The fact that Northern Rock is making repayments back to the Bank of England for the bail out loan it received seems, on the face of it, to be good news, though it could prove to be detrimental to the mortgage market as a whole.
It has been suggested that Northern Rock is only able to have overpaid on what it owes to date because it has effectively withdrawn from the mortgage market and has received significant sums of money by calling in the home loans. In the very short term it allows Northern Rock to get ahead on their payments, but in the future this means there is less money available in the mortgage market.
If there is less money available to borrow for mortgage customers then the cost of borrowing can rise further, fuelled by demand outstripping supply. Northern Rock mortgages may well come back into the market in the future but at the moment these are worrying times.
A review of the current mortgage market by Legal and General shows that the fixed rate mortgage is still very popular with consumers despite the recent rate rises they have experienced.
Legal and General have looked at the differences in mortgage choices between Quarter 1 and Quarter 2 of this year, seeing where the key trends are. Fixed rate mortgages fared very well, going up from 35 percent of the market in Q1 to 58 percent in Q2. This was achieved even though interest rates went up, on average, to 6.51 percent from 5.87 percent on the popular 2 year fixed rate mortgage.
The market for mortgages is going to remain very keen on fixed rate products it seems due to the expectation of increased mortgage costs in the future. House buyers want a level of security say Legal and General, something that a fixed rate mortgage provides as the repayment amount will not be affected by base rate changes.
A number of Abbey National mortgages have had their rates of interest reduced it was announced today, though the reductions are very modest.
All Abbey National tracker and flexible rate mortgages are seeing an interest rate cut of 0.05 percent, whilst some of the fixed rate mortgages are coming down by 0.17 percent. The ones seeing these bigger reductions are the safer options for the lender, namely seventy-five percent loan to value mortgages. This means the borrower had to put down a deposit of twenty-five percent. The five year fixed rate for this sort of Abbey National mortgage is therefore down from 5.92 percent to 5.75 percent.
An Abbey National mortgages spokesperson explained that the focus of the lender was to offer choice and value. To this end they have reduced rates on a variety of mortgages as the opportunity has arisen in order to deliver competitive products to their customers.
Find the best rate on an Abbey National mortgage at Moneygossip.co.uk