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Fixed Rate Mortgages IncreasingWith the recent credit crunch in the US and the UK a lot has changed in the last year. Now the cost of borrowing money for a home has increased. The mortgage lenders are changing how they are going to allow a person to get a loan. There are 14 lenders that have seen an increase in the costs for fixed rate deals. These costs have risen over the last two days. Some of the banks seeing the increases are Halifax, RBS, and Birmingham Midshires. There are also several building societies that have been seeing these increases. Mortgages brokers that work at Chase De Vere said that average charge for a two year deal is now 6.75 percent. This is for a 90 percent loan. Added to the increased costs of the fixed rate mortgage is the taking away of some of the products. A lot of the mortgage products you would have seen a year ago are no longer on the menu. Some figures that were released by the Council of Mortgage Lenders show that the fixed rate deals are becoming more popular in recent months. In April for example 59 percent of the new loans were fixed rate mortgage deals. The Council of Mortgage wants to warn lenders though. The increased price for these loans has also seen an all time high, which means that the rate is going to be increasing even more because of the current financial market. If you are buying a house you need to be aware of what could happen. In order for a home to be bought the price has to be in the range you can afford. This means you need to have 10 percent at the very least for a deposit on the house to get a 90 percent loan. For those buying this can be a good thing, as it is driving the housing prices down. However, you do need to keep in mind the higher interest rates we have seen in the last couple of months. For those selling their home you may be in a bit of a bind. Since the home prices are having to lower for the affordability of the loan you may not get the value from the home you are looking for. A bit of good news is that some lenders have been putting up the cost of the loans in order to get borrowers who may be able to afford a smaller deposit, in order to sell the house for the price the sellers need out of it. Those who are borrowing 75 percent or less of the value are also taking a smaller risk with the lenders. This is a good thing since the lower risk is going to allow for a better loan price overall. The lending criteria are still restricted which means it can be difficult to get a 95 percent mortgage from some companies like Abbey. They are making their 95 percent loan at 7.04 percent. That means you need on average about 2,499 pounds for the arrangement fee up front in order to get the mortgage. The problem has always been a lack of savings and the credit crunch is making this even worse. A lot of the residents trying to get a new home don’t have any savings. They have had to use their money in other ways or they just didn’t save up because of the 100 percent loans on the market at the time. The fixed rate bonds are also high, at 7.1 percent which means a consumer must put any savings they have away for a longer period of time in order to get the bonds to pay off in the future. These bonds could have been purchased now or earlier, the fact remains that the interest rate is not sterling. However investing is still something you might want to consider if you can’t yet afford your own home. Back To Financial News June 2008 100 Percent Mortgages |
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