New Mortgage Mantra - Interest Rates Down But Mortgage Rates Up
Existing homeowners already burdened by higher fuel, gas, electricity and food prices are being dealt another blow as mortgage lenders start increasing their monthly mortgage payments for their existing customers. So, even as homeowners were desperately waiting for the Bank of England to cut interest rates so that they could at least get some relief on one front, lenders such as banks and building societies have gone the opposite way and instead of maintaining the current mortgage rates, have in fact started increasing their rates for new and existing customers citing a shortage of liquid funds in the market and also due to a sharp increase in the cost of funding.
So, even as Kent Reliance and NatWest have raised the repayment figures for existing clients, Nationwide has raised its rates for new customers and others like Chelsea Building Society and First Direct have withdrawn some of their existing deals and changed the pricing levels of some of their other deals. These changes could affect millions of homeowners whose fixed rate deals are about to come to an end in the current year. Kent Reliance is raising their rates on their variable rate deals to 7.59% from the existing 7.34%. Nationwide too has raised the price by up to .57% on some of its base rate tracker mortgages. The rates for new borrowers too have been increased to 7% from the earlier 6.43%, with a 5% deposit on the 2-year tracker mortgage. It has also withdrawn many of its fixed rate and tracker mortgage deals. Commenting on the current situation, Louise Cuming of moneysupermarket.com said that as there is less money coming into the mortgage market, there could be a correction, which even as it might be good in the long term, could at present affect the first time buyers, adversely. Even as other analysts felt that Nationwide's decision to hike the interest rates were shocking, Mathew Carter, director of Nationwide explained that they continued to offer a range of fixed and variable mortgage rates, which were up to 95% centering on prudent and responsible lending, instead of just concentrating only on volume.
Other lenders like the Bank of Ireland have also discontinued many of their two, three and five year fixed rate loans along with its two year discounted rates. Chelsea Building Society has also come up with new schemes where their short term fixed rates have increased by .2% and short term tracker rates have increased by .35%. Yorkshire Building Society has also followed suit and raised their interest rates by 0.15% to 0.25%. Lloyds TSB's mortgage division, Cheltenham and Gloucester have also increased some of its two-year tracker rates thereby taking it to 6.99%. Due to the stagnant property prices in some areas and a fall in property prices in other areas and with the credit crunch in full swing, the number of mortgage deals accessible to home purchasers has already decreased currently to 5,700 from 15,600 in July 2007. The sub prime crisis and the inter banking credit crunch has rattled lenders so much that many of them have started turning their backs on new business while some small building societies are giving loans only to lenders from their own locality. The days of getting loans over 100% of the property value also seems to have been done with by all the lenders, as they are too afraid of taking any risks in this uncertain market.
So, Britons with existing mortgages or whose fixed term mortgages are coming to an end or even those seeking to buy a new home will have to shell out more since the decision to lower rates by the Bank of England has had no effect on lenders who have cited the cash crunch and high costs of lending as reasons for jacking up their interest rates. The current year thus promises to be tough for borrowers and lenders alike.
Article written by: Craig Parker - Make Money Expert |
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