Mortgages
Erin Ryan First time buyers have again hit the headlines this week as the market continues to twist and turn, but as the market potential opens up to new buyers once more it's worth looking at the process of getting a first time buyer mortgage in closer detail. This week the Bank of England issued its quarterly inflation report, and the signs are that rates will fall at least a couple of times in the next year. The government, meanwhile, has further cemented its intention to provide more affordable housing with the publication of its long-awaited Housing and Regeneration Bill. The combination of these two factors suggests that more and more attention is now being paid to the plight of new buyers, as housing minister Yvette Cooper has suggested. "We need new homes for the first-time buyers and families who are struggling to get onto the housing ladder. We need greener homes to tackle the challenge of climate change. And we need a better deal for tenants in social housing [ . . . ] we owe it to future generations to act now on more, greener, and more affordable housing," Ms Cooper said following the publication of the Bill. But the fact remains that it's no longer a simple matter to get a first time buyer mortgage. With that in mind, the first port of call would probably be to look for mortgage advice. With the effects of the credit crunch still filtering through to the mortgages market, the situation is somewhat unusual at the moment, with some analysts suggesting that lenders are in fact no longer looking to the base rate of interest when setting their own rates. This sentiment was seemingly confirmed yesterday, when Standard Life announced that it was raising its Standard Variable Rate (SVR) by 0.15 per cent. "Standard Life is pushing the boundaries and traditionally, once one lender is brave enough to venture into potentially unpopular waters, others follow," said Louise Cuming, head of mortgages at moneysupermarket.com. "It's increasing evidence that the mortgage industry is moving away from being movements in base rate by the MPC [Monetary Policy Committee]," Ms Cuming confirmed. Other lenders, however, continue to offer better deals, so it's not all doom and gloom for those looking for a first time buyer mortgage. Nationwide, for example, announced this week that it is set to launch a new two-year fixed-rate product -- the most popular deal on the market -- at a rate of 5.68 per cent, and added that it was cutting the rate of its ten-year fixed-rate deal to the same percentage. The lender suggested that longer-term deals were becoming increasingly popular, but moneysupermarket.com advised earlier this week that early exit fees for such loans could amount to as much as £10,000. Couple this with research from Stroud & Swindon which has revealed that someone taking out a £100,000 mortgage would be £10,000 better off if they had opted for a series of two-year fixes over the past decade rather than ten-year mortgage. So despite Nationwide's assertions, and those of Chancellor Alistair Darling, there remain a number of reasons why longer deals are not necessarily the best option despite the stability they provide. The credit crunch has hit in other ways too, with GE Money Home Lending advising that one in four deals has been affected by lenders changing their rates or other criteria, making it even harder to keep track of the latest deals. "As ever, the first decision you must make is whether you need the absolute security that a fixed rate provides," Drew Wotherspoon of John Charcol said this week. "If you do, then Abbey's two-year fix and Nationwide's five-year fix appear to be the current cream of the crop. "Both rates, however, are still above 5.5 per cent and there is currently much better value to be found in the tracker and discount markets, with rates starting at around 5.1 per cent. Of course, these rates are already available now, even without a reduction in rates which we are expecting soon," Mr Wotherspoon outlined. So, though some lenders are no longer setting rates in accordance with the best rate, old habits die hard for many and there will likely be a whole new crop of competitive first time buyer mortgages hitting the market soon. About the Author
Erin Ryan is a consultant of mortgage advice company First Rung Now. Erin Ryan may be contacted at http://www.think.eu. Click here to view more articles by Erin Ryan. Reprinted with Permission from IdeaMarketers.com
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