Bad Credit Mortgage

Borrowers warned not to rush in wake of interest rate hike

Leading mortgage lenders have warned against the temptation of fixed rate deals, in the wake of the Bank of England's interest rate rises.

Those seeking bad credit mortgages or lifetime mortgages might opt for a deal where interest rates were guaranteed to remain the same over time. This is as opposed to a tracker mortgage, which would correspond to changes in base rate as governed by the Bank of England.

Interest rates went up to 4.75 per cent last Thursday, but Ray Boulger, spokesman for independent mortgage provider Charcoal, told Reuters that this it was not necessarily a good idea to go for a fixed rate loan: "If base rates are going to go above five percent and stick there for a while, then it makes sense to take a fixed mortgage.

"But if it is not going to go over five percent, and I don't think it will, then a tracker mortgage makes far more sense," he continued.

Mortgage lending reaches new high

New figures show that gross mortgage lending rose to a new record high of £32.2 billion last month, up from £25.7 billion in June last year. The Council of Mortgage Lenders (CML) statistics demonstrate strong consumer demand for the whole range of homeowner loans, including bad credit mortgages and lifetime mortgages. May had also been a record month for the market, with gross mortgage lending reaching £29.1 billion. The 11 per cent monthly rise in June was widely expected because it is traditionally the month when the financial aspect of spring buying activity kicks in. "Today's figure reflects the seasonal rise in house buying, strong house price growth and high levels of remortgaging activity," said the CML's director general, Michael Coogan. He also noted that particular strength in London was also adding to the overall picture and predicted high lending figures in the coming months.

Low rates forcing mortgage fee rises

According to a report from MoneyExpert.com, the cost of applying for a mortgage has risen by almost a quarter in the last 12 months alone. The research suggests that mortgage lenders are trying to remain profitable whilst at the same time provide market-leading products to customers when even the rates on bad credit mortgages are relatively low. The average fixed-rate home purchase loan arrangement costs £494, up 22 per cent, MoneyExpert.com says, while the arrangement fee for a discount mortgage currently stands at £407 – an increase of 15 per cent from 12 months ago. "Borrowers need to budget for application fees when they take out a mortgage," said Sean Gardner, MoneyExpert's chief executive. "What you believe is a cheap deal saving you, for instance, £100 a month won't look quite so good when you add on application fees." Mr Gardner noted that because the base rate of interest had remained unmoved for almost a year, mortgage providers were looking at new ways to maximize their profits on fixed-rate products.

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