First Time Buyer - A Few Questions!

Dominic_

Hi all,

I know it's Monday morning so our brains might not quite be in gear yet, but I'm a first time buyer (but long-time reader of the MSE newsletter!) and wanted to ask more knowledgeable folk about mortgages, and buying in general.

My basic situation - I'm a uni grad who's been living at home for the last 2 and half years, kind of "saving" for a house of my own. As I don't earn a tremendous amount in my job (well, not nearly as much as I'd like anyway!) I've known for a while that I'll need a hefty deposit to get a reasonable house. I'm basically looking to buy on my own, and a 2 bedroom house would be ideal.

I went to see a mortgage advisor (or broker, I think you call them) from Countrywide. As I say, I'm a first time buyer so this is all new to me, but what are your opinions of Countrywide and the advice they give? Are there things that I should be looking out for in particular? I know that Countrywide don't compare the whole market, although they do have a fair few mortgage lenders under their belt - is that a good thing or a bad thing? How much research should I do myself? Am I likely to find a better mortgage deal elsewhere, or does Countrywide have the "buying power" to offer the best deals with the mortgage lenders they use, as stated by the advisor last week?

After seeing the guy for the first time last week, he explained a little bit about the different types of mortgages. He said that due to the current financial climate, nobody is offering variable rate and discount rate mortgages at the moment. However, a few other people I've spoken to have told me this is a load of twoddle. So, am I to believe the mortgage advisor, or the other people I've spoken to? On the one hand, the mortgage advisor is supposed to know what he's talking about, but then again, is he just trying to sell me a specific product for which he'll get a commision? (He said he's an impartial advisor, but I find that a little hard to believe).

Other questions I've got:

- What's an average interest rate for a mortgage of about £100,000?
- Are there any good mortgage lenders that anyone can recommend at the moment?
- With house prices set to decrease further still, how long should I wait before buying a house?

I've also got a question about variable rate mortgages. A year ago, when the BoE interest rate was around 5%, the average monthly mortgage repayment was about £500 or so (for example). Now that the BoE interest rate has gone down to 1.5%, those repayments could be quite a lot less for some people. If the rates were to go back up to 5%, then the mortgage repayments would also go back up to their original £500 mark. My question is, if I took out a variable rate mortgage now, would I benefit from the current low BoE interest rate as well (with my repayments going up to a "normal" level once the BoE interest rate goes up again), or would my repayments still start off around the £500 mark even though the BoE rate is low, and once the BoE rate goes up again, my repayments would go into silly territory?

One last thing. A friend of mine recently bought a new house under a 75% / 25% scheme. Basically, you only pay for 75% of the house upfront (meaning a lower mortgage and hence lower repayments) and the building company retains 25%. After 10 years, you repay the outstanding 25%, either buy repaying gradually over the 10 years, or buy selling your house at any time within the ten years. I was very interested in that kind of offer, as it would mean I may be able to afford a 2 bedroom house, whereas I might not otherwise be able to do so. As I don't plan to be living around here forever, I can easily see myself selling before the 10 years is up, and it would give me a step onto the property ladder. Do you think that it sounds like a good idea? Are there any pitfalls, or is there anything major that I should consider before I seriously look into it?

Thanks for all your help, and sorry about the barrel of questions so early in the morning!

Xinpei

Hi there,
I also went to Countrywide mortgage advisors. There is nothing stopping you calling another advisor. I rang L & C up too. Thing with Countrywide is they have a panel of mortgage providers and they only get commission if you choose from that panel. When our offer was accepted last week, there was a much better deal for us than what was available on their panel. Even though the mortgage advisor does not get any commission, she agreed to do our mortgage application with them. I found her to be very helpful but within Countrywide, there will be different advisors. So I'll say ring up as many as you can. Check all the banks that are not open to brokers (HSBC, Britannia.) for their rates versus what the brokers can get for you.

If you do decide to go with Countrywide, make sure you check their solicitors (countrywide property lawyers) fees before agreeing to sign up. The mortgage advisor quoted me £680 but didnt mention that was only the legal fees and when i recieved a information pack, the total cost came up to £1600! So check all the local solicitors out first.

About the 75/25 deal, there was a thread on it somewhere here before so can search for it? I personally will not consider such a deal.

Good luck..

Dominic_

Thanks for the advice. I'll have a search for the 75/25 deal, but these forums are quite large!

I'll certainly have a look at the mortgages offered by other lendors. I can't remember off the top of my head who Countrywide use, but I'll find out tomorrow. I think I'll spend the day doing a bit of research.

I would still like to know about the variable rate mortgages, though. Will my repayments start off quite low (due to the low BoE interest rate) or will they start off as normal (around £500-£600) and then go up if the BoE rate goes up?

Thanks.

MORPH3US

If you are on a variable rate mortgage, you will pay whatever the interest rate is now... if BoE rates go up in future then your repayments will go up.

However low BoE rate doesn't necessarily mean low SVR...

Go to any of the banks websites and they should have a mortgage calculator that will tell you what the payments would be.

non_believer_2

Personally, I would suggest using an Independent Financial Adviser who is whole of the market. I can't see how an adviser who is not whole of the market can be giving you the best possible advice for your circumstances. Remember you're making a major financial commitment so you need to get the best possible advice.

With regard to the comment made by the guy at Countrywide about nobody giving variable rate mortgages in the current climate, I'm certainly no expert but I would have thought lenders would be offering them far more than, for example, fixed rates.

Also, you need to bear in mind that lenders' variable rates are not the same as the BoE's base rate - although they tend to rise and fall when the BoE rate rises and falls (lenders are highly likely to pass on rate increases but don't count on them always passing on rate cuts), variable rates will generally always be higher than the BoE base rate.

Lister_2

Dominic_ wrote: »

He said that due to the current financial climate, nobody is offering variable rate and discount rate mortgages at the moment. However, a few other people I've spoken to have told me this is a load of twoddle.

Not sure on this TBH, but I would certainly expect discounted rates to be out of the question with the current base rate.

Dominic_ wrote: »

- What's an average interest rate for a mortgage of about £100,000?

That's sort of a "how long is a piece of string?" question. The interest rate does not depend on the amount borrowed, but rather on the relationship between the amount borrowed and other factors (eg value of the house, your income etc).
To pick a figure out of the blue I would say fixed rates are around 5% with trackers less.

Dominic_ wrote: »

Are there any good mortgage lenders that anyone can recommend at the moment?

If it was me I would find the best deal, and then research the lender to amek sure they're ok.

Dominic_ wrote: »

With house prices set to decrease further still, how long should I wait before buying a house?

Crystal ball required. I have no idea. Maybe others might.

Dominic_ wrote: »

My question is, if I took out a variable rate mortgage now, would I benefit from the current low BoE interest rate as well (with my repayments going up to a "normal" level once the BoE interest rate goes up again), or would my repayments still start off around the £500 mark even though the BoE rate is low, and once the BoE rate goes up again, my repayments would go into silly territory?

You would benefit from the low rates now.

You pay interest on your £100k. The amount of interest you pay depends on the interest rate you borrow at. Higher rates means more interest means higher monthly payments, and vice versa.