Commercial Market News – Interest rates and Products – Late 2022
15th November 2023
By Alex Walker
Video Transcript: commercial Mortgages Sept 2022
If you’re wondering what’s happening with interest rates and products for commercial mortgages in Sept 2022, I’m going to tell you.
So firstly, I think you can rest assured that the lenders are not reacting in the same way that the Residential Mortgages lenders are doing because they’re not pulling all of their products, and the criteria for commercial mortgages as at Sept 2022 is staying generally the same. So we haven’t got that same full-scale panic. However, where we’ve got a massive issue is in fixed rates. That’s because all the lenders are worried to death about the fixed rates and where they’re going to go.
Fixed rates have gone up a lot, in some cases one lender has cancelled everything on their fixed rate, they are not doing fixed rates anymore at all. But they’re in the minority. Most lenders are still doing fixed rates, but they have gone up. To give you an example, beginning of August we would probably be talking about fixed rates of 5.99 for five years, as a typical rate. Those have gone up to 7.99, but I would say it’s amongst the High Street lenders where there’s it’s even worse because they were offering much lower fixed rates and they’re looking further out to the future and their fixed rates are as high as any tier 2 and tier 3 lenders. So the High Street appear very very nervous about fixed rates.
Are variable rates now a better option?
Variable rates? They’re still okay and there’s still some great deals. I’m looking at a case at the moment we are looking to complete which is 2.3 above base, so that’s still a great deal; it’s just that base has gone up.
There’s a lot of turmoil in the market. The impact of rates going up is putting more stress on affordability. This is particularly on investment properties because many landlords want the maximum amount. The rental yields in some cases are now not high enough to support the same levels of borrowing as the repayments are now higher.
The key point is lenders are still lending. There’s a bit of volatility in terms of fixed rates. I think that some lenders are going to move rates up further. This is because they haven’t all yet reacted to what happened recently with regards to the mini budget, what’s going on currently in the market and the concerns over the pound.
But they are still lending so that’s good but rates are higher. Where as, two months ago, you may have been thinking “let’s get into a fixed rate” you might now be thinking “let’s get in to a variable rate” That’s simply because of how much higher fixed rates are and it might be better to go with a variable rate. So there’s a little bit of scaremongering around. Don’t be put off. I expect it to settle in a few weeks. And keep an eye on the base rate
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More than 50% of borrowers receive offers better than our representative examples
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Mortgages and Remortgages
Borrow £270,000 over 300 months at 7.1% APRC representative at a fixed rate of 4.79% for 60 months at £1,539.39 per month and thereafter 240 instalments of £2050.55 at 8.49% or the lender’s current variable rate at the time. The total charge for credit is £317,807.66 which includes £2,500 advice / processing fees and £125 application fee. Total repayable £587,807.66
Secured / Second Charge Loans
Borrow £62,000 over 180 months at 9.9% APRC representative at a fixed rate of 7.85% for 60 months at £622.09 per month and thereafter 120 instalments of £667.54 at 9.49% or the lender’s current variable rate at the time. The total charge for credit is £55,730.20 which includes £2,660 advice / processing fees and £125 application fee. Total repayable £117,730.20
Annual Interest Rate (fixed) is 49.7% p.a. with a Representative 49.7% APR, based on borrowing £5,000 and repaying this over 36 monthly repayments. Monthly repayment is £243.57 with a total amount repayable of £8,768.52 which includes the total interest repayable of £3,768.52.
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