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I could have fixed my mortgage rate for years longer. I’m a fool

I have been having flashbacks. Not the kind I used to have, of when I went hiking in Yosemite National Park without a map and ended up sliding down a bear-infested trail on my backside in the dark. No, these flashbacks relate to a time in my more recent life, and an ill-fated conversation with my mortgage broker in July last year that led to a severe financial misjudgment.

My wife and I had just sold our house while juggling careers and three small children, and it was time to choose a mortgage for the new one. Should we take a two-year fixed-rate deal or a five-year one?

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The five-year mortgage was with Santander, and the two-year with the West Brom building society. Both had interest rates of just over 1.2 per cent, and our broker pushed for the two-year deal. The Bank of England base rate was 0.1 per cent, and he said he would be stunned if the base rate or mortgage prices went up significantly by summer 2023, when we’d be due to renew. Plus (and after this week’s 0.5 percentage point rate rise, this is makes me squirm the most) he reckoned being stuck with a five-year deal and its hefty early repayment charge was the riskier option.

The clincher was that the West Brom would lend us £40,000 more than Santander would because it had a more relaxed affordability calculation, and we wanted that money — the place needed some work. It was an interest-only mortgage, which appealed because the repayments would be low while my wife was temporarily out of work. The two-year deal it was.

Fast forward a year and . . . yes, I know, I’m an idiot.

Since we took out our mortgage the base rate has risen six times, now sitting at 1.75 per cent. It is heading in only one direction, and could be as high as 3 per cent when our two-year fix term ends.

Lenders, of course, follow the base rate when setting their rates. According to the data firm Moneyfacts, the average two-year fixed-rate deal has gone from 2.55 per cent to 3.74 per cent since we took out our loan, and the average five-year fixed rate is up from 2.78 per cent to 3.89 per cent. Next summer we may be offered 4 per cent, which could mean paying £1,000 more each month than we do now.

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So what can we do about it? Work is about to begin on the downstairs of our house, and it’s becoming ever more expensive because of inflation — we’ve now scaled back our plans and are leaving a tumbledown garage in place. We’ll mitigate the impact of our bigger future mortgage payments by setting aside money each month, and perhaps overpaying on our existing deal. We’ll burn through our savings.

However, for many borrowers coming off fixed rates next year, the prospect of a deal at a much higher rate is going to trigger a “payment shock”, as the broker Andrew Montlake puts it. Of course, at this time of pandemic, war, rising inflation and heatwaves, planning anything is difficult — from when to remortgage to how often to water the garden. I’ll be far from alone in facing nasty flashbacks over the coming months.

By DAVID BYERS

Source: The Times

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Knight Frank: Scottish commercial property investment hits pre-pandemic levels in first half of 2022

Scottish commercial property enjoyed its best first half of the year for investment volumes since 2018 as the market continued its recovery from the Covid-19 pandemic, according to new analysis from Knight Frank.

The independent commercial property consultancy found that £1.2 billion of commercial property deals were agreed between January and June 2022, up 54% on the same period last year. The figure is also 21% ahead of the five-year average – albeit, this was skewed by low investment volumes during 2020 and, to a lesser degree, 2021.

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Overseas investors represented more than two-thirds (68%) of the total investment figure, equivalent to £843 million, with UK property companies the second most active buyers totalling £296m – 23.9% of overall investment volumes.

Investment in retail assets increased by more than 55% on 2021, rising from £148m to £230m with retail warehousing accounting for £165m of the total figure. Offices were the most popular asset class with £410m worth of deals, boosted by the sale of HFD Group’s 177 Bothwell Street in Glasgow, in what is believed to be a record transaction for Scotland.

Edinburgh saw £400m of investment, while Glasgow accounted for another £329m. Deal activity in Aberdeen continued to pick up, reaching £189m, largely from the sale of two retail warehousing assets.

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Alasdair Steele, head of Scotland commercial at Knight Frank, said: “The first half of the year has underlined a couple of key trends that have emerged over the last two years: retail warehousing and industrials remain in high demand, while prime offices are highly sought after – underlined by the deal for 177 Bothwell Street.

“Similarly, overseas investors accounting for such a high share of investment during the last six months also highlights the strength and depth of the buyer pool for Scottish commercial property.

“An uncertain macro-economic outlook will likely cool deal activity over the next couple of months. However, commercial property has typically acted as a hedge against inflation for investors and, with yields in Scotland’s main cities comparatively good value and supported by strong occupier markets, we expect interest to remain strong in the second half of the year.”

Source: Scottish Construction Now

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Foreign owners hold £90.7bn worth of property in the UK

Overseas nationals own almost 250,000 homes across England and Wales, the latest research by London lettings and estate agents Benham and Reeves shows.

In the current market, that is £90.7bn worth of property, suggesting that the UK remains a safe haven for foreign homeowners.

On a regional basis, London is home to the highest value of foreign owned homes, with the 85,451 properties belonging to overseas homeowners equating to a total value of £45.3bn.

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Westminster ranks top, with foreign owned homes commanding a current market value of £11.8bn, while in Kensington and Chelsea this total sits at £10.7bn.

Tower Hamlets ranks third, although some way off the top two, with overseas homeowners sitting on £3.7bn worth of property, followed by Wandsworth (£3.3bn) and Camden (£3.2bn).

Outside of the capital, Buckinghamshire is home to the highest value of foreign owned homes at £31.1bn, while Tandridge (£1.6bn), Liverpool (£1.4bn), Salford (£1.1bn) and Manchester (£1.1bn) also make the top 20 list.

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Director of Benham and Reeves, Marc von Grundherr, commented: “It’s not just domestic homeowners who have benefited from some extreme rates of house price appreciation in recent years and despite attempts to deter foreign interest, the value of homes owned by overseas buyers remains considerable, to say the least.

“While London is home to the highest concentration of foreign owned property market wealth, it’s certainly not confined to the boundaries of the capital alone, and overseas buyers remain an important segment of the market across England and Wales.”

By MARC DA SILVA

Source: Property Industry Eye