New year, new hopes for housing market

THE early weeks of the new year have provided further positive news in the housing market, with some healthy competition and lower priced new mortgage deals being launched.

With the economic uncertainty and the future supply of houses for sale making price predictions difficult, providers are certainly doing their bit to stimulate the market in an effort to keep the momentum going. The two-year fixed-rate market has been the focus of lender activity, with Cumberland Building Society trimming an already market-leading rate to 3.49 per cent, with a fee of 995 for loans to 60 per cent loan-to-value (LTV).

Mansfield Building Society also revealed a strong appetite for new business with a two-year fix at 3.59 per cent and 999 fee available up to a more generous 75 per cent LTV. The third in a trio of products launched in the first three weeks of 2010 from the mutual sector was courtesy of Coventry Building Society, at 3.75 per cent fixed for two years to 70 per cent LTV with a fee of 800.

Away from fixed rates, ING Direct is now a clear front runner in the two-year tracker market with a 2.54 per cent rate and 795 fee to 60 per cent LTV.

Unfortunately it's not all positive news, with more lenders choosing to increase their standard variable rates (SVRs) and in some instances these now stand as high as 5.99 per cent.

While some people will feel comfortable with remaining on their lender's SVR, others may be biding their time before switching to the security of a new fixed-rate product.

However, for those who purchased a property ten or 15 years ago when the average price was 77,968 or 51,084 respectively, according to the Nationwide BS house price index, some borrowers will be in the fortunate position of having a relatively small balance outstanding in comparison to typical loan requirements of today.

If, for example, you have a balance of 40,000 with ten years remaining on the term, you'll be paying around 443 per month at a 5.99 per cent SVR. But when you look at the rate and fee combinations available on fixed-rate deals, there's not really much of a financial incentive to move to a new deal if you have a loan of this size.

However, if you look at a larger balance, say 70,000, then it does make financial sense to switch, with savings of up to 960 possible over two years.

• Andrew Hagger is head of communications at Moneynet.