A recent pledge by the Chancellor of the Exchequer to encourage the provision of long-term fixed-rate mortgages has been responded to by Nationwide in the shape of a relaunch of its 25-year fixed-rate mortgage.
With the reintroduction of this mortgage product, Nationwide are aiming to provide stability and flexibility for borrowers. Individuals who take up the 25 year fixed rate mortgage will be able to benefit from a 6.39% interest rate for the full term of the mortgage.
The government is keen to see the current trend of homebuyers taking out short-term fixed-rate mortgages replaced with long-term fixed-rate agreements as it believes this will aid the stabilisation of the UK housing market.
Debt advisers are concerned that short-term fixed-rate mortgages, which account for a substantial proportion of mortgage borrowing, will soon incur costs for homeowners as a large number of them were taken out when interest rates were low. With five base rate rises since last August, the fear is that costs could be more than some people can afford.
While taking out a 25 year fixed-rate mortgages can prove to be almost as expensive a venture, especially as the UK is near the top of the interest rate cycle, Nationwide are confident that consumers are want their relaunched fixed mortgage.
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Remortgages
The costs involved in upgrading a UK home is on the increase according to research by Yorkshire bank.
A new report released by the bank reveals that homeowners in the UK are typically having to pay £34,000 more than their existing property is worth just to purchase a house that is one bedroom bigger than their current home.
Despite the rising cost of property, only 26% of homeowners surveyed in the report said that they would be put off by the increasing costs with our homeowners seeing the need of a larger mortgage as merely a step towards them owning their dream home.
Yorkshire Bank noticed that while homeowners are not being put off by the high price of having an extra bedroom, they are becoming more “prudent” in their purchases in an effort to ensure they can afford the increased repayments on their new mortgage.
This attitude of taking on the increased risk of a larger mortgage is mirrored by the opinion of the vast majority of homeowners, that interest rates will increase and they are ready to face the increased financial burden. Only 14 per cent of those surveyed by Yorkshire bank said that they thought they would struggle to make higher mortgage repayments.
Yorkshire Bank advised homeowners that they should not over-stretch themselves financially.
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Remortgages
A Lloyds TSB survey of young people between 18 and 24 has revealed that more and more of the country’s young adults are not only keen to get a mortgage and a foot on the property ladder, but also willing to forego their careers and education in an attempt to get it.
The survey found that one in ten young people decided not to pursue a degree or other higher education qualification in favour of working to save money for a mortgage and deposit.
The survey also showed that young people are increasingly prepared for the financial burdens of a mortgage and expect to make sacrifices early in their life if it will allow them to purchase a property as quickly as possible. One in five participants in the survey said they had given up a career path to take a job that, while not being as enjoyable or interested, did provide the wages needed to back their pursiut of property.
Other interesting trends from the survey include 54 per cent admiting to living at home to save money and a third of the participants putting off travel plans until they have a mortgage.
It is thought that even with a decent wage behind them, many first time buyers will have to opt for either 100% mortgages or bad credit mortgages due to their lack of actual financial history.
A recent report from the Council of Mortgage Lenders showed that first-time buyers will now have to spend approximately 18 per cent of their salary on the interest on their mortgage.
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