Review of 5 Year Fix Rates Mortgages – implication for property prices
Review of 5 year fix deals conducted on 7th Oct 09
This is a selection of the best deals:
Halifax – only for existing borrowers and to 75% loan to value (if a primary home – holiday homes get 55%)- and stepped increases. Assumes base rates to rise 1% Sept 10 and a further 0.5% in Spring.
Woolwich – for first time buyers and new customers, 5.69% for the length of the loan up to 70% (holiday homes only 50%).
So, holiday homes are toast – they must now be discounted by 20% against an equivalent property in a centre of employment.
Existing borrowers get favourable deals – first time buyers get much worse – this will, over time, reduce the number of property owners and therefore we can assume that current supply is adequate for the reducing demand.
Base rates will be around 4% within 18 to 24 months. Assuming the spread between the base rate and the mortgage rate of about 150 bps (basis points). Normally, the spread is around 100, but we will assume this will widen as the level of competition in the mortgage market will have reduced sharply.
Property prices are, therefore, going to crumble and there is a short selling window now available.