29 May 2010 / by Rachael Stiles
Mortgage rates have fallen, criteria have loosened, and yet borrowers remain wary of the housing market, says Moneyfacts.co.uk.
Borrowers are still not being tempted, the financial information website has found, by the lower mortgage rates and easier lending criteria which should be making the struggling market look ripe for a resurgence.
While some industry experts have criticised mortgage lenders for not doing enough to pass on more savings to borrowers as the base rate fell to a record low of 0.5 per cent last March, customers have nonetheless benefitted from some rate cuts.
According to market analysis from Moneyfacts, the average two year fixed rate mortgage is currently at the lowest level since the base rate fell to its current depths, falling from 5.21 per cent to 4.61 per cent.
Five and three year fixed rate have also fallen, the research shows, from 5.61 to 5.30 per cent, and from 6.24 to 5.74 per cent.
Consequently, monthly repayments on two, three and five year fixes have fallen by £52, £28, and £46 respectively, based on a £150,000 repayment mortgage.
Some borrowers have seen their monthly payments fall, and have used the extra to pay off their mortgage more quickly – a “wise move,” says Moneyfacts.
But many borrowers are resisting the lure of lower mortgage rates and easier lending conditions such as higher loan to values.
Darren Cook, spokesperson for Moneyfacts.co.uk, tries to make sense of what is keeping borrowers away from what “should be a perfect platform for a resurgent mortgage market.”
“Lenders are competing for a reducing amount of business and there is little incentive for borrowers to remortgage to another mortgage deal,” he explained. “Mortgage revert rates as low as 2.50% have meant borrowers should have taken the wise decision to overpay their mortgage.”
However, borrowers who have benefitted from falling interest rates and monthly repayments should prepare themselves for when interest rates inevitably start to rise, Mr Cook warns.
“A spiralling inflation rate, which could be aggravated by the predicted rise in VAT, can only point towards a Bank base rate increase sooner rather than later,” he predicts.
© Fair Investment Company Ltd