First Mortgage on Money Box Live

Ruth Alexander from BBC Radio4’s Money Box Live discussed the latest news from the mortgage market on Wednesday. Sharing their experiences alongside her were her guests including: Melanie Bien, Mortgage and Property Finance Expert, Ray Boulger, Senior Technical Manager, John Charcol and Kevin Gardiner, Sales Manager at First Mortgage.

Whether you are a first time buyer, remortgaging or looking to trade up or down, callers had the opportunity to put their questions to the presenter and her panel of experts. The session lasted approximately for 30 minutes, with many excellent questions being put forward. We have taken the opportunity to cover the main highlights.

Before taking questions from the public, Ruth Alexander put opening questions to her mortgage experts.

Ruth: Is this the best time to get a mortgage, given how low rates are?

Ray: It is the best time at the moment concerning where interest rates are, with two year fixed rates starting as low as 1.19% and five year fixed rates at 2.25%. However, it is not the best time in terms of satisfying lenders criteria, which presents some problems for borrowers.

Ruth: Apart from low rates and the strict lending criteria, what else is going on?

Melanie: Older borrowers are struggling to get a mortgage primarily because of tougher affordability criteria which was introduced by the Mortgage Market Review (MMR). Not so much people in their seventies or eighties, but early fifties and even late forties.

Ruth: “Is it getting any easier for first time buyers?

Kevin: “Yes definitely”. Lenders are accepting smaller deposits of typically 5% and there are various Government builder schemes which are similar. First time buyers typically required a deposit of 10%, so there is now great optimism in Scotland as rates are at all time lows.

Questions were then taken from callers across the country, presenting some very interesting discussions and recommendations.

CallerIf I’m remortgaging and taking some money out, what type of mortgage would they go for and how long a term this time given interest rates?

Kevin: Don’t do anything until the expiry of your fixed rate to avoid paying any Early Repayment Charges (ERC’s). We would then consider deals on offer from your existing lender before deciding to take the mortgage elsewhere. There are a number of lenders offering loyalty rates, undercutting the rest of the market, so we would need to make sure it was not “false economy” to leave the existing lender.

Ray: If your particular lender does not have a good deal and you need to remortgage, most lenders mortgage offers are valid up to six months. So it is not too early to start thinking about which lender you should move to if you need to remortgage.

 Caller: “What about fixing it again? Is it best to stay with existing lender and not fix it?

Kevin: My advice would be to seek impartial mortgage advice before making that call. A good mortgage advisor will take into account the deals on offer with your existing lender using it as a benchmark for the rest of the marketplace.

Ray: If you are going to stay with your existing lender or move, because you are borrowing more money you would have to go through the same affordability checks again.

Ruth: “About the best deals on the market at the moment, which are the most eye catching if you’ve got a relatively modest deposit?

Ray: For the best deals, and there some amazing ones out there, you need at least a 35% or 40% deposit. There are still plenty good deals only requiring a 10% deposit. For example, you can get a five year fixed rate at 3.99% with a 10% deposit and two year discount deals under 2.5%. For anyone with a 5% deposit, if you are happy to look at buying a New Build property, the Help to Buy Equity Share scheme the Government runs is really good value because you get much lower mortgage rates.

Ruth: “There are ten year fixed rate out there, what do you need to think about your own circumstances before you fix into that and what are these rates?”    

Melanie: With a 35% deposit you can get a ten year fixed, the market leader is First Direct at 2.89%, which is a phenomenally low rate, with a reasonable fee of £950. You need to think carefully if you are fixing for ten years, as if you need to get out of the mortgage in these ten years or move for example, you could face hefty Early Repayment Charges (ERC’s), running into thousands of pounds. A lot can happen in ten years, so you need to be confident for fixing for that length of time as there are some great rates available. Think about it first.

First Mortgage recently commented on the rise of ten year fixed rate mortgages.

Caller: “I’m new to the market and a first time buyer, I’m wanting advice whether to go with a fixed or tracker mortgage and why you would choose that option?

Kevin: Currently, and quite unusually, the fixed rates are lower than some of the trackers. It probably comes down to how confident the person is who is looking to take the mortgage on. Typically for a first time buyer they like having the security their payments will not change for at least a couple of years after they get into the new property.

Ruth: “Which of the products would you point him in the direction of?

Kevin: It depends on the size of the deposit being put down [25% confirmed, which is very good for first time buyers]. Typically a two year fixed rate with a 25% deposit going down is starting at 1.59% and a five year fixed rate at 2.64%. He should not be too worried about going five year fixed with the equity he has in the property because of the fact rates are at historic lows, and you could argue it is better value for money because the expectation would be that rates would likely increase over that period of time. But again we would need to consider the personal circumstances, for example, remaining in the property for that period of time, job security, job relocation or even meeting a nice lady and getting married! With that deposit going down, he is in a “win – win” situation.

There were many more questions put to Ruth Alexander and her guests. To hear the full broadcast, click here to find it on the BBC site.  Please note it will only be available to listen again for a limited amount of time.

Leave a reply

Your email address will not be published. All fields are required.

Your email address will not be published. Required fields are marked *