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Interest Rate & Housing Market Outlook for 2014

Brad

The only interest in yesterday’s Bank of England meeting was whether or not it would result in a statement reducing the unemployment target but with the next Quarterly Inflation Report due in February there must be a good prospect that if the MPC plans to change its “Explicit Guidance,“ as indicated particularly by comments from MPC member Charles Bean even before unemployment had fallen to 7.4%, this will happen next month, especially if the next set of unemployment figures pushes the rate down further.

 

International considerations as well as UK specific economic factors will of course be relevant in any adjustment of the MPC’s targets and the timing of the first increase in Bank Rate. In this context it is interesting to compare the recent performance of the UK’s gilt market with a country very close to home. On Tuesday of this week Ireland’s issue of 10 year bonds was 3 times oversubscribed and it sold Euro3.75bn of bonds on a yield of 3.54%, only 59 basis points higher than the closing UK gilt yield that day.

 

Following the success of this issue yesterday’s closing yield on Ireland’s 10 year bond had fallen to 3.28%, converging fast with the yield offered by stronger Eurozone countries and only 0.29% above the 2.99% yield on the UK 10 year gilt. Such a small differential between Irish and UK bond yields is a massive turnaround from 2 years ago when the spread was 6.24% (8.25% v 2.01%).

 

UK gilt yields and swap rates have already increased significantly from their low points early last year and so to some extent the impact of a Bank Rate rise is already reflected in fixed rate mortgage pricing. The bigger questions are when and how quickly will Bank Rate rise, and in particular what market expectations are, and when will they change; these will be material factors influencing gilt and swap rate yields and hence the cost of fixed rate money to lenders when setting their mortgage pricing.

 

What is very clear is that there is little scope for any fall in the cost of fixed rate mortgages, with any decreases being very modest and largely due to a lender tweaking rates at different LTVs or responding to a competitor change.

 

Borrowers on historic cheap term tracker rates are unlikely to consider it worthwhile switching to a fixed rate, but will have to hope other lenders don’t follow the path of Bank of Ireland, which now sells its mortgages through the Post Office brand, and West Bromwich in reneging on their term tracker contracts. However, it is unlikely any other lender will risk going down this route pending the FCA’s promised consultation on this situation. When deciding which lender to offer their business to borrowers may want to consider a lender’s previous track record in treating customers fairly.

 

Looking at the UK housing market, activity will continue to increase this year, with the massive improvement in the availability of 95% LTV mortgages due to the two Help to Buy options (although many 95% LTV mortgages are also offered outside the Help to Buy scheme), despite lending criteria remaining tight. This increased availability has provided an opportunity for both First Time Buyers and movers who were previously excluded from the market due to the lack of an adequate deposit, despite having a good credit status and being able to afford the monthly payments, to participate. Furthermore, activity at the lower pricing levels provides the catalyst for transactions further up the scale to take place.

 

A common criticism of those who don’t believe anyone should be allowed to buy a home without a deposit in excess of 5% is the risk of default when interest rates rise. This demonstrates a failure to understand some of the dynamics of the market. First of all lenders assess affordability at an interest rate well above today’s levels, typically at around 7%. Secondly, 95% rates are around the 5% level and most lending is from lenders whose SVR is around 4%.

 

Therefore, if a 95% borrower takes a fixed rate most are in effect insulated from the first 1% rise in Bank Rate, whereas a borrower with plenty of equity taking a sub 2% 2 year fix risks a sharp rise in payments in 2 year’s time. Secondly, now that all high LTV mortgages have to be on a repayment basis, over the first two years of the mortgage, depending on the term selected, around 4% of the capital will be repaid.

 

Couple this with the probability that the value of most homes will rise by at least 6% over the next two years and in this eventuality the LTV would come down to 85% after only two years. A reduction of even 5% in the LTV would allow a remortgage to rates around 1% below 95% rates and a 10% reduction to 85% LTV would mean rates a whole 2% lower were available, based on current rates. This provides a further cushion against rate rises for 95% LTV borrowers.

