Does Base Rate Cut Mean That Lenders Will Cut Rates?
Many consumers may be looking forward to seeing their borrowing costs fall as a result of the recent base rate cut, with senior officials from the government having announced earlier this month that they were shaving 0.5% off the base rate in a move to aid the flagging economy, increase confidence amongst consumers, and ease financial pressures amongst consumers. This was news that was greeted with joy by some industry officials and most consumers.
Most people assume that if the Bank of England cuts the base rate then lenders will also cut their borrowing rates by the same amount, but whilst this may have been true once it seems that it is no longer the case. In fact, a number of industry officials have expressed concern that there seems to be no connection between base rate movement and interest rate movement from lenders any longer, which could make things very difficult for borrowers
Following this latest base rate cut a number of lenders did react quickly and say that they were planning to pass on all of the rate cut to borrowers, and this means that some consumers will be able to cut their borrowing costs following the base rate cut. However, it is not all good news, as some lenders have decided that they will reduce their rates by only a fraction of the amount of the base rate cut, and others have said that they will not be reducing their interest rates at all.
Anyone that is looking for a new loan may find that the interest rates being charged are lower depending on which lender they go to, and those with existing loans may find that their rate is going to be cut if they are on a variable rate loan. Those with fixed rate loans and mortgages will not see any change in their repayments, as the interest rate is fixed for a period of time, and is therefore not affected by any changes in the base interest rate
It is best to take matters into your own hands if you want to save money on your borrowing costs following the base rate cut. As an existing borrower you can shop around and look for more competitive rates on loans, mortgages, and credit cards, and as a new borrower you can compare different financial products from a range of lenders in order to find the most competitive deal and get the most affordable repayments.
For existing mortgage holders it is worth remember that if your lender does not pass on the rate cut then it may be worth remortgaging and going with a lender that has passed the interest rate cut on. However, bear in mind that there could be arrangement fees and other upfront costs involved, so weigh up the costs to check whether the switch is going to be a viable one
Decrease Your Mortgage Interest
There is more to taking out a mortgage than just borrowing the money you need for the cost of the home. The various interest rates charged by mortgage lenders will seriously impact how much you pay over the term of the mortgage. This is the cost of financing the home and in the first few years of the mortgage, the bulk of your payments will be for interest with very little coming off the outstanding balance. You should search online to find what the interest rates are from the various lenders and read the information they have available about the mortgage process
When you have large enough deposit to place as large enough deposit on your mortgage, you will lower the amount of money that you need to borrow. Having an amount of money is also one way of ensuring approval for the loan as lenders know you do have a stake in making sure you do meet your monthly obligations. Reducing the amount you borrow will also result in lower interest rates so it won’t cost you as much to have a mortgage. There are lenders who will approve mortgages without a down payment, but they require you to have insurance cover for the amount of the usual down payment. This will increase your monthly payments in the premiums you have to pay for such cover.
If the interest rates are high at the time you take out the mortgage, choose a variable rate mortgage for a short term. In this way, when the interest rates go down, you can then lock in at a fixed rate for a specific term and know that your monthly payments will remain the same for that length of time. Opt for a mortgage that allows you to make extra payments once or twice a year. In such a plan, you can make a repayment of any amount in addition to your regular mortgage payment to cut down on your outstanding balance and therefore the amount of interest you pay in subsequent months.
Since the amount of interest you pay on your mortgage is based on your outstanding balance, you can cut down on this cost of your loan and pay off your mortgage in a shorter period of time by opting for bi-weekly payments. Instead of making your payment once a month, you make payments every two weeks. This does mean you make 26 payments a year, but it will help you to own your home much sooner.
The length of the term you choose can determine the cost of your mortgage. The shorter the term you choose will help you pay off the mortgage quickly. If you can afford to have higher monthly payments, this is one option you can use to save money on the cost of borrowing.
