The winds of change

This post is over a year old. There may now be updates to the facts stated and the views of the author. Please read with this in mind or check for more recent articles in LIFT-Mortgages.

Back in 2002, I thought it was time for a change in career, so I left my job in the military and decided to try my hand at selling houses. As a result, I ended up spending a few busy years collecting parking tickets as a result of working for Foxtons in Notting Hill. 

At the time the property market was still on the increase and whilst the media and most people were concerned about a property crash, mortgages were easy to come by and rates were reasonable with the Bank of England base rate at 4%, If only we knew what was on the horizon!

With a close friend and the support of a very understanding mortgage provider, I was able to purchase my first flat, just off the Lillie Road in London. A 3-bedroom terraced house for the princely sum of £255,000. The mortgage we had was a 95% interest only, on a tracker rate - we were advised at the time this was the cheapest option.

During 2006 and 2007 whilst I was working at HSBC, most of my clients were selecting lifetime tracker mortgages. These type of mortgage products were 0.5% - 0.25% above the Bank of England base rate, which at the time was 5%. Oh, how these clients benefited during the problems of 2008 and the subsequent years. 

With the complex question of a deal or no deal Brexit on the lips of all my clients, it’s easy to forget what has happened with the property market and how that affects each one of us.

I am often asked by clients what is the expectation of interest rates considering the ever-impending doom of leaving the EU and if I would recommend a short-term fixed rate or a long-term mortgage? The simple answer to that question is that it really depends on your personal circumstances. If the best advice is a 2-year fixed rate, the benefit is the low-interest rate and the ability to get out of the contract after the 2 years with no early repayment charges. The risk is where interest rates are going to be after the 2-year period. If, however, the best advice is a 5-year fixed, the benefits are protecting yourself from interest rate increases for the subsequent 5 years compared to the downside which is the large early repayment charges.

It’s important to remember that what is best for one person may not be best for the next, my job is to make sure the advice is tailored to the client’s individual needs.

You can currently secure a fixed rate mortgage at 1.39% fixed for 2 years and 1.78% fixed for 5 years. This is based on a 60% loan to value. It’s important to say that if the loan to value is higher then the rate will increase.

If you have a case which you would like to discuss, please get in touch for a chat.

Simon Morgan – Latest Blog Posts

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