Mortgage Rates – the Fly in the Ointment

Many people trying or dreaming of buying a house or flat for the first time in Britain might be cheered by the news that fixed rate interest loans for five years are at their lowest rates ever. Apparently you can fix the rate at between 2.69% and 3%. However there is a rather large fly in the ointment, or if you prefer to use a modern idiom, rather a lot of horsemeat in the hamburger.

In order to qualify for the low interest rate you will need a deposit of 35% to 40% of the property price.

Traditionally people in these islands like to buy their own homes. It gives them a feeling that the monthly payment is not wasted and that they can control their own homes, improve them and perhaps after the mortgage has been paid off after twenty five years be able to afford another home and ultimately leave something to their children.

Renting a home usually means paying more each month in rent that you would in paying a mortgage. Most renters pay their rent but do not qualify for a lower mortgage payment because they have insufficient capital. So there are many people who rent and many people who buy property as an investment in order to rent it to the renters. Once someone starts to rent it is very hard to save enough to become an owner, mainly because the monthly rent is higher than the monthly mortgage payment on an equivalent property.

Most people live on a financial edge. They have to meet their obligations as they go, and because getting or keeping a job is much less reliable than it has ever been, it is really hard for the young to build up any savings. Buying a house is a good way of saving; the value of the house may go up or down but at least you will not have to pay the secret commissions and fees that insurance and investment companies charge.

It should not be beyond the wit of the mortgage lenders to devise a mortgage with low interest rates but requiring a modest deposit.

Solar electricity panels reduce the value of your home but solar water heating improves the value of your home

The press seemed to have cottoned on to a fact that I first reported about solar panels that produce electricity. As I have previously explained these are often “given” away free. In reality they are not given away but remain firmly in the ownership of the company that persuaded the homeowner to have the PV panels installed. They are so much in that ownership that the home owner has to grant a twenty five year lease of the roof space on which the PV panels sit. In return the home owner gets free use of the daytime electricity that the panels produce (usually worth £150 per annum) but the owner of the panels gets the subsidy from the government for the next twenty five years usually worth at the outset £1500. Continue reading