Cheap Home Owner Loans Could Soon End
Over the course of the past two years, the average cost of running a home has fallen significantly for families. Despite many expenses such as fuel and food having increased in cost over the period, overall the cost of running a home has fallen by around 14 per cent since 2008.
The main reason for this decrease in costs is due to the current low interest rates charged on a typical home owner loan or mortgage. Since the Bank of England reduced the base rate of interest in March 2009, the average home owner spends 28 per cent less each month on their loan than they did two years ago, when their loan typically accounted for around 43 per cent of their income.
But one property expert has warned that this run of cheap loans could be coming to an end, pushing up the costs of a home owner loan once more.
Timothy Lambert of Ducalian, an independent property firm, has warned that many borrowers have taken out cheap loan products over a short term of just two or three years and that when the initial deal runs out, their loan repayments could increase significantly.
With current lending restrictions from lenders and the possibility of changes to regulation of home owner loans by the Financial Services Authority (FSA), many individuals with a current loan may now be excluded from the option of being able to remortgage once their initial loan deal ends.
This fact, coupled with the likelihood that the base rate of interest on loans will increase in the next couple of years, means that those borrowers who are currently enjoying cheap loan rates should take full advantage of the fact at the moment and use the opportunity to overpay as much as they can on their loan whilst rates are still cheap.
