Mortgage News Article

29.10.08 by Sarah Fox-Clinch

Don't Miss Out On Low Interest Rates

With many economists crying out for aggressive interest rate cuts there are some who believe that we could see rates below 2% - some even predicting that 0% is an option!

As a result tracker rates are proving to be incredibly popular at present, even though many lenders are increasing these to new customers and trying to push people onto fixed rates.

As I have mentioned before, some lenders have introduced collars that is basically the opposite of a capped rate.  Whereas a capped rate protects your payments by capping the rate at a maximum level of interest.  A collared rate will protect the lender by collaring the payment above a certain minimum.

For example;  Nationwide have collared their base rate trackers at 2.75%.  Therefore if base rate goes below 2.75% someone with a Nationwide tracker mortgage will not see any benefit.  This is really something to bear in mind when comparing lenders and the deals they offer.

One of the mainstream lenders who currently do not have such a collar, therefore in theory will pass on all the benefit, still has competitive offerings starting at just 1.09% above Bank Base. This gives a current rate of 5.59%.

As well as free valuation and legal fees, the key benefit of this particular lender is that they offer a “drop-lock” facility. This means you can switch onto a fixed rate when you feel rates are low enough.
 
In this scenario, if the Government starts hiking up interest rates in 2 years time, we can arrange for you to swap over to a fixed rate with no penalty, to secure your payments.
 
This is a great scheme and is becoming more popular with lenders as it keeps clients with them for a longer period of time. For applicants, as you can protect yourselves against base rate rises in the future, it gives you the best of both worlds.

To see our latest Best Buys please click here.

News Archive

Monty's Mortgage Blog

06.01.09

A Cut, But By How Much?

The debate this week is around the next expected cut in the Bank of England Base Rate that is likely to be announced, with the main question being how much the cut is going to be, either 1% or 0.5%.

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