Loan and mortgage rates drop
June 30, 2011
For many borrowers in the UK there has been some welcome news recently, after it was revealed that both mortgage and personal loan rates have been falling. For those that are taking out mortgages, thinking of refinancing, or wish to take out a personal loan this could mean significant savings on the cost of their borrowing, which is something that many people are looking for in the current financial climate.
The base interest rate in the UK still stands at its record low of just 0.5 percent, where it has been for well over two years now. The good news for consumers is that with loan and mortgage rates now dropping further, borrowing becomes far more affordable. Mortgage rates are said to have dropped to their lowest level in twenty three years according to reports. Many person loans are now offering rates of below 7 percent.
Figures show that the average rate on a loan of between £7500 and £15,000 is 8.6 percent, but due to individual lenders dropping their rates to compete more fiercely there are some very good deals about with these mid-range loans available for under 7 percent. However, interest rates are much higher on smaller loans, with the average rate on a loan for £3000 coming in at an average 19.1 percent.
This means that those considering a personal loan will need to determine whether they could actually be better off taking out a slightly larger loan in order to get a far more competitive interest rate than a small loan with high interest rates.
One finance expert said: “For anyone looking to carry out home improvements, a personal loan is a good choice - particularly for borrowers who are prevented from increasing their mortgage due to loan to value restrictions. Let’s hope other banks and building societies are forced to follow suit to maintain their slice of the market.”
Fears over home repossessions exaggerated
June 28, 2011
The governor of the Bank of England, Sir Mervyn King, has recently voiced his opinion about rising fears over repossession levels in the UK, branding them as exaggerated. Many are concerned that the UK is in line for a wave of repossession, but King has said that this is something that has been overdone, as interest rates are set to remain low for some time to come.
The governor of the central bank said that now was not the time to increase the base rate, adding that even when interest rates did increase there would be an interim period before this was reflected in borrowing costs. His comments come after the head of UKAR claimed that when interest rates went up there would be a ‘tsunami’ of repossessions across the UK.
Mr King was addressing the Treasury Committee when he said that there was no planned rate increase at the moment because the economy would not be strong enough to cope with it. He added that a rate rise would only be considered if the economy was stronger and unemployment figures were falling rather than increasing. He also said that borrowing costs for consumers were unlikely to increase at the same rate as the base rate.
King said: “The reason we would raise interest rates would be in the context of a much stronger economy with unemployment falling rather than rising.” He added: “It should also be the case that the interest rates that borrowers face should not rise as fast as the rise in bank rate.”
However, in a recent interview Richard Banks, the chief executive of UKAR (UK Asset Resolution), said that the company was being proactive in contacting customers to ensure that they would be keeping up with repayments because of fears over interest rate increases making repayments unaffordable.
He said: “You can see if you don’t do something about it, you can see a tsunami. If you don’t get into the hills you could get drowned by this. If you don’t manage this properly it could get very messy.”
Paying off credit cards with a loan could be beneficial
June 18, 2011
It has been suggested in a recent report that many people in the UK that have high levels of credit card debt could actually benefit by paying off their high interest credit card debt with a lower interest personal loan. Around one third of people in the UK have admitted that their personal debt levels have increased over the past year and for many of these people the main burden of this debt is high interest credit card debt, which is clocking up huge amounts of interest.
With credit cards charging such high rates of interest, with an average of 18.43 percent despite the rock bottom base rate of just 0.5 percent, many people will be paying these cards off for years if not decades if they are only able to make small repayments towards clearing the balance. Over that period of time they will also pay out a huge amount in interest.
It is suggested that rather than do this, consumers may be better to search out a competitive personal loan and they use it to repay the credit cards. The loan will be taken over a set period of time with a set rate of interest. Consumers can therefore be more structured with their repayments, knowing exactly how much to pay each month, when the loan will be cleared, and how much interest they will pay over the term of the loan.
One official said: “There is no need for consumers to bury their heads in the sand when it comes to their finances and by taking steps to reduce personal debt, many of these problems can be nipped in the bud early on, before they escalate out of control. Trimming down household budgets and ensuring they are paying as little as possible for all their financial products can really help to free up some cash to pay down debt, and should be the first port of call for anyone who is struggling. If you are in the fortunate position where you are able to consolidate your debt, an interest free credit card would always be a good solution. Alternatively, a personal loan could be an option if you want fixed repayments and pay down your debt over a set period of time. For those in more serious trouble, I would advise seeking help from one of the free debt advice charities who can help.”
Rents to continue going up
June 14, 2011
A recent report that has been released by the Royal Institute of Chartered Surveyors has shown that rents in the private sector are continuing to rise, which could result in many non-homeowners being frozen out of the property rental market as well as the mortgage market. For some time, first time buyers have been struggling to get a mortgage in the current climate and many have had to turn to private rented properties. However, this soaring demand for rental homes has driven prices up to a point where some people may no longer be able to afford the rent on a property.
The figures from RICS showed that in the three months to the end of April there were 42 percent more surveyors that saw an increase in property rental prices compared to those that saw a fall in prices. The figures also showed that there were 33 percent more surveyors that were expecting property rental prices to continue rising over the coming months compared to those that expected them to fall.
In April property rents reached a record high, with the average rent reaching a staggering £692 per month. In London and the south ease the property rental price hikes have been even more severe. Many people that are unable to get a mortgage to purchase could find themselves in a very difficult situation if they are also unable to afford rent.
An official from RICS said: “Although we are beginning to see more mortgages aimed at first-time buyers, many potential homeowners are still restricted from getting a foot on the property ladder, leading to increased demand in an already oversubscribed rental market. There has been a small uplift in supply, but the imbalance between demand and availability can only mean rents will continue to rise.”