Top

A hung parliament could cost you thousands!

Why your vote could affect your mortgage rate

Last week saw the Bank of England hold the Base Rate at its record low of 0.5% for the 12th month in a row.

It came as no surprise, of course, as the Bank’s Inflation Report in February had made it pretty clear that high inflation in the short-term would not be enough for it to increase rates. It actually forecasts that the Consumer Prices Index will plummet below its 2% target by the end of this year.

The decision to maintain means that borrowers on a variable mortgage rate -- like a tracker or standard variable rate -- have been given another stay of execution. We all know rates will rise at some point but the big question is when.

Keep it on the down low

Looking at the picture on purely financial terms I’d probably have to side with a tracker rate if my priority was minimising my repayments over the next couple of years (for the record payment security is my priority and I am actually paying over the odds on a fix).

If you have a decent deposit of around 25% you can get hold of some super-competitive variable deals. Here are five of the best cheap and cheerful trackers (up to 75% LTV):

Lender

Type of Deal

Rate

Fee

Cheltenham & Gloucester

2-year tracker

2.29% (Base + 1.79)

3%

Market Harborough BS

2-year tracker

2.48% (Base + 1.98)

£1,845

ING Direct

2-year tracker

2.59% (Base + 2.09)

£795

Yorkshire BS

2-year tracker

2.64% (Base + 2.14)

£495

Leek United BS

3-year tracker

2.69% (Base + 2.19)

£950

Throwing politics into the mix

So what does politics have to do with all this?

Related how-to guide

Cut your mortgage costs

Find out how to cut the cost of your mortgage by hundreds of pounds a month and become mortgage-free years earlier.

It had been widely assumed for much of 2009 that the Conservatives would win a General Election, but that assumption is now on shakier ground. And the prospect of a hung parliament is becoming ever more likely.

It wasn’t just the media that thought a Tory victory was inevitable -- so did the money markets. They had factored in a Tory government that would take strong action on reducing the UK deficit by cutting public spending. This would help maintain the country’s AAA credit rating.

But now election polls are all over the place. We might be facing the prospect of a slim Tory lead or Labour staying in power with a minority Government, or even something completely different.

These new polls have shocked the money markets as a hung parliament has massive implications on the UK budget deficit at a time when they are already losing faith in UK plc -- Labour doesn’t want to slam the brake on public spending while the recovery is so fragile, and who knows what a hung parliament could achieve?

Sterling and gilt prices plummeted at the start of the month (indeed Sterling dropped this week again following gloomy trade deficit figures) and could fall further.

The greater the chance of a hung parliament in the polls, the more the markets will worry about the deficit. And the whole point of this is that it low gilt prices (and therefore high gilt yields) could feed through into higher fixed rate mortgages. Gilt yields affect swap rates and swap rates affect fixed rate mortgage pricing.

Swing towards fixed rates?

Leading mortgage pundit Ray Boulger reckons that markets hate uncertainty most of all -- the one thing a hung parliament would most certainly bring. He thinks that the markets’ reaction to the changing political landscape could make fixed rates more expensive, meaning now could be a perfect time to lock in.

Some of the best deals for those with a 25% deposit are extremely attractive as the table below shows, which highlights the best buy five-year fixes as well as the leading short-term deals. Locking in for the long-term could prove a shrewd move in the event of political and therefore market volatility.  

Lender

Type of Deal

Rate

Fee

The Co-op Bank

2-year fixed rate

3.19%

£999

Hanley Economic BS

2-year fixed rate

3.29%

£749

ING

2-year fixed rate

3.29%

£945

The Co-op Bank

5-year fixed rate

5.04%

Fee-free

The Co-op Bank

5-year fixed rate

4.74%

£999

What should you do?

Boulger makes the point that it’s impossible to confidently predict mortgage pricing with a general election looming, and never more so than when the outcome is so uncertain.

Arrange a mortgage over the internet.

If there was ever a time when personal mortgage advice tailored to your specific needs was vital, it is now.

This is especially true for first-time buyers, those with unusual circumstances such as jumbo loans, a history of bad credit, buy-to-let investors or the self-employed. In fact for anyone other than whiter-than-white low-risk remortgage clients who are comfortable choosing their own mortgage, a broker is the way to go.

In the current climate brokers will help you to fully work through the through the pros and cons of fixed versus variable rates for your specific circumstances, rather than you simply trying to second-guess the markets.

You can get fully qualified mortgage advice from lovemoney.com’s independent team of experts. Plus they will be able to access exclusive deals that are not available to borrowers on the high street.

But, best of all, they do the boring bits -- form-filling, chasing lenders, and pushing though your mortgage or remortgage as quickly as possible.

