North London Estate Agents explain different rates and their Impact on Property

Nov. 23, 2014 - PRLog -- In general, the lower these rates, the more affordable buying property for sale in north London becomes. Although the rates don't directly affect house prices, they do affect how costly monthly mortgage repayments are. If mortgage repayments are high, buyers will usually modify their purchasing behaviour - buying cheaper properties, borrowing less money or even deferring moving plans altogether. An increase in any one of the three main rates can be used to dampen an over-heated property market.

Winkworth present a guide to the three rates that every buyer looking at properties for sale in north London should be aware of, and the rate outlook for 2015.

Interest rate - this is the interest rate the Bank of England (BoE) charges banks for secured overnight lending. The Monetary Policy Committee meet once a month and vote whether to hold, decrease or increase interest rates, taking into account unemployment figures, inflation, the housing market, and the wider economic outlook at home and internationally. The current historically low rate of 0.5% is not expected to rise imminently due to falling inflation, limited pay rises and new mortgage lending measures to stop a boom/bust property market. Mortgage rates usually rise when interest rates do.

Mortgage rates - this is the rate of interest set by a lender and paid by a borrower on a mortgage loan. It is worth remembering that mortgage rates and interest rates are not the same thing. Mortgage rates are heavily influenced by swap rates (see below) and mortgage rates can also alter in line with industry competition - if one lender lowers its mortgage rates to attract more business, the others normally follow suit to compete. For buyers of property for sale in north London, this means more affordable, lower monthly mortgage repayments. When mortgage rates rise, so do monthly mortgage repayments.

Swap rates - Winkworth north London estate agents (http://www.winkworth.co.uk/regions/north-london) agree that swap rates should be more talked about in property circles as they have a bigger impact on affordability. Lenders don't always use their own money when they grant a mortgage loan. They can buy money from other banks at a certain rate - a swap rate - as well as use money from savers. The cheaper the swap rate, the more money they borrow and the more generous they are in offering borrowers loans at lower mortgage rates.

Short-term swap rates react to gilt yields and the rate of inflation. If inflation stays low, so will short-term swap rates and in turn, mortgage rates. Long-term swap rates are more in tune with the BoE interest rate and if there is expectation for the interest rate to rise, longer-term fixed rates will usually experience uplift.

Currently swap rates are low and inflation has fallen; therefore mortgage rates are at their most affordable for many years.