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Fixed rate deals are becoming attractive

With borrowers holding out for news that the base rate has hit rock bottom and longer term swap rates low, we are inching towards that mythical time when a five or 10-year fixed rate could suit both parties in the mortgage transaction.

Since the last cycle of rate rises mortgage features have evolved to benefit borrowers. Most lenders now offer portability – a significant benefit in long-term borrowing – and arrangement fees represent better value over longer terms.

Also, overpayment facilities allow those expecting their income to rise later in the period to reduce their debt.

For most lenders, finding funding is now the top challenge, followed by meeting the demand for higher LTVs. Not only could a mortgage at 95% LTV be in excess of 100% LTV in less than a year if property values continue to fall at the present rate, the capital ratios lenders are required to stockpile above 75% LTV wipe out much of the available cash.

However, five-year fixes of 4.89% have been inching their way onto best buy tables. There are whisperings of a recovery in the next two years which would allow some lenders to take the view that more of the five-year life of a tranche will be spent in a rising property value climate than a falling one, thus reducing risk.

But it is the low cost of five-year swaps at around 3% that makes pricing more palatable. Offering products at 4.89% with an arrangement fee of 1% of the average loan size gives a solid five-year margin of around 2%.

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Leadbay says first-time buyers are adapting to the low-LTV mortgage environment after noting a rise in the number of borrowers looking for deals with LTVs between 70% and 90% in the past six months.

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Guide: reporting to the Pensions Regulator — what and when?

Johnson Fleming has published a step-by-step guide demonstrating the importance of record keeping and reporting, and how it can ensure you operate a successful scheme. The guide takes you through some key questions you need to ask and identifies the information you need to obtain. The topics include: why you need to keep records and the benefits of doing this; registering your scheme; what information you need to record to ensure you meet the Pensions Regulator’s requirements; and what items need to be recorded and when.

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