The Bank of England’s Monetary Policy Committee voted today to reduce the official Bank Rate to 1 percent. Thats the fifth rate cut in a row as the UK recession takes its toll. The rate cut is good news for borrowers and struggling businesses with existing loans. Savers are hit again though as the interest recieved on money in the bank goes down yet again.
I welcome the rate cuts as the interest I pay mortgages of mine seem to be getting lower and lower in the last few months. One of my mortgages with BMS is at 0.95% below base. Thats at an amazing 0.05% of interest. I think my monthly payments will probably be in the region of Â£50 a month, thats almost too good to be true! I’m also curious as to what will happen if the base rate drops again to lets say 0% then the interest on my mortgage would in theory be – 0.95% Would BMS then actually pay me every month instead?? That would be very nice!
In the last 2 weeks or so ALL UK banks and lending institutions that I and my fellow investors use seem to have tightened their belts and repriced their mortgage products. Fixed rates have gone up as well as variable tracker rates. Arrangement fees are also still stupidly high.
Even though UK Interest rates have recently come down or stayed the same for the last few months. These latest lending rate hikes are definitely a result of the US credit crunch and is a result of less money being available to the banks to lend out.
BMS fixed rate products have gone from 3 year 5.09% rates to 2 year 5.54% rates with heafty arrangement fees of 2.5% of the loan amount (even this poor rate has today been pulled in favour of possibly an even worse product).
Mortgage Express who do instant remortgages for investors have repriced their 2 year fixed rates at 6.09% making most deals not possible for investors who need the instant remortgage product.
As it is now harder for borrowers to get decent mortgages to buy homes, this will directly reduce the ammount of sales as people cannot buy the homes they want to at todays price. The rate hikes mean that affordability will be reduced. This may in turn bring a downturn in the market. I’m a little worried are you?
The UK Bank of England has cut interest rates to 5.25% from 5.5% following signs that the UK economy is slowing down. The Bank needs to ensure that growth and inflation are balanced but the move today was widely anticipated by analysts after cuts in the US, where the Federal Reserve slashed its borrowing costs to 3% from 4.25%.
Even myself, I predicted that the prices would be falling. I should have put money on it, that the interest rates would fall in February. Well actually, maybe I did as the last 3-4 investment mortgages I took out were on variable rates so I should be slightly better off every month on these mortgages. A quarter point reduction in the rates would reduce the payments by about Â£25 on each of these mortgages.
Not all mortgage lenders will pass the interest rate cut onto their customers soon, limiting the cut’s impact on the economy. Some banks will not cut their rates until the 1st of the next month giving them over 20 days to make some more money from their customers.
Savers will be worst off from the interest rate cut. Most banks will pass the changes in interest paid on savings almost immediately. Isnâ€™t that nice of them?
Thats right Interest rates down to 5.5% and I’m about a week late to report this but is it really news?
The Bank of England last week dropped their base rate to 5.5% the first drop in rates in 2 years. Economists predict that rate will reach 5% by mid next year.
Save Â£21, Merry Christmas!!
On a mortgage of Â£100k the annual interest is Â£5750 at the old rate. At the new rate it would be Â£5500. Thats a whole Â£250 cheaper a year, on someones monthly mortgage payments thats a whopping Â£21 cheaper every month. Nothing really to right home about, thats less then Â£1 per day cheaper.
Interesting things are happening on the new mortgage side of things though. Confidence in lower interest rates for the near future is high. Fixed rates are falling, lenders are lowering their fat arrangement fees, things in general are looking better for investors. The best rate for investors at the moment is from..
Yup you guessed it BMS. Birmingham Midshire Solutions have released a 5.09% 3 year fixed rate with only 1.5% arrangement fee. This is THE best rate to come along in months so I bet investors will be scrambling to get it. I would love to take advantage of the new rate, but i’ve got to find a house to buy first!
Interest rates rise again to 5.75%
The Bank of England raised its base rates yet again this month up to 5.75% this is the highest interest rates have been since 2001. This is bad news for anyone borrowing money for any reason as mortgages and loans of any type will be affected.
Many homeowners could soon be facing mortgage arrears and financial hardship as monthly outgoings will be increased by the recent rate rise. A borrower with a Â£100,000 variable rate repayment mortgage is paying Â£104 a month more than at the same time last year. Experts predict that the rates could hit 6% by the end of the year.
Most homeowners (57%) however are on fixed rate mortgages and therefore will not feel the pinch of the higher interest rates on their mortgage. until at least their fixed rate period ends and they have to remortgage. They may then find that it will be harder to get as good a deal on their home mortgage.
How does this affect investors with BTL mortgages? well as an investor myself I always get fixed rate products for as long as possible. this means that i know how much monthly payments will be for the next 3-5 years for each property. I am finding that new mortgages i take out have reduced fixed periods and increased rates. the current best rate i can get is 5.89% fixed for 2 years. not great i know.
one plus side is that as rates go up there will be more and more people wanting to sell their homes. many in financial hardship will be looking at sell and rent back solutions for their homes. as i am a part of one such company that offers these services it should be good for business.
over the last year the number of companies that offer such services have increased dramatically. there used to be about 3 or 4 companies that did these types of transactions. now a quick google search will reveal a few hundred such companies. its important for anyone looking for a sell and rent back solution to pick a reputable company that isn’t going to let them down. as a property investor myself I always aim to be fair, honest and ethical in all my dealings as i strongly believe in karma.