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Hi All,

I'd been waiting to see if anyone was going to post but I haven't seen anything this far.

Yesterday in the budget the BofE base rate was cut from .75 to .25... in theory meaning interest rates for mortgages could be reduced.

What are thoughts on whether the lenders will reduce rates and if so the time it will take for this to happen?

Could now be a good time to remortgage and fix the rates in if this happens? Generally speaking.

Thoughts welcomed.

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10 minutes ago, sandrawoodpecker said:

I've been wondering exactly the same thing so will be interested in other people's thoughts on this. I have just submitted 3 mortgage applications for btl purchases but wonder if rates will drop before I complete on them

Same here. I've submitted an application and the process is going through, I can't help but wonder if I wait two weeks could I get .50% knocked off the rate... assuming that's how it works? It's a big saving that, more so for you with three, it would be thousands I imagine.

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There are a few reason why this womnt really mean anything for fixed rate mortgages:

Interest rates are at absolute rock bottom, there simply isnt anywhere for them to go. Most big lenders are running at a loss just in order to maintain market share. Generally mortgages are seen as a gateway to sell more lucrative options to clients such as current accounts with overdrafts, credit cards etc, and based on this FCA report, they expect to recoup costs from those who cant or wont switch to better deals when eligible. If you consider that you can get a 2yr BTL mortgage for just 1.19% currently, im not sure where you think those rates could go? Considering that in that 2 year period 0.4% of that loan is going to me as commission, and then the rest has to cover staff, tax, margins for defaults etc there just isnt anything left from that.

Fixed rate mortgages are not linked to the Bank of England Base Rate. The actual mechanisms are much more complex but are losely related to the rate at which they can borrow from other lenders and the terms under which they can package up mortgages to be sold to other financial services providers, often pensions and investment firms who have cash lump sums and pay out regular amounts. This stuff is mind bendingly complex, far beyond my comprehension, but i know for sure the BoE rate doesent directly influence rates.

043_logo_final_03.png.0cdf828351f81e6097208048ac2d018d.pngStuart Phillips

Independent, Whole of Market Mortgage Broker

AALTO Mortgages Ltd

Web  www.aaltomortgages.com

Email  sales@aaltomortgages.com

Call  020 7183 1101

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Thanks for the information Stuart, all very interesting.

I'm applying for 5 year fixed rates of around 2.3% and with 3 mortgages in the pipeline any reduction would make a  big difference to my bottom line. As I'm in very early stages of purchasing, I've got a little time to wait and see what happens with the rates, if they do reduce slightly then that's a bonus, if not then I've still got a mortgage rate I'm happy with :)

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1 hour ago, Stuart Phillips said:

There are a few reason why this womnt really mean anything for fixed rate mortgages:

Interest rates are at absolute rock bottom, there simply isnt anywhere for them to go. Most big lenders are running at a loss just in order to maintain market share. Generally mortgages are seen as a gateway to sell more lucrative options to clients such as current accounts with overdrafts, credit cards etc, and based on this FCA report, they expect to recoup costs from those who cant or wont switch to better deals when eligible. If you consider that you can get a 2yr BTL mortgage for just 1.19% currently, im not sure where you think those rates could go? Considering that in that 2 year period 0.4% of that loan is going to me as commission, and then the rest has to cover staff, tax, margins for defaults etc there just isnt anything left from that.

Fixed rate mortgages are not linked to the Bank of England Base Rate. The actual mechanisms are much more complex but are losely related to the rate at which they can borrow from other lenders and the terms under which they can package up mortgages to be sold to other financial services providers, often pensions and investment firms who have cash lump sums and pay out regular amounts. This stuff is mind bendingly complex, far beyond my comprehension, but i know for sure the BoE rate doesent directly influence rates.

Thanks Stuart, that's useful to hear. Makes me think that I'll just continue as is for now then, similar to what Sandra stated. 

I know they're low now but as we are in the habit of lowering costs as much as possible I thought I would float the question. 

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On 3/12/2020 at 9:01 AM, Stuart Phillips said:

There are a few reason why this womnt really mean anything for fixed rate mortgages:

Interest rates are at absolute rock bottom, there simply isnt anywhere for them to go. Most big lenders are running at a loss just in order to maintain market share. Generally mortgages are seen as a gateway to sell more lucrative options to clients such as current accounts with overdrafts, credit cards etc, and based on this FCA report, they expect to recoup costs from those who cant or wont switch to better deals when eligible. If you consider that you can get a 2yr BTL mortgage for just 1.19% currently, im not sure where you think those rates could go? Considering that in that 2 year period 0.4% of that loan is going to me as commission, and then the rest has to cover staff, tax, margins for defaults etc there just isnt anything left from that.

Fixed rate mortgages are not linked to the Bank of England Base Rate. The actual mechanisms are much more complex but are losely related to the rate at which they can borrow from other lenders and the terms under which they can package up mortgages to be sold to other financial services providers, often pensions and investment firms who have cash lump sums and pay out regular amounts. This stuff is mind bendingly complex, far beyond my comprehension, but i know for sure the BoE rate doesent directly influence rates.

What you say makes sense but any thoughts about Ltd Co mortgages where rates are higher (reflecting higher perceived risk) and in theory have room to come down?

Thanks

John

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I dont think its risk, per se, because the loans are assessed on the same terms as a personal mortgage by and large. Lenders wont lend on something in a limited company that they wouldnt in personal names for instance. Most lenders also dont allow any kind of complex structures that might increase risk, and those companies are brand new, with one or two directors and either an intercompany loan or directors loan account. The riskof financial crime or fraud isnt significantly higher than with personal mortgages and there is no limited liability as personal guarantees are provided.

I think the increased rate is a combination of:

  • Supply and demand, there was less supply and so lenders had an opportunity to make more. In the same way when pricing aproduct or service, you shouldnt work on what it costs you and add a margin, you should start with the percieved benefit to the client and come down from there. I think limited company rates will come down gradually as more lenders enter the market, and the pool of potential clients increases. They are simply at a different life stage to personal BTLK mortgages.
  • Training, compliance and risk analysis costs - These are new products and entering the market costs money to train the staff, create policy etc. Once thats been paid for then the lenders are more free to be competitive. Thats probably why big lenders like TMW can come in and offer much cheaper rates straight away than the building societies and specialist lenders because that intial cost can be absorbed more quickly.

I think theres also still a little uncertainty about the government u-turning or repealing some of the tax rules that drive limited company mortgages. The more budgets that pass without change, the more confident they will be about the products becoming a core of what they do. In time limited company mortgages will be priced much closer to personal ones, we are seeing them trending downwards slightly at the moment.

043_logo_final_03.png.0cdf828351f81e6097208048ac2d018d.pngStuart Phillips

Independent, Whole of Market Mortgage Broker

AALTO Mortgages Ltd

Web  www.aaltomortgages.com

Email  sales@aaltomortgages.com

Call  020 7183 1101

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Have they now been reduced to 0.1%? 

What does it mean the anticipated rate will be now for a standard 20 or 25% LTV is? Would anyone dare hazard a guess? 

Do you think they're that worried about people not being able to pay the bills they're basically making stuff really cheap or trying to entice a market to prop the economy? I have no idea I'm not smart enough but some people on here might be able to give me the benefit of their wisdom.

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