December 2024 Newsletter
November was a pretty stable month in terms of mortgages although banks interest rates have been rising slightly.
We'll have a look at why this is happening along with a UK property market overview.
We'll also be looking at Gifted Deposits, what's acceptable and how it works with lenders.
Latest News
On November 6th The Bank of England made a very welcome reduction in the Base Rate from 5% to 4.75%.
This is great news for anyone on a tracker rate mortgage as they will have seen an immediate change in their monthly mortgage payments.
When we look at fixed rate products being offered by banks, they are priced to take into account the projected long term forecast for the economy. They take into account fluctuations over time, any political unease among many other factors and so although the base rate is 4.75% Banks interest rates will vary.
The banks will price their products based on wholesale lending rates, these are the rates that they borrow at. To check on wholesale rates you can look to the SONIA rate, or The Sterling Overnight Index Average rate. This is an interest rate benchmark that reflects the average interest rate banks pay to borrow sterling overnight from other financial institutions.
This means that the products offered can be very different to the Bank of England Base Rate. This is exactly why I'll always include examples of the interest rates and how they have changed in the section below.
In positive news, house prices have been slowly increasing in value over the past few months. In October property prices surpassed their peak in June 2022 with the average house price, countrywide being £293,999 (we should be so lucky in this area!). This is 3.9% higher than October last year which is really good news for the health of the market.
Mortgage Rates Today
1 Lincoln Road - 1 Bed Flat
£235,000
Deposit: £58,750 (25%)
Mortgage Required: £176,250
In November 5th 2024 a 2-Year Fixed Rate for this level of lending would have been 4.33% (APRC 7.45%) with Nationwide
On a 35-year term that would make the monthly payment: £815.66
As of December 3rd 2024, under the same terms the interest rate would be 4.57% (APRC 6.58%) with Barclays
This would give a payment of £841.77
So since November 5th the payment for a purchase of this level has reduced by £26.11 per month or £626.64 across the initial 2-year term
Middle Street - 3-bed Semi-Detached House
£500,000
Deposit: £125,000 (25%)
Mortgage Required: £375,000
On November 5th 2024, a 2-yr Fixed Rate for this level of lending would be 4.09% (7.41% APRC) with Nationwide
On a 35-year term that would make the monthly payment: £1,680.71
As of December 3rd 2024, under the same terms the interest rate would be 4.35% (6.55% APRC) with Barclays
This would give a payment of £1,740.04
So since November 5th the payment for a purchase of this level has increased by £59.33 per month which would be £1,423.92 across the initial 2-year term
North Street - 1-bed Terraced House
£345,000
Deposit: £34,500 (10%)
Mortgage Required: £310,500
On November 5th 2024, a 2-yr Fixed Rate for this level of lending would be 4.85% (8.49% APRC) with Virgin
On a 40-year term that would make the monthly payment: £1,275.22
As of December 3rd 2024, under the same terms the interest rate would be 5.19% (7.88% APRC) with Virgin
This would give a payment of £1,336.09
So since November 5th the payment for a purchase of this level has increased by £60.87 per month or £1,460.88 across the initial 2-year term.
What are the guidelines for Gifted Deposits
In the spirit of Christmas I thought we'd have a look at gifted deposits and how this all works.
Gifted deposits can be the difference between getting on the property ladder or not, or, in most cases, not for a few years time and after a lot of struggle. As a parent, I would love to be in a position to help my children onto the market when they're ready, what a wonderful achievement.
So, gifted deposits should be celebrated.
For lenders gifted deposits are widely accepted, especially when they come from a family member who is related by blood, law or marriage.
You don't need to have the family member transfer any cash into your account, all of the transfer of funds will be handled by your solicitor and so the gifter can transfer the funds directly to the solicitor when it is requested.
In most cases the lender will request a gifted deposit form to be completed as a part of the application process for proof of funds and to confirm that the funds are a true gift are not expected to be repaid. Many of them have their own form designed specifically for this purpose and your broker will supply this at the point of application.
When a gift comes from a non family member, a smaller number of lenders will find this acceptable, however some will, and in fact some very prominent high street lenders will. The lender would again, require a gifted deposit form which clearly states that the funds are not to be repaid. They may also ask for a bit of background to understand the generous gift.
As always, every lender is very different in their approach. They will have different processes and appetites for different scenarios, that's why brokers are so useful and why it's always worth having an expert with you from the very first stages of buying a property.
If you ever need our help, you know where to find us,
Merry Christmas
Approved by In Partnership FRN 192638 December 2024
Jen Boulter