Mortgage Rates Could Go Up Even Without An Increase in the Base Rate
The recent contagion in the US sub prime mortgage market has led some commentators to think the BOE will probably hold base rates at 5.75% to help the credit markets out.
Normally this would mean that mortgage rates will not rise further.
However, there is a nasty side effect to the credit crunch which means that if you have a mortgage with Northern Rock or another lender which is heavily reliant on the wholesale markets to raise funds, its still likely that you could see an increase in your mortgage rate even in the absence of any base rate change.
Mortgage Companies Are Suffering
To a greater or lesser extent all mortgage lenders are suffering as liquidity levels in the credit markets have been squeezed.
Rising wholesale funding costs mean that lenders will have to tighten up their own lending criteria, particularly those lenders dependent on wholesale funding. The credit crisis means that the cost of funding is increasing and as most lenders can’t cut margins any more, so the pricing of mortgage products - i.e. the rate they charge you - could be affected.
According to the FT, Mortgage PLC, a subsidiary of Merrill Lynch, has increased rates by around 0.75 percentage points, while Kensington is about to increase rates too.
Other centralised lenders with no access to retail (savers) funds have also closed for new mortgage business. Accrding to the FT, DB Mortgages, Infinity Mortgages and Unity Mortgages all withdrew their subprime mortgage ranges last week.
The problems are less likely to affect those lenders who use funds on their balance sheet rather than securitise their loans and sell them into the wholesale market.
So, shop around. If you are a good risk, there should still be some good deals around.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the buy to let experts and I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property and buy to let book for the last 3 years.
We help you make money in property by showing you and coaching you in the ways that work and which are of minimal risk to you.
I have been a landlord and property investor myself for over 25 years.
At LettingFocus we offer independent unbiased advice for landlords and property investors on a one to one mentoring and coaching basis as well as through occasional group seminars.
MAIN PAGES AT OUR SITE LETTINGFOCUS.COM:
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This blog is updated once a week
Normally this would mean that mortgage rates will not rise further.
However, there is a nasty side effect to the credit crunch which means that if you have a mortgage with Northern Rock or another lender which is heavily reliant on the wholesale markets to raise funds, its still likely that you could see an increase in your mortgage rate even in the absence of any base rate change.
Mortgage Companies Are Suffering
To a greater or lesser extent all mortgage lenders are suffering as liquidity levels in the credit markets have been squeezed.
Rising wholesale funding costs mean that lenders will have to tighten up their own lending criteria, particularly those lenders dependent on wholesale funding. The credit crisis means that the cost of funding is increasing and as most lenders can’t cut margins any more, so the pricing of mortgage products - i.e. the rate they charge you - could be affected.
According to the FT, Mortgage PLC, a subsidiary of Merrill Lynch, has increased rates by around 0.75 percentage points, while Kensington is about to increase rates too.
Other centralised lenders with no access to retail (savers) funds have also closed for new mortgage business. Accrding to the FT, DB Mortgages, Infinity Mortgages and Unity Mortgages all withdrew their subprime mortgage ranges last week.
The problems are less likely to affect those lenders who use funds on their balance sheet rather than securitise their loans and sell them into the wholesale market.
So, shop around. If you are a good risk, there should still be some good deals around.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the buy to let experts and I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property and buy to let book for the last 3 years.
We help you make money in property by showing you and coaching you in the ways that work and which are of minimal risk to you.
I have been a landlord and property investor myself for over 25 years.
At LettingFocus we offer independent unbiased advice for landlords and property investors on a one to one mentoring and coaching basis as well as through occasional group seminars.
MAIN PAGES AT OUR SITE LETTINGFOCUS.COM:
THE HOME PAGE OF THIS BLOG click here: Blog
THE HOME PAGE OF OUR MAIN SITE click here: LettingFocus Home Page
NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors:
Next Property Investing Seminar and Networking Event
We have GREAT OFFERS on a range of products for landlords too, click here: Services and Products for Landlords
For general info on our SEMINARS AND CONSULTING click here: Property Seminars, Networking Evenings and Consulting
ONE TO ONE CONSULTING click here: Property Consulting
CLIENT TESTIMONIALS from past customers click here: Testimonials
BUY THE BOOK click here: Buy the Book at Amazon
Have you seen this article on buying agent and property finders:
BUYING AGENTS and PROPERTY FINDERS
To JOIN our Free QUARTERLY NEWSLETTER simply send an email to david@LettingFocus.com - Please note we WILL NOT send spam or sell our mailing list to advertisers!
IF YOU HAVE A SITE WHY NOT LINK TO THIS BLOG OR OUR WEBSITE?
Selling services to landlords and property investors and have a national coverage? You could be a partner, please get in touch!
Copyright of Blog: David Lawrenson 2009. This blog is updated roughly once a week usually on a Monday or Tuesday.
WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
Over on the right hand side under all the previous blog entries you will find a button which says “Site Feed.” Simply copy the site feed link into your News Reader or News Aggregator.
If you have a website & are thinking of reproducing material here, that’s fine but we DO require a link to the blog to be included, including also all the links in this section. (The full article including all links must be available to ALL VIEWERS of your site and not restricted.)
TO VIEW RELATED POSTS select a “Category” at the bottom of this page.
WANT TO ADD A COMMENT OR VIEW OLD COMMENTS?
To add a comment to this post, simply click on “link to this post” to add your comment and to view comments of other people. Copyright: David Lawrenson 2007.
This blog is updated once a week
Labels: buy to let mortgages, mortgages, sub prime mortgages
This entry was posted by lettingfocus, on
Wednesday, August 22, 2007.
