borrowers to struggle if rates rise

Published On: September 29, 2015 at 12:21 pm

Tags: interest rates,mortgage repayments,mortgages

A concerning new report indicates that over half of the total number of borrowers in the UK believe that they will struggle or fall into arrears with mortgage repayments, should interest rates rise.

Research published by the Building Societies Association suggests that 52% feel they would be in trouble, should the rates increase.

Issues

Further data from the survey shows that 10% of respondents would face severe financial hardship. 14% said they would be able to keep up with repayments, albeit at a constant struggle. 23% expressed concern that they would experience difficulty from time to time.[1]

After being questioned on the impact that rate rises would have on their lifestyle, 18% of borrowers said they would have to cut down on essentials, such as food or clothing. 15% said that they would have to work more hours to keep on top of their mortgage commitments.[1]

‘Concern from borrowers is natural when it comes to interest rate rates,’ noted Paul Broadhead, head of mortgage policy at the BSA. ‘There are at least 1.85 million home owners that have never experienced a rate rise, we have had a record low Bank Base Rate for so long, it is unsurprising that some people are concerned that a rise in rates will affect their lifestyles and ability to make mortgage payments.’[1]

Broadhead feels that, ‘clearly, some of the actions borrowers say they would take may not be within their control, for example working additional hours. Our advice to those concerned about interest rate rises is to start thinking about how they will manage the increased costs.’ He suggests that this could include, ‘creating a household budget to taking a look at mortgage calculators and rescheduling unsecured loans such as credit cards. Free money advice is available for those that are concerned.’[1]

Over half of borrowers to struggle if rates rise

Optimism

‘The good news is that the results of our survey show nearly a quarter of borrowers will not have to make any changes to their lifestyle when interest rates rise,’ Broadhead continued. ‘With the economy more stable than it has been for years, this is a positive result.’[1]

‘That said, with inflation near zero and the Monetary Policy Committee voting by a majority of eight to one to maintain the Bank Rate at 0.5%, it is looking unlikely that things will change before well into 2016,’ he added.[1]

Joanna Elson, chief executive of the Money Advice Trust, believes that after years of rates being at such a low level, borrowers are beginning to plan for the inevitable rise. She said however, ‘nevertheless, many mortgage payers are still in for a big financial shock when rates do start to climb and we remain concerned that many will fall into problem debt as a result. We must not forget that renters too, are likely to be affected as extra mortgage costs are passed on by landlords.’[1]

‘Households now have a window of opportunity to re-assess their budgets, look again at their borrowing and think about how they will cope with higher interest rates. It is crucial they take advantage of this and prepare themselves now,’ Elson concluded.[1]

[1] http://www.propertywire.com/news/europe/uk-home-lending-poll-2015092911031.html

Interest Rates Likely to Rise, Says George Osborne

Published On: September 22, 2015 at 12:17 pm

Author: Em Morley

Categories: Finance News

Tags: Bank of England interest rate,interest rate rise,interest rates

Interest Rates Likely to Rise, Says George Osborne

Chancellor George Osborne has revealed that interest rates are more likely to rise than fall, due to the success of the UK and US economies.

Osborne has been touring China to establish closer political and business ties.

On Tuesday, he told BBC Radio 4’s Today show that an increase in interest rates, suggested by the Bank of England (BoE) governor, Mark Carney, reflects the “robust growth” of Britain’s economy.

The BoE’s chief economist, Andy Haldane, recently indicated that interest rates might remain low, partly due to the slowdown in the Chinese economy.

Osborne said Britain has “the right people to make the call”, adding, “the governor has signalled, I think pretty clearly, the direction interest rates are heading”.

He also mentioned that the Federal Reserve has defied expectations by keeping interest rates down due to the decline in Chinese stocks.

He said that interest rate setters “are always going to be sensitive to what is going on at that moment, but the general signal coming from the Bank and Federal Reserve is, because the economies have been growing robustly in the last couple of years, the exit from very loose monetary policy is going to come”¹.