 

If a life changing event such as redundancy or a relationship breakdown occurs the challenges for a 95% LTV borrower will be greater than for someone with a bigger deposit, but this would also be true if they were renting. However, when assessing the risk solely from an increase in interest rates, other things being equal, a buyer with a 95% LTV mortgage is less exposed for the reasons given above.

 

For these reasons a 2 year fixed rate will make sense for many high LTV borrowers, but one thing they must bear in mind is that many lenders will not allow the fee to be added above 95% LTV and so in addition to needing a 5% deposit and the stamp duty land tax if they are buying at a price in excess of £125,000, they may need to find up to an extra £1,000 to cover the lender’s fee.

 

For borrowers with a larger deposit, or more equity, 5 year fixed rates are still available under 3%, even at 75% LTV. The differential between 2 and 5 year fixed rates, particularly after amortising over just 2 years the very high fees on the lowest 2 year fixed rates, is relatively small when considered in the context of buying interest rate security for two years, when it is not really needed, or 5 years. The further ahead one looks the more difficult it is to be confident what will happen to interest rates, despite the expectation they will only rise slowly. Therefore a 5 year fixed rate looks the product of choice for lower LTV borrowers.

 

Faulty purchase? Know your rights

Brad

If you buy something that breaks you do have rights; here’s what you need to know:

Everything you buy should be of Satisfactory Quality, Fit for Purpose, As Described and last a Reasonable Amount of Time. This is your legal right under the Sale of Goods Act so if it’s not, complain!

The retailer is responsible for sorting faulty purchases, not the manufacturer!

You have 6 years to return faulty goods in England, Wales and N. Ireland. In Scotland; you have 5 years from when you became aware of the fault.

Proof of purchase can be a receipt or a bank or credit card statement; some will even accept a delivery note.

You can get a refund including delivery & return fees for 3 weeks after making a faulty purchase even if it was on sale. You should get your money back within 30 days.

Faulty after 3 weeks? You’re still entitled to a repair or replacement from the retailer.

For the first 6 months after you buy something the retailer has to pay for repairs or give you a replacement unless they can prove you caused the fault. Thereafter you may have to prove the item was faulty when you bought it.

If the retailer won’t help, complain to Trading Standards. If you bought on credit card then check if you can claim under Section 75.

Sky Broadband, TV, and Telephone Bundles

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cta Sky Broadband, TV, and Telephone Bundles

Sky Broadband, TV, and Telephone Bundles

Join SKY with a great value package and save money on broadband, phone, and TV.

family Sky Broadband, TV, and Telephone BundlesKeep your family entertained with a great value bundle deal from Sky, in our best buy table which is updated every day you will find sky’s most popular bundles for Sky TV, Sky Broadband and Sky Telephone.

Some offers include a freebie that you will get when you sign up such as a voucher for a high street shop just click the find out more button for details of each offer, which takes you direct to skys ordering page with the selected package already in the basket to make signing up as easy as possible.

Todays Top Sky TV,Broadband, and Talk Packages Order Online
Sky Broadband Everyday Lite and Sky Talk Anytime UK & Line Rental  £30.25 / month 
skyoffers Sky Broadband, TV, and Telephone Bundles
Sky Broadband Unlimited and Sky Talk Weekend & Line Rental  £19.50 / month 
skyoffers Sky Broadband, TV, and Telephone Bundles
Sky Fibre Unlimited and Sky Talk Weekend & Line Rental  £24.50 / month 
skyoffers Sky Broadband, TV, and Telephone Bundles

Build your own package

 Sky Broadband, TV, and Telephone Bundles

Find the current best offer for sky internet, phone, and TV here

Would you like to cut the cost of watching TV and surfing the internet – and getting a better service too by getting a bundled package?

Packages offer the convenience of just one bill for telephone, television and broadband services, and are often far cheaper and less bother than dealing with individual suppliers. About 40% of UK households already have a bundled service, according to regulator Ofcom. That figure is expected to rise rapidly as more attractive deals and offers become available.

