To Fix Or Not To Fix

Halifax announced their latest house price figures today for September and indicated that prices fell by 3.6% last month.  I'm not sure that this is a pointer towards impending doom as falls were greater in 2008 and general consensus is that prices are inflated and have been for quite some time.  For those wishing to buy their first home though it will be of little or no help that the prices to get onto the ladder are coming down as the lack of funding available for those with smaller deposits is staggering.

I have noticed one or two lenders are offering better deals than earlier in the year on the 80 and 85% mortgage level but at 90% there is a significant jump in the interest rate charged and the number of deals available.  To perhaps put some light at the end of the tunnel for those first time buyers the better deals at the 85% level might be an indication that lenders are looking to improve deals for the higher loan to value (LTV) customers.  I say this because earlier in the year there was a big difference between the interest rates charged at 75% LTV and the deals available above that.  Now the gap is much smaller and with any luck those with 5-10% deposits may be able to achieve competitive deals to enable them to buy a home.

For those with larger deposits or equity in their home then rates do look rosy, with Barclays and Coventry Building Society in particular having extremely competitive deals. Certainly now looks like a good time to consider going for a fixed rate with deals available below 3% making them attractive in comparison with the majority of lenders standard variable rates.  My opinion on interest rates is that we are not going to see a change for a good while yet, today the Bank of England announced their rate was to remain at 0.5%.  Still if the Bank pull a surprise on us then just a small increase will lead to a jump in mortgage payments and with belts being tightened around the country this could have an impact. 

I think the Bank will want to see what effect the Government's austerity measures will have first, in particular the VAT rise starting in the new year.  Further down the road losing Child Benefit will certainly cause some families issues but it's early days there and I feel they may have to review their options on that bit of legislation.  Still with the cost of living set to rise it may be prudent to consider fixing your mortgage payment for a time to help balance the household budget.

Please be aware that the above does not represent financial advice but is merely my opinion.