There are always seasonal trends, although this is the second year running where August, which is usually the peak month for people to take a break away from the Island, has shown a significant increase in activity. Many people making appointments at The Mortgage Shop have already found property to purchase and are keen to press ahead with the transaction for fear that somebody else further down the line might overtake them if they delay.
The average turn-round for a transaction is four to six weeks - a target that can be challenging at this time of year, as lenders, lawyers and surveyors all take their holidays, so it is inevitable that delays can occur.
In the lead up to the Brexit decision there was much said about the impact that an exit vote would have on mortgage rates, many of which fell in anticipation of the Bank of England base rate being reduced to 0.25% in July, but which didn’t actually happen until 4th August. The borrowers who have benefited are the 20% who have a mortgage that is linked to a base rate tracker option, where their lenders are obliged to pass on the rate reduction immediately. For a typical mortgage of £300,000 over a 25 year term, this reduction represents a monthly saving of £78, or £26 for every £100,000 borrowed.
In recent months our advisers have tended to recommend fixed rate options, not because they offered greater financial security, but because they are at rates that are lower than the majority of tracker options. If base rate has in fact bottomed, then this is likely to continue to be good advice.
Due to tighter lending regulations and changes of policy, local banks currently have little appetite for certain types lending, particularly mature borrowers and self employed individuals and this has resulted in the growth of peer to peer or private lending. Many investors are sitting on funds earning a token rate of interest in their bank accounts. The good news is that for the past eight years or so we have been able to offer these people decent returns, for terms of one, two or sometimes three years, interest only, to a growing number of genuine people who cannot access a conventional mortgage.
The concept is simple, as the borrower will usually need the funds for a short period until they become eligible for a conventional bank mortgage, or they sell the property.
Interest rates average around 6% - 7% and this type of funding will continue to be popular until Jersey lenders decide to follow some of their UK counterparts, by offering a more comprehensive and flexible range of products. The trigger for this may be any future increase in competition between local lenders, or the possible arrival of new lenders – prepared to introduce more flexible lending criteria than currently exists, or perhaps a rise in property prices! It could be a combination of all these factors.
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