A half per cent cut in interest rates will have little or no effect on the availability of mortgages for those looking to buy, according to a leading independent Birmingham broker.
Commenting on the expectation of at least a 0.5 per cent reduction by the Monetary Policy Committee on Thursday or before, Joyce Coakley, managing director of MCEdgbaston said it would only help those who already have a mortgage.
The stock market rallied at the end of last week on the back of an expectation of a cut following the cut in the US that saw interest rates down to just one per cent and Gordon Brown during his tour of the Gulf states said that conditions were right for a cut although would not go as far to say he expected to see one.
Speaking at a seminar on finding ways through the present mortgage maze, Mrs Coakley said that despite the fact that the fall in house prices make it a good time to buy, there are any number of obstacles to overcome before a mortgage offer is likely to be made. Lenders have taken the stance that if they are going to make an offer it will only be fixed rate deals at hiked-up rates over long terms”, she said. “We have seen some lenders in the last few days, increase their tracker rate deals by half a per cent in anticipation of an interest rates cut.
“For the few lenders that offer any type of deal on a 90 per cent loan on the value of the property, most are not offering tracker packages so any drop in rates will not be passed on. Current deals vary up to 8.19 per cent and normally tie in the borrower to between five and 10 years.
“The options improve only at 75 per cent loan to value, when more lenders are offering more attractive tracker and fixed rate deals, but there are not many who can afford a 25 per cent deposit”.
Ms Coakley says that re-mortgage options are equally challenging for people at the end of existing deals.
“The only options are to remain on the current variable rate of around seven per cent, which optimistically will reduce in the near future, or re-mortgage at another long-term fixed rate
“It makes sense, with fixed rates at around 6.44 per cent, to stay with the existing lender until lenders in general offer more attractive deals.
“Again the whole proposition changes at 75 per cent loan to value. That will encourage people to move to a lender offering reasonable re-mortgage tracker rate deals., And as far as buy-to-let investors are concerned they are still affected because lenders are still unwilling to offer deals above 75 per cent even though the rising number of repossessions present excellent investment opportunities”.