¹http://www.theguardian.com/politics/2015/sep/22/uk-interest-rates-likely-go-up-george-osborne-china

Mortgage lending forecasted to hit £286.8bn by 2019

Published On: August 17, 2015 at 4:43 pm

Author: Em Morley

Categories: Finance News

Tags: interest rates,Mortgage lending,mortgages

There is to be a growing demand for mortgage lending over the next four years, driven by a wider economic recovery, greater housing construction and more-tempting incentives.

That is the result of a report from a report by Timetric, which suggests that there is to be a boom in the coming years.

Optimism

The greatest growth in mortgage lending is expected in 2017, with a forecasted rate of 11.7%. This prediction coincides with the Office for Budget Responsibility also suggesting that the largest rise in British property prices will occur during the same period.[1]

Timetric expect that gross lending will hit £218.6bn by the end of the 2015, before rising further to £241.6bn in 2016, eventually reaching £286.8bn in 2019.[1]

However, mortgage outstanding balances are expected to grow at a slower pace. Repayments are also likely to increase as a broader economic growth generates a rise in the official Bank of England policy rate and an increase in banks’ mortgage interest rates. Outstanding balances are tipped to hit £1.33 trillion by the end of this year, rising to be £1.39 trillion by 2019.[1]

Mortgage lending forecasted to hit £286.8bn by 2019

Rising rates

Ben Carey-Evans, Analyst at Timetric, commented, ‘rising interest rates, combined with reduced growth in the UK housing market, is set to stunt increases somewhat from the 15% and 22% rates seen in 2014 and 2013 respectively. Improving economic conditions, however, particularly the continuation of improving real wages – due to extremely low inflation – should see gross lending rising at a steady rate up to 2019.’[1]

‘Growth in the mortgage market will be supported by rising house prices necessitating larger-value loans, and regional variations in house prices will continue to influence the distribution of mortgage lending,’ Carey-Evans concluded.[1]

[1] http://www.propertyreporter.co.uk/finance/mortgage-lending-to-reach-2868bn-by-2019.html

Mortgage rates up ahead of interest rate rise

Published On: August 5, 2015 at 3:59 pm

Author: Em Morley

Categories: Finance News

Tags: interest rates,mortgage rates,rent rises

As a result of Bank of England indications that interest rates are set to be elevated, possibly from the beginning of 2016, a number of lenders have already begun to increase their mortgage rates.

Rises

An investigation by comparison website MoneySuperMarket indicates that since Bank of England Governor Mark Carney’s remarks on potential rate rises, a number of previously desirable mortgage deals have become less inviting.

First Direct for example offered a 1.49% rate on its two-year deals at the beginning of 2015, but their best rate now stands at 1.69%.[1]

With this said, data from the report suggests that there are still a number of great mortgage rates available. Additionally, 65% LTV mortgages were found to be typically cheaper than 60% LTV mortgages.[1]

Value

At present, the average 60% LTV rate for fixed, discount and variable mortgages is 2.23%, with the average 65% LTV rate at 2.08%.[1]

Mortgage rates up ahead of interest rate rise

Dan Plant, consumer expert at MoneySupermarket feels that it is, ‘prime time for those looking for a mortgage as there are still some great deals on the market even if it’s a bit bizarre that you can currently get a cheaper deal with a smaller deposit.’[1]

‘However, the recent rate rise speculation is starting to make providers cautious, and this is being reflected in their offers. We know choosing a mortgage can be confusing but if people can do it now, they avoid the risk of rates rising over the next few months,’ he continued.[1]

Plant also said that, ‘many lenders allow mortgage holders to reserve rates available now for up to six months for a small fee, so even those who still have some time left on their current deal can benefit.’ Concluding, he warned that, ‘as always, prospective buyers need to think about the long term and work out the total cost of the mortgage, including both rates and fees, before committing to deal.’[1]

[1] http://www.propertywire.com/news/europe/uk-mortgage-interest-rates-2015080510826.html

Fix a Mortgage Before Rates Rise

Published On: June 8, 2015 at 1:52 pm

Author: Em Morley

Categories: Finance News

Tags: base rate increase,fixed rate mortgages,interest rates,low mortgage rates,mortgage lender competition

In the late 1980s, mortgage rates were in double digits. But as of last week, home loans can be secured for under 1%.

