Secured Loan or Re-mortgage, The Balance of Power.
Application fees on the best buy fixed-rate mortgage deals have nearly doubled in the past year, according to current analysis.
During the last 12 months the five most competitive two year fixed deals’ fees have increased from 998 to 1,500. Three year fixed deals’ fees have also increased from 575 to over 1,100.
Last October the Bank of England base rate was 5.75% and the average rate amongst the best 3 year fixed rate mortgages was 5.84%. This has gone down to 5.65% which is expensive comparatively speaking. Two year deals were at 5.68% and they have only gone down to 5.57% in the same time period.
The recent, very high profile, problems in the banking and mortgage industry have meant that lots of people are jumping the gun a little and opting for the lowest interest rate deal they can possibly find. They should also consider the fees associated with these lower rate loans as when added together over a two or three year deal these are working out to be much more expensive.
There could be a nasty shock when it comes to the fee which is charged as they have surely increased beyond proportion during the past year. What people should focus on is the true cost of their loan by taking into account fees as well.
Lenders in the current financial climate are taking a much tougher line but there will still be lots of very good deals available, unfortunately largely for people with lots of equity in their home and a strong credit rating.
With Clients wishing to raise capitol intermediaries should now be changing their strategies for raising this money in light of the credit crunch. Also changes in the Consumer Credit Act have come into force and this means that a secured loan could probably be a better option than re-mortgaging.
All secured loans for any residential purposes, under the new legislation, now come under the Consumer Credit Act. This means the client has to have a compulsory cooling off period. This has obvious advantages in that the client doesn’t feel under such pressure. If you also consider that with a secured loan there is no valuation fee, no conveyancing and no booking or application fees it’s pretty obvious that secured loans are a much better option in some cases than re-mortgaging. Even early repayment charges have a ceiling of two months interest (depending on when in the month the borrower informs the lender).
So if you’re tied in to your mortgage provider and wish to restructure some finance or raise money for a project then a better alternative to a re-mortgage could be a secured loan. Given the protection of the CCA and the lack of any upfront fees backed up by a simple one month’s interest to redeem a secured loan, clearly they are significantly, cheaper, easier to arrange, more transparent, and possibly more accessible than a re-mortgage.
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