24 Jan Lending Increases reports Peter Gordon of A.J.Buckley
Mortgage lending increased for the fifth month running in December, but the housing market faces a weak first half of 2012 as demand from buyers wanes and lenders raise rates, warns the Council of Mortgage Lenders (CML) They say the challenging economic outlook suggests a weak first half for the housing market despite the improving trend at the end of last year. Gross mortgage lending for 2011 totalled £140bn, marginally above the CML’s forecast of £138bn and a 3% increase on 2010. Lending in December was an estimated £11.7bn, a 12% rise year-on-year
Elsewhere, Martin Lewis advises people to pay off as much of their mortgage as possible while rates are low, however he warns to check their deals do not have overpayment penalty clauses as they can wipe out any gain. However, once a mortgage is repaid it is not always that easy to resurrect it if incomes or profits have suffered during a recession. We, therefore, tend to favour an offset mortgage whereby any of your savings will reduce the cost of borrowings, but allow you access to savings without further affordability checks at the time.
Offset mortgages have now been around for 30 years although they were more popular in Australia and South Africa before hitting our shores 10 years ago. They would also appeal to the self employed who need to ‘park’ their future tax liabilities until needed at the end of the year. If the mortgage interest rate is say 3.5% per annum, any savings will effectively attractive 3.5% net of tax is which is far more attractive than most banks at the moment.
Finally, there is a distinct difference between ‘variable’ and ‘tracker’ mortgage rates although many borrowers feel they are the same. The CML have warned that mortgage rates may increase this year. Unless Bank Rate increases, any tracker rates will remain unchanged. However, Standard Variable Rates (SVR) are determined by the individual lender and can be changed at any time.
We are finding that interest rates and mortgage schemes are changing weekly with some improvements whilst others are withdrawing more popular and competitive ones. Five year fixed interest rates are still popular given that we will see an increase during this term and borrowers with large mortgages are comforted by knowing their monthly repayments will not vary.
Peter & Julia
A.J. Buckley Financial Management Limited
Independent Financial Advisers
Registered Office :
Tel 01483 426300
Fax 01483 426123