Property Crumble

5 year fixed rate mortgages have improved since we last tested the mortgage market one month ago.

The Woolwich has reduced its 5 year fix by 0.2% but is maintaining the 70% LTV (loan to value) ceiling.

In addition a number of new products have been launched into the market setting the median competitive rate at 5.49%, the same as the Woolwich, but at a slightly higher LTV of 75%.

The fact that the Newcastle has launched below 5% can be taken as a sign that banks are willing to squeeze margin to gain business, which is a sign of the mortgage market returning health rather than a rapid drop in 5 year interest rate forecasts.

Nevertheless, the number of new entrants is a sign of increased confidence in the direction and level of long term interest rates and that expectations are that they will be slightly lower than previously forecast. Therefore we are reducing our forecast of UK base rates to 3.75% within the next 18 to 24 months.

Here is the data

4.99% – 5 year fix at 75% LTV by Newcastle – available to all home buying borrowers

5.49% – 5 year fix at 75% LTV by Abbey – available to all home buying borrowers

5.49% – 5 year fix at 70% LTV by Woolwich – available to all home buying borrowers

5.88% – 5 year fix at 75% LTV by Nationwide – available to all home buying borrowers

6.49% – 5 year fix at 90% LTV by HSBC – available to all home buying borrowers

All mortgages carry a set up/ admin fee of around £1,000.

To summarise the increased availability and improved flexibility of loans should keep the property market moving this winter and moderate any price decreases or keep prices relatively stable.

If the next upward step in interest rates is delayed until at least spring of 2010 then by this point any modest interest rate move is unlikely to have an effect on property prices.