We are fortunate that at the moment, rates are historically at a low level and have been now for some months, as a result you may have been benefitting from your lenders Standard variable Rate being lower than expected when you initially took out your mortgage.
The current situation in the mortgage market is that the bank of England Base rate is very unlikely to reduce from the 0.5%, where it is now. Many economists are predicting a slow rise in this rate during 2011.
If interest rates start to rise next year, as expected by many, we are expecting a huge demand for fixed rates, from clients who are currently on their lender’s Standard Variable Rate but who will want to have the security of knowing that their mortgage payments will not increase if rates rise further. For many of these clients, a fixed rate could be the solution.
As a result there is likely to be a high demand for fixed rates at this point, but the supply is unlikely to be able to match that demand. This is due to the fact that over the past years, lenders have had to make cuts in their processing staff numbers, combined with tighter underwriting requirements and less money to lend.
If this were to happen, there is a good possibility that only a small increase in the Bank of England Base Rate could trigger a much larger increase in the lenders fixed rate products, as lenders increase rates to reduce the demand for their products, to enable them to cope with the increased number of applications.
Currently lenders are offering 5 year fixed rates at competitive levels. Therefore it may be worth considering re-mortgaging to a fixed rate while the competitive rates are still available and before they start rising.
If you would like independent advice on mortgages or protection, feel free to call Alpha Independent Mortgages on 0844 5008300 or visit Alpha Independent Mortgage’s website – www.alphaim.co.uk
Your home may be repossessed if you do not keep up repayments on your mortgage
Because we are independent, you can choose how we are paid:
The two choices that you have are:
You do not pay us a fee and we will retain the commission that we receive from the lender as our
payment for arranging your mortgage. Our minimum expected income for arranging a mortgage is £850. Typically a lender would pay a commission to Alpha Independent Mortgages 0.4% of the amount of the loan.
For example on a mortgage of £200,000 this would be £800. In this example we would charge
you a fee to cover the difference between £800 and £850 which is £50, on completion.
You can pay us a fee, which will be 0.75% of the mortgage amount that you apply for and we will
refund the commission that the lender pays us, to you on completion of your mortgage. If
you choose to pay us a fee and have us refund the commission to you, we still expect a
minimum of £850 for the advice and will charge you the difference between 0.75% of the
mortgage and £850 if the fee is less.
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