Mortgage Should Be Secured Sooner Rather Than Later

Homeowners are being advised to secure a mortgage by the end of the year. Although the level of mortgage repayments has fallen of late, there are signs that the rates are rising, prompting experts to issue the warning. Only last week the price of a two year fixed rate mortgage deal increased by 0.16 per cent. This amounts to an extra £228 a year for the average homeowner. At the current rate of increase, homeowners can expect to be paying an extra £1,000 in less than a month. Michelle Slade who spoke for a personal finance website, said: "After a period of relative calm in the mortgage market, lenders are stumbling over each other to increase fixed rate mortgages." She added: "The last time we saw such frantic activity was at the end of June 2008, when the average two year fixed reached a staggering 7.08 per cent. Lenders are quick to pass any increase in the cost of wholesale funding onto borrowers, but are never quite as quick to reduce rates when the cost of funding declines." According to Darren Cook, a mortgage expert at the personal financial website, the rise in rates is an unfortunate result of the present climate. He said: "Any increased cost to lenders in arranging the funds on the money market is passed on to customers." Adding that, "Lenders are also taking an increased margin on top as they price their products for risk." He continued: "We hope that this recent downturn is not short lived and trust that lenders will play a fair game by reflecting this decrease in the rates that they will have on offer in the next few weeks." First time As the interest rates on mortgages continue to increase, so to do the arrangement fees, these can cost borrowers as much as £3,000 which, combined with increased rates and deposits, end up pushing many buyers out of the market. However the problem does remain that first time buyers find it increasingly difficult to get their foot on the property ladder as they now have to raise a mortgage deposit, which is invariably more than their average salary. The average house price for first time buyers is now around £162,000, with mortgage lenders typically asking for 13 per cent of the house value as a deposit. The average salary for first time buyer is £20,113 a year. The UK's biggest mortgage lender, Halifax currently refuses home loans to people who need to borrow more than 60 per cent of the property's value. "While people are still moving, the increase in the number of people choosing to move between rented accommodations is a reflection of consumers' lack of confidence in the property market and current affordability constraints." Mr McNeilly added: "Potential first time buyers who previously would have been the largest group moving from renting to buying, are now delaying a purchase as an uncertain market and tougher lending criteria is making it harder for this group to step onto the property ladder – a trend that is likely to continue for the rest of 2009"