The Post Office launched a new fixed rate mortgage product on Monday. The new deal has a two year fixed rate of 2.85% but you will need to put down a hefty 35% deposit to take advantage of it and the arrangement fee is £1495. However, the rate is highly competitive and could encourage others to lower their rates.
This new deal comes at a perfect time for house hunters as new data shows that tracker rates increased from 3.54% to 3.56% last month. There are also less mortgage products available in the marketplace due to the lack of competition. Mortgage lenders are still showing reluctance to commit to longer term deals as the outlook for both the economy and the housing market is unsure and the government is struggling to improve liquidity.
Uncertainty over interest rates is certainly taking its toll on the property market. People shopping for a mortgage do not know whether to fix their rate or go for a variable rate or tracker mortgage.
UK mortgage lending companies are also concerned about the publication of the FSA’s new mortgage rules which are set to shake up the mortgage industry to avoid a further financial crisis. Lenders will need to apply even more stringent rules on an applicant’s ability to repay before granting an interest only loan.
The Chartered Institute of Housing has gone as far as to warn that homeownership could become a thing of the past as millions of young people are forced to spend a lifetime renting. Deposits of over £40,000 are unattainable for the majority of first-time buyers and the CIH is calling on the government to do more to help people in private residential housing who want to buy their own property.
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