Colin Shairp, Director of Fine & Country Drayton explains how new mortgage rates could benefit the housing market: “News that fixed rate mortgages pushed below the two per cent interest rate threshold is good news for more than just first time buyers. Along with the lower rates and fixes of up to five years, borrowers will frequently find a demand from the lender for a larger deposit. At a time when there’s so much emphasis on getting more people into home ownership for the first time this is a real incentive for those already on the ladder to take the next step up.
"While the advice is always to never borrow more than you can afford so you don’t overstretch your finances and ultimately lose your home, the new mortgages could bring a big advantage for existing borrowers who have built up equity in their home. Taking a new mortgage inevitably incurs fees – lenders will quite happily relieve you of an application fee and another for sending someone to value the property, which is not the same as asking for a survey. Bear this in mind if you are using the funds to acquire a new property rather than just to refinance your mortgage at possibly preferential rates. It’s most likely that these rates will be used by buyers making the move to their second or third home and as they move up the scale more owners will move into the space they relinquish, thus opening the door to first time buyers.
"It has the real potential to boost house sales – mortgage rates historically have never been lower although, of course, house prices historically have probably never been much higher. It’s all down to affordability and with longer mortgage terms of 30 or even 40 years in place of the more traditional 20 to 25 years the monthly cost goes down. I think these longer terms will be become more acceptable as the norm because State retirement ages are pushing back from 65 to 70, meaning a potentially longer working life over which to pay down the mortgage.
"Of course, for the low mortgage rates to have any effect there have to be active buyers in the market to use them and active vendors to supply the houses. At the moment, it’s the vendors who are in short supply. Basically, we need more houses in the market to provide a better choice for buyers. If you have a particularly appealing home, there has never been a better time to sell than now. Without being political, many people feel a bit brighter about their financial future and are looking forward to rising incomes once more. We’ve got a bright spring and everyone seems to have a sunny disposition. So maybe now is the time to get moving.”