michael sterios asked:


The Bank of England has slashed the Base Rate in previous months to an all time low. The reasoning behind this was to alleviate some pressure on current home owners and to help rejuvenate the financial economy hoping the banks would begin to lend money again. It is still too early to tell if the drastic measures of the Bank of England were necessary, but the short term effect show okay results.

For those individuals that have a variable, or floating, rate mortgage, the reduction in base rate will increase their cash flow significantly. If you have a £500,000 mortgage and were paying 1% above the Base Rate, your mortgage payment in September 2008 would have been £2997. In June 2009, your mortgage payment would be £1,725. The change in base rate will save you £1,272 per month in mortgage payments.

The Bank of England was hoping that the savings in mortgages would help consumers spend the saved money in other areas, such as the automobile industry or the retail industry. Unfortunately, statistics have not shown a considerable increase as of yet. Most experts believe that it is because people are concerned about the future and are saving their money. Unfortunately, the low base rate means that savings accounts are paying practically nothing in the way of interest.

While the base rate has helped those on a variable rate, it has made those people with a fixed rate mortgage look into remortgaging their property. Fixed rate mortgages, while safer in a time of rising rates, are not nearly as attractive looking right now, in this time of decline. As mentioned previously, with a savings of potentially over £1,000 per month, it is worth it for those on a fixed rate mortgage to seriously consider looking into remortgaging.

It is an uncertain time and the economy is still struggling, but no one knows how low the Bank of England is willing to cut the Base Rate. As of June 2009, it can not go much lower. Even more caution is given to thinking about when the Bank of England will raise rates. This is more concerning to individuals with variable rate mortgages. The unknown nature of the rates market is what makes it so frustrating, yet so exciting.

Once the rates begin to rise, more people will want to obtain a fixed rate mortgage, so that their mortgage payments do not start to increase every month. It is knowing when to make the change that is the big gamble. If you make it too early, you lose out on taking advantage of extremely low rates. If you make the switch too late, your fixed rate will be higher.

Currently the low base rate is affecting the remortgage area of the UK mortgage market the most. It is allowing those on a fixed rate to take advantage of a lower variable rate. Until banks begin to lend significant amounts in the consumer market arena, the effect on new mortgages will not be seen.



Wilma

Stephanie Larkin asked:


When you get a mortgage, one of your top priorities should be shopping around for the company that has the best interest rate offer. What you’ll be offered from one company to the next will vary, depending on your specific circumstances. However, you can also find the best interest rates just by studying the mortgage market. You can use the following tips to time it so that you’re getting the lowest interest rate possible.

Tip #1: Study the market in terms of cycles.

When it comes to real estate, everything about property moves in cycles. The prices of real estate and the mortgage interest rate cycles are not always in sync, simply because they are not 100% dependant on one another, but the concept is the same - what goes up must come down. The opposite is true as well. If interest rates are sky-high right now, it is only a matter of time before the federal rate is cut to decrease foreclosures and entire people to buy homes. If interest rates are really low right now, it is only a matter of time before that bar is set a bit higher so that banks can make more money.

Study the cycles in the past ten years. You should see a regular up and down wave and by using that graph, you can figure out where in the cycle you are currently. Try to time your real estate purchase so that you are buying when the interest rates are still very low.

Tip #2: Pay attention to politics.

Whenever there is a new political leader, he or she makes promises regarding money and interest rates. While some never follow through on these promises, others do. If you want to time the market so that you get the bet mortgage rate possible, be aware of these interest rate proposals and when the election will be held. If they’re proposing to cut the rate (or do things that will make it naturally lower), you might want to hold off on your purchase until after they re elected. This is always a gamble, but it might be one worth taking.

Tip #3: Make market work for you no matter what.

One of the great things about the real estate mortgage market is that you can make it work for you, even if rates are high right now. If you can’t wait to make a purchase, go with the higher interest rate, but choose a balloon mortgage option or choose an option that has you paying out over the course of a long, long time. That way, you’ll pay as little as possible right now but when the rates are lower, you can refinance.

Refinancing isn’t cheap, so you don’t want to do it often. In fact, it is a good idea to wait until interest rates go very low and then refinance just once during the life on your loan. Try to lock in that low, fixed interest rate when you can, making sure that the option to refinance is available to your when you first sign the agreement for the mortgage.

Tip #4: Work with a mortgage professional.

A third party can help you figure out everything having to do with mortgages. Although this is an added expense when you’re applying for a mortgage, by working with a mortgage professional, you really can find the best options for you. A mortgage professional, after all, is dealing with interest rates and other issues every single day. Find someone who is good at his or her job and you’ll be able to find the best rate for you at the best time for you.

Remember, even though it is important to do your homework and watch the mortgage market, the very best way to get a good rate on your mortgage is to be an excellent mortgage candidate. That starts with making sure that you have a clean credit history. Pay off all of your past debts and make sure that your credit history is free from all errors. In addition, take some time to figure out your debt to income ratio. If that is too high, you won’t be approved for a loan no matter how good your credit score may be.

Basically, a mortgage lender offers you a lower rate if he or she can be more certain that you’ll repay your debt. Yes, the mortgage market has something to do with it, but by following the tips above and making sure that your credit history and income is on par, you can be sure to get a great interest rate.



Allen