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Credit Crunch Suits Savers but Mauls Mortgage Holders
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(07-03-08) - Savers continue to profit from the credit crunch, but mortgage borrowers are being hit were it hurts: in the pocket. writes Dan Drage dan.drage@consumerchoices.co.uk |
Interest on savings accounts has risen, on average, 1.2% since January 2007, despite the Bank of England base rate remaining unchanged during that period. The typical rate on a savings balance of 1,000 pounds has risen from 2.67% to 3.87%.
Borrowers, on the other hand, are left standing in the dust of the credit crunch juggernaut, with the average fixed rate mortgage rising by 0.62% in the past fourteen months.
Lenders have changed tack, pulling cheap deals and cutting the maximum percentage of a property's value they are prepared to lend. More mortgage applications are being refused as they perceive greater risk among borrowers.
Leading mortgage analyst Julia Harris discusses the new mortgage lender tactics:
‘Whereas a year ago mortgages at 95% loan to value were the most competitive, lenders are taking a much more cautious attitude to risk; now you are most likely to find better deals with a larger deposit, say at 75% loan to value.’
Chris Eagle, commercial manager at CreditChoices, urges savers to top up their savings accounts:
‘While this is bad news for first time buyers, savers should make hay while the sun shines. Get those savings accounts topped up, and consider taking out a tax free ISA when the next financial year begins on April 6th. First time buyers will find that the best mortgage deals will be offered to them if they can provide a 10% deposit.’
Related Articles:
Lenders criticised for reckless mortgage policies
Mortgage crisis to hit saver's pockets
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