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
As the Bank of England put up interest rates last week, there has been a rush for fixed rate remortgages the Financial Times reports.
Interest rates are expected to rise again this year so it makes fixed rate remortgages even more appealing to buyers.
Buyers are taking the opportunity to lock into fixed-rate mortgages with favorable rates, ranging from a low of 4.95 per cent to about 5.1 per cent depending on the number of years of the contract.
Customers are trying to beat mortgage lenders before they adjust their rate tables’ inline with the higher interest.
Variable-rate mortgage holders have been hit by a third rate rise since last August while fixed-rate mortgages have not been effected.
Economists expect the interest rate rise on mortgages could see the housing market stabilize as buyers become more cautious. The interest rate rise caught everyone by surprise and will make homes even less affordable.
Neil Chegwidden, head of research at Cluttons, cut his forecast for 2007 house price growth from 9 per cent to 2 percent.
Mortgage soared to a three year high in November, the Bank of England reported.
Total mortgage lending jumped to £9.8bn, while the number of new mortgage approvals rose to 129,000 in November from 128,000 in the previous month, the highest since December 2003.
With the continued rise in the housing market an increasing number of first-time buyers borrowing from their parents. About 14,000 people a year are remortgaging their homes to release an average of £74,000 to help relatives get on the property ladder.
After a steady rise from 107,000 to 127,000 new mortgages between April and September, the numbers have stabilised in the last two months with fears of interest rate rises.
