The debt storm is brewing for 2008

With 1.4 million borrowers coming off their cheap 2-year fixed rate deals in 2008, they would be in for a shock with higher mortgage costs and tightened lending criteria.  Borrowers with poor credit history looking for a new deal would find it even harder;  Lenders are now asking for 25% equity as opposed to 15% before the credit crisis hit the financial markets.  To ensure you get a good deal, first talk to your existing lender so you have something to compare other offers against.  Also be sure to take into account the cost of switching lenders; valuation and solicitor’s fees.  The easiest comparisons are with deals from other lenders that would pay these costs for you or just obviously much lower rate without extended tie in.

Hope for US property market

Reports on the US mortgage applications for last week showed a surge of 22.5% on the back of plunging interest rates.  Let hope that the US economy may not go into recession after all.  I’m a possitive thinker.  As the say, when America sneeze, the UK catches a cold.  Let hope that does happen.

Hurray! Base rate down to 5.5%

The Bank of England has finally reduced the base rate by 0.25% to 5.5% after 5 increases since 2006.  In the past 2 to 3 months, lenders have increased their mortgage rates by as much as 1% or more even though the base rate had not changed.  Lets hope that the BoE’s decision can go some way into easing the present turmoil in the financial markets.  I say, expect further reductions.

Long-term remortgaging could be the solution

The devastating impact of the credit crunch on rates plus rising arrangement fees mean that for many borrowers, longer-term deals are now their best bet.  For example, if you purchased your property within the last year with little or no equity, my recommendations would be to get a good 5 year fixed rate so you avoid paying these ridiculously high arrangement fees every couple of year.  And most importantly you don’t have to worry about falling housing price or negative equity till your next rate change.  Alternative, you could go for a good lifetime tracker as most have no penalties and you can make as much over payments and redeem your mortgage whenever you want.  This is especially handy as economists are predicting that the Bank of England is very likely to reduce rates from 5.75% currently to 5% by the end of 2008.  But be sure to get advice from a good mortgage broker.