If you don’t have a Sky package yet, you could be wasting up to £40 every month , save money, get a package!

Sky Packages:

Pause and rewind live TV with Sky+ Subscribe to Sky TV from £20 a month (plus £12.25 line rental) a month

Best value TV, broadband, phone offer gives you..

Sky TV

• Entertainment Pack, or any one Entertainment Extra for £5 extra a month

Watch a host of channels with the Entertainment Pack, including Sky One, named Best Entertainment Channel at the 2008 Broadcast Digital Channel Awards. If you would prefer another Entertainment Pack, it’s easy to change this on the Order Summary page when you order online.

Sky Talk Freetime – Free

• Free UK¹ evening & weekend calls
• Rates to mobiles & international destinations 5% lower than BT’s ‘Unlimited Weekend Plan’
• No need to change your BT number
• You need an active BT compatible line and still pay BT line rental

Sky Broadband Lite – Free

• Up to 2Mb* download speed
• 2GB monthly usage
• Includes wireless router worth £50
• Free 12-months’ McAfee security for PC users worth £49.99
• Up to 10 Sky.com email addresses
• 24/7 technical support

Get the value package now!

 


Most Popular TV, Broadband, Phone offer gives you..

Sky TV

• Entertainment Pack, or any one Entertainment Extra for £5 extra a month

Sky Talk Unlimited

• Unlimited UK¹ landline calls any time
• Unlimited calls to 20 international destinations³
• Call rates to UK mobiles are 25% lower than BT’s ‘Unlimited Weekend Plan’ 
• No need to change your BT number
• You need a Sky phone line (£12.25)

Sky Broadband Lite – Free

• Up to 2Mb* download speed 
• 2GB monthly usage
• Includes wireless router
• Free 12-months’ McAfee security for PC users worth £49.99
• Up to 10 Sky.com email addresses
• 24/7 technical support
• Exclusive to Sky TV customers

Get the most popular package now!

 


Deluxe TV, Broadband, Phone offer gives you all this!

Sky TV

• Sports Pack
• Entertainment Pack, or any one Entertainment Extra for £5 extra a month

Sky Talk Freetime – Free

• Free UK¹ evening & weekend calls
• Rates to mobiles & international destinations 5% lower than BT’s ‘Unlimited Weekend Plan’
• No need to change your BT number
• You need an active BT compatible line and still pay BT line rental
• Exclusive to Sky TV customers

Sky Broadband Lite – Free

• Up to 2Mb* download speed
• 2GB monthly usage
• Free 12-months’ McAfee security
• Includes Wireless router
• Up to 10 Sky.com email addresses
• 24/7 technical support
• Exclusive to Sky TV customers

Get the huge deluxe package now!


 Sky Broadband, TV, and Telephone Bundles

 

Deciding which TV, Phone, Internet and even mobile package is right for you

When you package all three services it’s a good idea to work out which service is most important to you and select the strongest supplier for what you use most. So where do you begin?.

Step 1: Decide what you need

You should be clear about what you need from the bundle package. Analyse your use of the products;

  • Is watching movies and sport your main interest?
  • Do you download loads of music from the internet?
  • Are you an online games addict?
  • Do you want the ability to make free telephone calls every evening?

Once you know how much you really use the internet you can ensure you are not paying for more than you need.

For most purposes such as checking your email, a little web surfing, and a modest amount of downloading a 2 megabit package will be fine.

Step 2: Select an offer

Now you have a better understanding of what your needs are, in particular what you like to watch on TV and how much you use the internet you are armed to select an offer such as one of those we feature on this page.

Telly addicts may be drawn towards Sky due to the fact that they provide a broader TV entertainment package range.

Sports fans are more likely to find Sky the best option for live game coverage.

Step 3: Final check

You may want to also consider any free calls that may be included depending on the package you buy, in most cases they only apply to landlines beginning with 01, 02 or 03 and not to mobiles or premium rate numbers.

Step 4 click here to order Sky today!

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