Christmas cheer as fixed rate cuts surface, bah humbug as stamp duty holiday axed

As reported on TotallyMoney.com this week, the mortgage market has seen a number of reductions to the rate charged on fixed rate mortgages.

Drew Wotherspoon, of John Charcol, the UK’s leading independent mortgage adviser commented:

“It should provide some welcome Christmas cheer for those first time buyers who need the security of a fixed rate, as well as for those borrowers who have been sitting on their lender’s standard variable rate, waiting for the right deal to lock into. Despite these cuts however, tracker mortgages are still looking more attractive overall.”

“However, a note of caution. Rates are undoubtedly going to have to increase at some point in the future, so picking the right length of term for a new mortgage is as important as getting the best rate you can. Coming out of a fixed rate at the wrong time could be costly. As ever, borrowers would be well advised to seek independent advice on their own specific situation before committing to a rate.”

And there’s more bad news for potential buyers and sellers as it was announced in the Chancellor’s pre-budget report yesterday that stamp duty holiday on properties under £175,000 that will cease at the end of 2009, meaning affected purchasers will face a stamp duty bill of up to £1,750 next year.

Robert Sinclair, Director of the Association of Mortgage Intermediaries (AMI), said:

“It is disappointing that the Chancellor has failed to extend the stamp duty holiday on properties under £175,000 that will finish at the end of this month. The housing market is showing signs of recovery but a further stimulus is required. The Government should also carry out a full review of the stamp duty regime. At present, it both distorts the housing market and places a disproportionate burden on first-time buyers.”

“The extension of the Mortgage Interest Scheme will help some homeowners who experience mortgage difficulties and this, combined with lender forbearance, is helping many people in financial difficulty stay in their homes.”

“The greatest problem we face in the mortgage market is a lack of competition. We are therefore frustrated that the Chancellor has not sought to address this more urgently. The commitment to work through the Council for Financial Stability on Mortgage Backed Securities needs accelerating together with the promise to clarify the rules on Covered Bonds. We will continue to seek government support for our proposal to draw Building Societies and non-banking institutions back into lending.”