Interest in buying property has picked up since the start of the year as buyers try to match cheaper property prices with lower mortgage rates.
Interest rates are at historic lows of 0.5% and likely to stay there for some months as the Bank of England concentrates on quantitative easing rather than cutting rates further. Some £150bn has been allocated to this asset purchase scheme and initial results are looking encouraging.
With March’s UK CPI inflation at 2.9% and RPI falling to -0.4%, there has been much talk of deflation and the potential need to raise interest rates to counteract this. But the RPI fall is largely due to the drop in mortgage interest rates and underlying inflationary pressures still exist so a rate rise at this point is unlikely.
Mortgage rates continue to be relatively cheap, particularly for those with sizeable deposits. Obtaining finance is not an issue if you are the ‘right sort’ of applicant, with a deposit of 25 or 40% – and have a squeaky clean credit history. There has been further easing in recent weeks with some of the best deals available to those with a 25% deposit as opposed to 40%.
There remains a lack of funding for those with a 10% deposit or less, which means a dearth of first-time buyers unless they can call on the ‘Bank of mum and dad’ for assistance. Those deals that are available at this loan-to-value carry a significant premium on the rate.
Fixed rates are proving popular as there is no guarantee that interest rates will remain low forever. Base-rate trackers may look cheap but are increasingly priced at a significant margin above base rate – and once it starts rising, the pay rate may not look so attractive. Longer-term fixes are competitively-priced, with five-year fixes available from less than 5%.
Remortgaging is trickier with lenders’ standard variable rates or ‘go to’ deals proving enticing while interest rates are low. But for those looking for the security of a cheap fixed rate, it may be worth securing one before rates start to rise again.
Private banks remain willing to lend, often with better terms than many high-street banks. This continues to be the best option for many high-net-worth clients, particularly those with complicated income streams, who rely on bonuses and share portfolios, or have considerable assets in property and investments but a relatively low basic salary.
Savills Private Finance has excellent contacts in this area, offering exclusive rates not available direct to those with investable assets of around £500,000. We can also negotiate the rate and fee on behalf of the client. Offshore funding and complicated tax structures can also be catered for, as well as multi-currency lending and deals with no early repayment charges.
For further information, please contact:
Savills Private Finance
+44 (0) 870 900 7762