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With the recent drop in bank base rate from 4 per cent to 3.75 per cent, mortgages are potentially more attractive in value-for-money terms than they have been for some time.

However, given the current level of house prices and a degree of market uncertainty over the Bank of England&#39s decision, the issue is far from clear-cut.

The matter where mortgage experts seem least sure of the best option is when advising first-time buyers. Extremely competitive rates provide an attractive reason to buy now but with house price inflation approaching 30 per cent it might be sensible to hold off and wait to see what happens.

According to Rob Clifford, director of Mortgage Force, wait and see is probably the best option. “I wouldn&#39t be surprised to see a decrease of about 5 per cent overall,” he says, “and maybe up to 15 per cent in London and the South-East. However, I do not expect to see the same level of change in rates in the next few months. I think first-time buyers would lose nothing from waiting for half a year. At worst, they would be in the same situation as they were six months before.”

Most other estimates agree that prices in London and the South-East will go down over the next few months but opinions are more evenly split about the rest of the country. Most advisers see no benefit in waiting.

For many prospective borrowers the best advice seems to be hold off at the moment. However, for someone taking out a new mortgage there remains the question of which one to choose.

Variable-rate mortgages are currently at the bottom of the pile. The interest rate reduction has for the most part not been passed on in its entirety to borrowers and mortgage experts see little likelihood of any large-scale change in this policy.

Clifford says: “Those who would like to steal a march have done so and we can only now expect relatively minor adjustments.”

For the majority he recommends a tracker mortgage. The main and most obvious advantage is that at the moment only a tracker mortgage gains the full benefit from the low base rate.

Another reason Clifford gives is the “what you see is what you get” nature of tracker mortgages, which are less amenable to lender manipulation than the conventional varied rate.

He looks back at the days when mortgage lending was a far less open shop, saying: “The market lacked transparency and this has led to many clients having a very cynical view of how mortgage lenders set rates. Clients value a policy which is clear.”

To those buying a property with no savings or spare income, the favourite advice is to take on a fixed-rate policy now to take full advantage of low rates in the longer term.

IFAs highlight the short-term reductions available to help a new buyer who must not only buy but also fit and furnish a new home. The additional protection of a fixed rate allows a borrower with little flexibility the assurance that he will not find himself suddenly forced to pay beyond his means if the market changes rapidly.

Bob Riach, of Riach Independent Financial Services, says: “Don&#39t think about what you can afford now, think about what you can afford in five years, especially if interest rates double.”

Not that a client should despair if he finds himself in difficulties. The general mood is that big lenders have become less likely to repossess. Most are happy to defer interest rates and restructure payments.

Riach says this is, in part, because it is now far more difficult for the lenders to win their case in the courts. The attitude of the law has become far less sympathetic to lenders since the housing slump of the early nineties.

One universal word of caution is that the worst thing that a borrower can do is take out other loans to cover a shortfall in the mortgage.

Clifford also strongly advises clients to consider remortgaging: “It is shockingly attractive at the moment. Many lenders will pay all legal costs and handle difficulties. Cash in while you can.”

Good advice, he suggests, is for a client to re-examine their policy about every two years, to consider whether changes in the market make remortgaging worthwhile. He says: “Providers have benefited from inane loyalty from their customers for too long.”

John Wriglesworth of the Wriglesworth Consultancy says that anyone with a standard variable rate remortgage should remortgage without question.

Riach suggests another good bet is a five to seven year fixed-rate mortgage but stresses that it is worth looking carefully at both penalty rates and mortgage portability before getting tied down. He also distrusts the housing market&#39s loosening of its own strictures. “Lenders are bending over backwards to get people to borrow at the moment. They are going as high as four times income. That is too much,” he says.

Another idea along similar lines that many borrowers might be considering is offsetting. Thanks to some heavy marketing this idea has been given a great deal of public exposure recently but is it a good idea? Wriglesworth says: “I would recommend it to many high-rate taxpayers,” stressing that it can bring worthwhile tax savings. But most advisers also caution that it is best not to leave yourself overexposed.

So how do the mortgage experts see the policy market overall? No one likes the standard variable rate and most think that even with interest rate reductions, the biggest rises are over. Wriglesworth says: “I think the boom is finished but I don&#39t expect to see a crash, more of a soft landing.”


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