Oak Tree Mortgages Blog

"Can we fix it? Yes we can!" Fix rates fall...

Following on from my last post, the 'major mortgage lender' who re-priced their mortgage range the day after the Bank of England cut the base rate last week was Cheltenham & Gloucester. 

And how have the new offerings gone down? Well, having tried to call the lender today, there was no answer and no answer phone! I doubt the C&G staff are on strike, lets assume the new rates have been very popular and all staff are engaged busily processing applications. Thankfully, we use the lenders fully automated mortgage submission system for brokers which keeps our need to contact the lender by telephone to a minimum.

Hot on their heels and not to be out done, Abbey have today announced a re-price of their entire mortgage range, with rates falling by as much as 0.6% with effect from 10th December 2008. We await the new Abbey products with interest.

What is interesting is to see two major mortgage lenders reduce their rates at 90% loan to value and 85% loan to value. This will help the purchase market.

With so much negative comment surrounding the mortgage market, it is great to see some real competition again among the major mortgage lenders and bodes well for the purchase market. These are the first rate reductions we have seen since September that are aimed at first time buyers and home movers. Up to now, mortgage lenders have focused their attention around the lower risk end of the re-mortgage market and those with very large deposits.

What our recent experience of navigating the market with first time buyers and home movers has shown is that lenders are still using credit scoring to control their business levels. Put another way, not everyone can get a mortgage!

A good mortgage brokers knowledge of the various lenders criteria and credit scoring is of huge benefit to buyers in this market. A brokers knowledge and experience can save disappointment and the perils of 'multiple credit scores'.

As ever, we remain committed to finding the most suitable mortgage to your current needs and demands. Oak Tree Mortgages can be contacted on 0121 733 8833.

What difference will 1% make?

4th December 2008, 12pm and our central bank announces another 1% cut in interest rates to bring the official Bank of England rate down to 2%. The graph shows how steep the recent rate cuts have been in an effort to tackle the recession. 

But how is this likely to affect mortgages over the coming weeks? Let's deal with this question by looking at a couple of scenarios...

Firstly, those lucky enough to already have a mortgage linked to the Bank of England, known as a tracker mortgages. In most cases, the full rate cut will be passed on by your mortgage lender. Good times!

Those on a fixed rate, no change... but that's what you wanted!

Those no longer on any 'special rate' who are sitting on their lenders Standard Variable Rate (SVR)... The lenders are under no obligation to pass on the rate cut in full on their SVR. Look at the decision of two of the largest lenders following yesterdays rate cut. HBoS (Halifax, Bank of Scotland) will only be passing on 0.25% of the cut and Nationwide will be passing on 0.69% of the cut. Those naughty mortgage lenders...

As difficult as it is to have any sympathy for the banks, they are commercial organizations, so the smaller rate cut to those on the Standard Variable Rate is likely to reflect the current cost of funding mortgages which remains significantly higher than the rate set by the Bank of England. The collective bleatings of the government and the press do nothing to change this fact.

What does this mean? For those coming to the end of their mortgage deal, sitting on the lenders Standard Variable Rate may now not seem such an attractive option.

So how is this likely to affect those currently looking for a new mortgage?

Well, the key driver to what rates will be on offer to you will be how big a deposit you have. The recent rate cut is likely to give rise to some attractive new products if you are lucky enough to have a 40% or 25% deposit. New products will be released by the lenders over the coming days.

For those with deposits of 15% or even 10%, the recent rate cut may only have a marginal effect on the products available to you. Indeed, it seems perverse that shortly after the last dramatic rate cut, the interest rates offered to those with a 10% deposit actually increased!

So the key driver as to how the rate cut is likely to affect you...

If you already have a mortgage linked to the Bank of England, you are a winner!

For those of you looking for a new mortgage, the reality is that the size of deposit you are able to offer will affect the interest rate you will be charged. New offerings will be issued by the lenders over the coming days. Those with a deposit of 25% of more may see some new products on offer. Those with a deposit of 15% or less are unlucky to see significant changes in the rates on offer.

Oak Tree Mortgages are of course on hand to advise you of the latest mortgage interest rates as an when they are released by the mortgage lenders www.oaktreemortgages.com

UPDATE 5th December 2008

Here's a turn up for the books... One of the major mortgage lenders has just lowered the rates on their entire range of products at all loan to values, including the 85% and 90% loan to value range. This is good news for anyone considering buying with a smaller deposit and reflects the decrease in the interbank lending rates over the past couple of weeks