If you have funds available, it is better to have a deposit to place on the mortgage. This will reduce the amount of money you have to borrow to purchase a home. It will also mean that the lender will not require you to take out extra insurance cover on the mortgage to include the amount that you should have paid in the down payment
How To Improve Your Chances Of Getting A Great Mortgage Quote
One of the most important financial commitments that you are ever likely to make will be your mortgage, and the responsibility and risks that come with a mortgage make it vital to ensure that you have the right mortgage loan for your needs and your pocket. The current financial crisis that is affecting most people means that it is more important than ever to ensure suitability and affordability when looking for a mortgage, so you need to make sure that you bear a number of things in mind when looking for a mortgage loan
It is surprising how many borrowers simply assume that the best package that they will be offered is bound to come from their own bank, and with this in mind many do not take the time to look anywhere else other than with their own bank. However, in the majority of cases you will not get a better package with your bank than any non-customer would get, and you could even find that newer customers get a better deal than you from your own bank, because your bank may be focusing on bringing in new custom
You should make sure that you always shop around for a suitable and affordable mortgage. By all means check with your own bank to see what they can offer, but also take the time to look at other mortgage deals with other lenders. This is because the interest rates and terms on mortgages can vary widely from one lender to another, so it is well worth doing your research to see what is on offer
Speaking to an experienced mortgage broker is another way of getting a good package on a mortgage, as many brokers will have access to a wide range of lenders that cater for your needs. However, when you speak to a broker as if they cover the whole of the market rather than just a portion of it, as a whole of market broker will boost your chances of getting a suitable, competitively priced mortgage
You should always make sure that you compare different areas of any mortgage loans that you are considering, as this will also help to ensure that you get an affordable mortgage loan. Look at areas such as the typical APR charged on the mortgage, the repayments periods offered, the eligibility requirements, and the terms of conditions of the loan, as well as any upfront charges that are applied such as arrangement fees
Ask any lender that you are considering taking a mortgage through to quote you an APR and work out how much you will be paying each month on your mortgage, as well as any additional fees that form part of the mortgage deal. This will enable you to work out exactly how much you will be paying on your loan
Also, if you are taking out PPI, or payment protection insurance cover, then you should remember that this does not have to be taken out with any particular lender, and you can shop around in order to save money on the cost of your protective mortgage cover
Putting A Value On Your House
Just about a year ago many homeowners in the UK knew just what the value of their properties was, having tracked soaring home prices that had been rocketing for the past decade. However, over the past year there has been a turnaround in the housing markets, with property prices plummeting month on month according to reports, and this has left many homeowner unsure as to what their home is now worth.
There are many reasons for the falling prices of houses for homeowners, mainly being the current credit crisis, which will new house buyers off the market as there are no online mortgages available anymore.
Homeowners decide to try and find out the value of their house for one of a range of reasons. Some may simply be curious and want to know what their major asset is now worth; some may be concerned about falling into negative equity and want to check how their home price has been affected. Of course the main reasons why people try to find out the price of the property is either to put the house on the market for sale or because they are thinking about taking out a secured loan against the property and therefore need to find out the equity levels.
It is vital in the current climate to try and get the most accurate valuation on your house so that you know what the property is worth following nearly a year of house price drops. You can get an estate agent to come out and provide you with a valuation on the property. However, there is a risk that you could end up with a valuation that is either too high or too low depending on whether the estate agent is looking to get increased commission on the sale of the property or whether the estate agent wants to try and get your house sold as quickly as possible.
One solution to help you to get a more accurate idea of the price of your home is to get a valuation from a number of surveyors from different estate agents in your area. You can then see whether the valuation from each of the estate agents is around the same, enabling you to enjoy the peace of mind that the valuation that you receive is pretty much on the mark. In order to get a truly independent valuation from each surveyor you should not tell them that you have already had the property priced by another agent.
You can also help yourself further by doing your homework. All you need to do is check the prices of other houses for sale in your area that are similar to yours and see whether they are going for the same sort of price that the estate agent has priced your house at. By checking out the prices of other houses that are already for sale you can get an even better idea of the true value of your home.
Homeowners should be prepared for disappointment when getting a valuation, as the chances are that you home is worth a lot less than it was this time last year. However, try to avoid inflating the asking price if you are putting the house up for sale as otherwise you could find that your property is simply overpriced and will not sell.
If your property does not sell at your desired price and you still have equity in your home, then homeowner loans could help to improve your current home removing the need to move. For more information on property prices and finding out your properties worth read the articles on try and buy your next home