You get great free advice and help with the legwork, leaving you plenty of time to catch up with that all-important election coverage.

More: Make money from falling house prices! | Need to rent out your home? Tell your lender!

Most Recent


Comments



  • 23 March 2010

    To avoid a hung parliament, Cameron must openly and transparently offer major policies which undoubtedly will increase substantially the gap between Labour andConservative.                                                                                                 Firstly, remove the pro E.U. Bilderberger, Ken Clarke. A dangerous tory partner for all free thinking voters. Secondly, agree a referendum on membership of theE.U.                                                                   Offer policies such as a large increase in the state pension for the old and POOR, most of whom fought in a war to keep us free of a New World Order. A SINGLE Pensioner in Germany and Switzerland receives double the UK pension for 2 persons. This alone would be worth thousands of votes! Get tough with the banks and their disgusting bonus ripoffs. If they threaten to leave and find employment abroad, well let them. They will be lucky to find a better job! The public do not realise that there is only so much money in the pot which has to be shared by 60.000.000 population. Pay a footballer £100,000 per week, an actor a couple of million, Blair £2,000.000 per year for security, multiplied by thousands of similar expenses how much is left to pay the rest of us or support the men dying in Afganhistan because of a lack of equipment. Come on David Cameron, lets see a bit of Margaret Thatchers strength and guts.

    REPORT This comment has been reported.
    0

  • 15 March 2010

    Labour say that they have saved the banks, however this artical makes for an intresting read: http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/03/why_a_new_government_may_exten.html The basic message is that who ever is in power in 2012 will have to re-bail out the banks as all Labour have done enough so that it is left for the next government to sort out, knowing that it is unlikely to be them and that they can then use it to try to get back into power at the following election (in about 2015). Given that during the boom years they did very little to limit borrowing (public and private), so that they could then use it if things went wrong. For instance during the early part of the 00's the retail sector was saying, don't raise intrest rates it wil mean that we'll have to cut staff - so the BofE didn't raise them and then the shops would say that they had made big profits. If they had raised intrest rates a little a little less would have been spent in the shops a few people would have lost their (although more likely moved to another) job BUT it is likely that we would still have Woolworths and the economey would be in a lot better place now. I for one hope that they get so few votes that they are become the third or even fourth placed political party!

    REPORT This comment has been reported.
    0

  • 15 March 2010

    We know that Labour's policies and knee jerk legislation has never been thought through. We know that Labour has squandered obscene amounts of taxpayer's money with little or no positive result to show for that. We know Gordon Brown has made some glaring mistakes (selling our gold reserves at the bottom of that market; removing the 10p tax band; robbing pensions; iniquitous retrospective legislation) and he refuses to accept responsibility for these things. All Labour ministers are clones of each other and none will say boo to Brown. They have broken more manifesto promises than kept them. So why vote Labour at all? Some say they do not trust Cameron or the Tories. If this means they trust Brown and his Labour lot more, God help all of us. At least we know that the Tories can sort out a financial mess as that is what they always end up having to do after Labour have been voted out. Ken Clark is a ray of hope for the Tories for those that cannot bear to see new Tories serving us. It is time for a change, so please exercise your one point of some control in this mess and vote for that change. If we end up with a hung parliament it is because people continue to vote Labour. Lets see what a Conservative v Lib Dem government can do for a change!!

    REPORT This comment has been reported.
    0

Do you want to comment on this article? You need to be signed in for this feature

Copyright © lovemoney.com All rights reserved.

 

loveMONEY.com Financial Services Limited is authorised and regulated by the Financial Conduct Authority (FCA) with Firm Reference Number (FRN): 479153.

loveMONEY.com is a company registered in England & Wales (Company Number: 7406028) with its registered address at First Floor Ridgeland House, 15 Carfax, Horsham, West Sussex, RH12 1DY, United Kingdom. loveMONEY.com Limited operates under the trading name of loveMONEY.com Financial Services Limited. We operate as a credit broker for consumer credit and do not lend directly. Our company maintains relationships with various affiliates and lenders, which we may promote within our editorial content in emails and on featured partner pages through affiliate links. Please note, that we may receive commission payments from some of the product and service providers featured on our website. In line with Consumer Duty regulations, we assess our partners to ensure they offer fair value, are transparent, and cater to the needs of all customers, including vulnerable groups. We continuously review our practices to ensure compliance with these standards. While we make every effort to ensure the accuracy and currency of our editorial content, users should independently verify information with their chosen product or service provider. This can be done by reviewing the product landing page information and the terms and conditions associated with the product. If you are uncertain whether a product is suitable, we strongly recommend seeking advice from a regulated independent financial advisor before applying for the products.