Certainty in an Uncertain World of Mortgages

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With uncertainty over interest rates and stagnation in the housing market first time buyers have been particularly badly hit by the recession. One of the first casualties in the mortgage market was the low deposit mortgage that many first time buyers had relied upon to get their foot on the property ladder. Santander, amongst other banks, is now beginning to offer deals that may help to inject much-needed life into the lowest level of the housing market - and the one on which all homeowners rely. In May it introduced a limited offer - still available at the moment - with a low 99 arrangement fee and Loan to Value (LTV) of 90% - one of the best on the market.

Price fixing

The fixed rate on this deal may well be more attractive in the coming years than it seems at the moment. The price for the low arrangement and high LTV of this particular product is the 5.79% interest tag that comes with it. However, interest rates have only one way to go at the moment meaning tying in to a fixed rate deal is something that many homeowners are actively considering. Santander's deal is only available to first time buyers and offers some certainty in an uncertain world. Analysts are expecting the Bank of England to raise interest rates at the next meeting of the Bank's Monetary Policy Committee, on the 9th June.

Inflationary measures

The target rate that the bank of England is working too in terms of inflation is 2% - but estimates put it at close to 4%. There is little chance that the bank will be able to resist calls for it to raise interest rates much longer. General expectations had been that the Bank would raise the base rate later this year, but it seems likely that this will have to be brought forward. With this prospect even an interest rate of 5.79% should look attractive to first time buyers. Many commentators are also predicting that when interest rates begin to rise they will have quite some way to go - reaching high levels that will be welcomed by savers but not by homeowners. By offering a product that is affordable to arrange now and may well protect against the risk of hikes in interest for the first two years of the mortgage Santander is offering some serious security for first time buyers.

Re-mortgage opportunities

Those looking to move or re-mortgage will also find some attractive offers in the Santander mortgages portfolio. The best fixed rate they are offering for movers and re-mortgagers is currently 2.79% for two years. The offer is available to first time buyers but with a LTV of 60% is unlikely to be feasible for many in this market; the rate should be attractive to re-mortgage customers, however. The chances are that this rate will fall below the base rate during the fixed rate period - and it may well do so more quickly than previously anticipated.