Lenders cut rates but only well off will benefit from them
October 1, 2008
Over recent weeks a number of lenders have reduced the interest rates on some of their mortgage products, and this has been the result of a drop in swap rates, which are indicative of mortgage interest rates as they are the rates at which lenders lend to one another. With swap rates having fallen a number of lenders have passed on the cut by reducing the interest rates on some fixed rate mortgages.
One official stated: ‘Swap rates - the rates at which banks lend to each other - have fallen by about half a percentage point in the past month, so it is no surprise that fixed rates have started to fall. It is a huge relief to borrowers.’
However, whilst many people may be relieved to hear that interest rates on some mortgages are falling industry officials have stated that the lower rates and best buy mortgages are largely only being made available to those with a high level of deposit, which means that only the well off can benefit. Those struggling to scrape together a larger deposit, such as first time buyers, will therefore find that they are only able to get the higher rate mortgage products in most cases.
One industry official stated: ‘It means the most cash-strapped homeowners with little equity could continue to be penalised with much higher rates, even while the best fixed rates fall.’
Some officials have commented that although interest rates have fallen over recent months and house prices have been falling month on month, upfront fees for buyers seem to have been getting higher and higher.
Many industry officials have predicted that the upfront fees for purchasing property could remain high for some time to come, as the problems in the mortgage market are expected to continue for some time. The level of property sales is also expected to remain low, as consumers struggle with affordability.
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