July 1st, 2016
As the dust clouds start to clear a little following last week’s referendum result, clear casualties of the UK’s vote to leave the EU have emerged.
Whilst the media focuses on the tattered reputations of the leaders of the UK’s two largest political parties, the value of sterling has taken a battering, and the value of UK’s banks and housebuilders have also been subject to a severe kicking.
Surprising winners include fixed rates for remortgages; which could be very useful indeed for those looking to lock in security and certainty for a period of time on existing debt.
In the past week, HSBC have grabbed the headlines by launching a sub-1% two year fixed rate at 0.99%, although it carries a heavy arrangement fee of £1,495. High street competitor Santander has launched a 10-year fixed rate at 2.94% for remortgages, alongside their already competitive 2.24% 5-year fixed rate, also available for remortgagors. Contractor-friendly Accord, provides the flexibility of offsetting savings against competitive fixed rates, with a recently launched suite of 3-year products that remain rare in the market when combined with the offset facility.
Longer term fixed rates of 5 years plus are predicted to be plentiful and cheap in coming weeks, which could provide some stability for contractors when it is needed most. The impact on house prices cannot be predicted with as much confidence as lender pricing yet, but if they do fall over the coming months as many are quick to predict, an eroding property value will work against homeowners looking to lock in the best rates.
“It is too early to see the impact of Brexit on house prices at this stage, but we can clearly see lenders’ offerings for fixed rates improving across the board,” commented Andy McBride, Business Development Director at specialist broker Contractor Mortgages Made Easy.
“If house prices do fall by 10%, it could mean the difference between two interest rate thresholds when applying for a remortgage, which can result in a significant difference in the rate and therefore the mortgage payment. The average loan taken by our contractor clients is circa £330,000, if the property value drops, effectively making the loan more than 60% of the property value, there’s a 0.4% increase in the 5-year fixed rate available from Halifax, the largest contractor-friendly mortgage lender in the UK. This means an additional £110 per month in interest, or £6,600 over the fixed period.”
“It is therefore more important than ever to review the current mortgage to ensure it is suitable and cost effective, particularly if the equity could be eroded due to Brexit.”
With economists and business leaders predicting uncertainty as the only real certainty for a period, stability in the monthly mortgage payment, still the largest personal outgoing for most contractors, is likely to appeal.
Views expressed in this article do not constitute mortgage advice, for a no-obligation review of your mortgage needs, please contact us on 01489 555080.
Article By: Taj Kang, Recruitment Director at Contractor Mortgages Made Easy
Media Contact: Sarah Middleton, Public Relations Manager
Tel: 01489 555 080