Increase in interest could usher in capped mortgages claims expert
August 05, 2010
Capped mortgages will make a re-entry into the lending market, once it is relatively certain that interest rates are likely to rise, commented a leading industry expert.
Ben Wilkie, editor at What mortgages, said: “They were a popular deal so they certainly will have a place in the market. I think that once people start to think that interest rates will go up, they will become more popular.”
Although the deals were not among the cheapest, they were preferred by customers because they are able to estimate how far their interest rates would rise, he added.
Capped mortgages allowed borrowers to pay their instalments at variable rates that had a fixed limit. However, lenders topped offering these schemes once basic bank rate dropped sharply during the global economic downturn.
In recent times, as the economy begins its slow climb out of the recession, some lenders are beginning to make these mortgages products available to clients.
One of these providers is the Coventry Building Society, which is offering customers a capped mortgages product that allows them to borrow up to as much as 65 per cent of the total value of a property. The deal is currently available at the rate of 2.99 per cent and has a fixed cap of 3.99 per cent.
The building society is also offering house-hunters who need to borrow more money a mortgages product with 75 per cent loan-to-value, with a present rate of 3.49 per cent that is capped to a maximum 4.49 per cent.
Last month, John Charcol reported that the mortgages lending market is being dominated by variable rate products which claimed a 75 per cent share of the market.
According to findings published by the mortgages adviser, first-time buyers accounted for the smallest share of business in the market, since December 2008.
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