Questions borrowers need to ask

Apr 19 2008 by Francesca Craggs, The Journal

Colin Heseltine

THE Bank of England reacted like an Olympic torch bearer on the streets of San Francisco by running scared this week, as it announced another rate reduction.

Without even a track-suited Chinese guard for comfort, the bank crossed its fingers and hoped the most recent interest rate cut would have the desired effect.

The Bank has cut the base rate for the third time since December of last year to 5% in an effort to persuade UK banks and building societies to reduce their rates and pass these savings on to their customers.

Many commentators, however, are unsure of the effect this latest rate reduction will have, especially as Halifax has just released figures showing a fall in house prices.

What does this mean for potential and current home owners? The questions borrowers need to be asking are:

When does my mortgage revert to the standard variable rate?

Can I afford my mortgage payment at the increased rate for the whole term of the mortgage?

Am I able to switch lenders for a better deal?

How much can I borrow?

What type of mortgage is best for me?

Interest rates are only one part of the complex situation facing borrowers in the UK. As the “credit crunch” has taken effect, lenders have not only increased their rates but have also tightened their criteria.

In the past, lenders were willing to offer mortgages at high loan to value with little or no deposit, with high income multiples, sometimes more than five times people’s salaries. On the whole, these types of deal no longer exist and where they do the rates are extremely uncompetitive, making them unaffordable for many.

The inherent problem with many of these mortgages is they did not take a long-term view, factoring in the effect of a change in the economic climate.

At HRC Group we assess our client’s financial position and recommend mortgages based on the sound financial principles of long-term affordability and financial prudence. Whether a homeowner or a landlord, it has never been more important to get independent advice in this arena.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Our typical fee for mortgage advice is £350, although the precise amount will depend on your circumstances.

For more information contact Colin Heseltine at HRC Group on (0191) 488-8445.