Rate cuts offer positive outlook for Contractor mortgages

Just when you thought the news was all doom and gloom in the housing market, Central Banks across the world announced emergency rate cuts last week. In the UK 0.5% was cut from Bank of England base rates to help ease the impact of the credit crunch.

Our mortgages team have been rushed off their feet making sure our clients can take advantage of the good rates when they appear but many are currently offered for a limited period as competitors try to balance commercial pressure with their lending capacity and with service standards. Simon Foster urges purchasers and remortgage clients to move quickly to secure the best deals.

Whilst we are by no means suggesting that the mortgage market is back to normal, this rate cut coupled with the Governments bailout package for UK banks is breathing life back into what seemed at times to be a dead patient. Lenders are responding with competitive rates that are changing on a sometimes daily basis.

If you are on a base rate tracker mortgage then the rate cut should signal an immediate drop in your monthly repayments by 0.5%. This will bring some mortgages repayments almost back down to where they were two years ago which will help homeowners that have been struggling to regain control of their expenditure. However with the interbank lending rate now significantly higher than base rate many lenders are pulling trackers out of their product ranges for new deals until things stabilise.

If you are attempting to secure a new mortgage then the rate cuts should eventually help across the board. Whilst most borrowers are preferring variable discounted mortgages even fixed rate mortgages are looking attractive again , in some cases dropping to 4.95% from 5.6% last month. Those who are coming to the end of your current rate and getting ready to remortgage should see a few better options now thanks to the drop.

The rate decrease is not the only development that will help to ease the mortgage markets woes. The Governments bailout plan should help to increase inter-bank lending and for those institutions who accept taxpayers support in the shape of equity stakes will be encouraged to lend more freely which could result in a two tier mortgage market.

It should certainly make it much easier to secure a mortgage if you have a deposit and even Northern Rock is once again back in the market.

Offsets offer investment security
Given the current fear stalking world banks it has come to light that moneys held in certain Offset mortgages could represent the safest bank deposits of all. This is because these funds do not need the £50k guarantee by virtue of the fact that these savings are reducing the mortgage debt by the total cash deposit and, in the event of a bank failure the borrwer would simply have a smaller outstanding debt rather than run the risk of losing funds above the £50k FSCS guarantee.

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