Chelsea Building Society introduced a 0.98% deal for borrowers with large deposits or equity worth 35% of the property’s value. A fee of £1,545 also applies.

Fix a Mortgage Before Rates Rise

Currently, every week is seeing lower and lower rates from competing lenders. Most of this action has been in the fixed rate market, with Yorkshire Building Society offering a 1.07% fix over two years for the same level of deposit and a £1,369 fee.

But don’t take these rates at face value – Chelsea’s loan is a tracker rate. This means that repayments will decrease or increase in line with the Bank of England’s (BoE) base rate, plus 0.48%.

Tracker loans can be cheaper when the base rate is low, as it is at present, but will become more expensive when the rate rises in the future.

The base rate has been at a record low of 0.5% for six years, which could attract borrowers to trackers. But despite inflation also being extremely low, it is unlikely that the base rate will drop further.

It is expected that the base rate will increase in 2016. Ten-year bond rates, which indicate interest rate sentiment, have grown from 1.3% in late January to 2.1% last week. This suggests that markets are becoming concerned about inflation and a solution would be to raise interest rates.

Additionally, if wages begin to push higher, interest rate increases will likely follow.

For borrowers looking for security, a low-cost fixed rate mortgage is the best choice.

Higher interest rates will please the savers who have earned very little in the last six years. Inflation has been low for a long time and annually, this has reduced savers’ returns in real terms.

A recent report from Henderson Global Investors reveals that Britain’s savers earned a total interest of £26 billion in the past five years. However, due to inflation, they have lost £116 billion in real terms, leaving a net loss of £80 billion. This is £3,000 per household.

Henderson suggests that savers place more cash into the inflation-defying stock market instead. The report found that UK equities returned a total of 122% over five years, compared to only 2.2% for instant access savings accounts.

But cash is still necessary. The investment groups recommends keeping at least three months’ income for emergencies and a £2,500 rainy day fund.

Just 1% interest rate rise could affect 7m lenders

Published On: June 3, 2015 at 12:11 pm

Author: Em Morley

Categories: Finance News

Tags: interest rates,lenders,mortgage repayments

Alarming research has indicated that up to 7 million people will face difficulty in paying their mortgage costs if interest rates increase by just 1%.

Worrying

According to a report from Ocean Finance, a rise of just a single percentage would see lenders with a variable rate mortgage have to find an extra £55 per month for every £100,000 owed. While a rise is not expected until the Spring of next year, the findings are likely to concern a vast number of lenders.[1]

63% of borrowers quizzed for the report said that they felt they were have to scale-down spending on non-vital items to cover the extra payment. Another 13% said that they felt they would still end up in financial difficulty even if they were to cut back.[1]

Nearly 25% of borrowers said they had already moved onto a fixed-rate mortgage, with an additional 16% planning to follow suit in the near future. Furthermore, the increased demand on mortgage payments would see around 10% to think about selling their existing property [1]

Just 1% interest rate rise could affect 7m lenders

Inevitability

Spokesman for Ocean Finance, Gareth Shilton, said that, ‘it’s inevitable that interest rates will rise at some point, whether that happens in Spring next year or later in the year.’ Shilton feels that the rate is, ‘likely to be gradual and it may take a while to get to a 1% increase.’ However, he warns that, ‘every rent hike will have an impact on hard working families who are already struggling to make ends meet.’[1]

He went on to suggest that, ‘many people will feel like mortgage prisoners because their circumstances have changed since they took out their loan and they’ll understandably be concerned about what a potential interest rate rise means for them.’ Shilton says, ‘it’s important to understand that in most cases there are options, so it’s important that anyone who is concerned about a rate increase should seek advice on the best deal available to them.’[1]

[1] http://www.propertyflock.co.uk/f/A732D8635