“Customers appear to be waiting for the ‘magical’ product and are missing out on the great offers that are already out there. This is costing them dearly for each month they delay.”
Commentary:
Last week saw the Chelsea Building Society (who replaced the Portman Building Society with the cheapest two year fixed rate) remove its 4.49% with no notice and replace it with a product 0.2% higher (at 4.69%). The Portman is fighting back with the release of a good two year discount at 4.48%. Halifax is changing its rates this week – last time the change was insignificant – let’s see what they come up with this time!
Two year money on the markets is running at 4.87% and one year money is slightly up at 4.95%, so the Chelsea’s 4.49% represented excellent value for money; this is why it came and went so quickly. Borrowers are waiting and as a result, missing out on these products because they are coming off the lowest 2 year fixed rate for 50 years (at around 4% - 4.25%) and looking for something just as good. But rates like that are simply not around any more.
There are far too many borrowers on variable rates waiting for a ‘magical’ rate. Last week they missed the boat with the Chelsea product – and the week before the Portman product.
Here is an example to demonstrate how much people can save by switching:
£130,000 interest only mortgage with Halifax paying variable rate of 6.75% = £731.25 p.m.
£130,000 moving to the Chelsea 4.69% = £508 p.m. – a monthly saving of £223.17
If borrowers delay by one month, the rate needs to be 0.17% better than this month’s best rate or they will have lost money.
We do not expect to see the launch of significantly better rates than the current products so our message is clear – borrowers paying their lender’s SVR should remortgage and start saving money now. And if people are buying a home, there are some great products out there to help keep the costs down while house prices and stamp duty are so high.
Current ‘Best Buys’
Fixed
Lender
Rate
Term
Initial Rate
APR
Reverts To
Incentives
Early Repayment Charges
Portman Building Society
2.35% Fixed
Until 28/02/07
2.39%
6.2%
6.74%
Beyond term
Chelsea
Building Society
4.69% Fixed
Until 31/03/07
4.69%
6.6%
6.74%
Within term
Clydesdale
(Semi Exclusive)
4.90% Fixed
2 Years
4.90%
6.8%
6.84%
Free Valuation & Legal Fees
Within term
National Counties
4.69% Fixed
Until 01/04/08
4.79%
6.50%
6.74%
Within Term
Portman Building Society
4.89% Fixed
Until 28/02/2010
4.89%
6.3%
6.74%
Within Term
Discount/Tracker
Portman Building Society
2.26% discount from SVR
Until 31/03/07
4.48%
6.6%
6.74%
Within term
Abbey
0.31% under Bank Base
2 Years
4.44%
6.7%
6.75%
Within Term
Intelligent Finance
Bank Base
Until 31/3/07
4.75%
6.0%
6.00%
Free legals and refund of valuation fee for remortgages
Within term
Alliance & Leicester
0.01% under Bank Base
5 Yrs
4.74%
6.6%
6.84%
Within Term
