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has been suggested that Northern Rock is only able to have overpaid on what it owes to date because it has effectively withdrawn from the mortgage market and has received significant sums of money by calling in the home loans.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.
The Nationwide Building Society house price index showed a fall in property prices of 2.5 percent in May, making them almost 4.5 percent lower than this time last year.
Despite the falling numbers, when compared with two years ago house prices are still higher now than they were then. This reflects the dramatic price rises the country has experienced and may make existing property owners feel a little better since they can see that the value of their home is still very strong.
A Nationwide Building Society spokeswoman supported this view, feeling that the price reductions were of limited concern to home owners in the short term. As she pointed out it is only those who bought at the very peak of the prices who may feel a little concerned at the moment, though even then property in the medium to long term has always proved to be a good investment.
Effective from 16 May the Nationwide Building Society will have reduced interest rates on both two year and five year fixed rate mortgages.
The two year fixed rate mortgage will have a new rate of 5.95 percent with just a GBP599 arrangement fee. There is also a fee-free Nationwide Building Society two year foxed rate mortgage that will be available at 6.35 percent. These rates are for people moving house but there is also a remortgage offer, with rates of 6.15 and 6.55 percent respectively for the same mortgage offers as above.
The longer five year fixed rate mortgage can be had at 5.85 percent for house purchasers, again with a GBP599 fee, while the remortgage option is 5.95 percent. Customers coming to the Nationwide Building Society to change mortgage from a different company are also entitled to a special offer on a five year fixed rate mortgage, with no fee, at 5.95 percent.
