Here is the news... in English?

The last week has seen a lot of changes in the UK mortgage market. Just as mortgage lenders withdrew the last of the mortgages which only needed a 5% deposit, the Bank of England reduced the base rate by 0.5% to 4.5%, in an effort to get banks lending money again, this is good news for people wanting to borrow money.

 

I won't go into an explanation of the base rate, far too boring. So long as you understand that lenders charge a percentage above the base rate for lending you money, that is why it is relevant to the mortgage market.

 

How is this good news?

Until last week there were only 3 main lenders who were still offering 95% mortgages and because there was so much demand they were charging higher interest rates.  Lenders also found they were being hit with something called a Higher Lending Charge, which is used where loans exceed 95% to insure the lenders against problems, this can add a couple of thousand to your mortgage, in turn making the monthly mortgage payments much higher.

 

Now that a 10% deposit is required there are a lot more lenders with in excess of 100 deals to choose from.  As a result rates and fees are much more competitive, making your monthly mortgage payments more affordable, this with the saving of fees can save you thousands in the first two years.

 

An example of this is shown below, these figures are based on a property purchased at £100,000 over 25 years –

                        

 

*These fees are added to your mortgage.

 

In short the difference in interest between the 5% and 10% option plus £1790 in fees saves you £5006 in the first 2 years.

 

Lets take a quick look at these 'base rates' that everyone keeps harping on about...