Expat Mortgage Experts
To Fix or Not To Fix
April 2011
Noble thoughts
are alien to our greedy bankers and they would like you to fix as fixes are more
profitable for them. They also prefer borrowers to opt for capital and
interest loans for the same reason. A good consumer rule of thumb has always
been to take the opposite course to that recommended by the banks.
Forgetting
expatriate status, the best two year residential fixes at 1st March
were 3.5% with five year fixes a ‘shocking’ 5%+. Average rates 3.5% and
5.5%. Add expatriate status and letting to the mix and higher rates prevail.
We believe that trackers still offer better value where rates are still in the
low/mid 3’s. This is for family occupation or letting provided the loan value
is not too high.
Our greedy
‘casino bankers’ having wrought havoc with the UK economy have cashed in their
chips and gone off to cosy retirement, knighthoods or highly paid non jobs with
‘old chums’. Vince Cable, sadly diminished by shrewd sidelining by Cameron and
Osborne, remains the voice of reason where the banks are concerned. His
description of our ‘casino banks’ determination to nationalise their losses and
privatise their profits’ could not have been more accurate.
In January 2006
Bank Rate was 4.5%. The banks average authorised overdraft rate was 12.3%.
Despite a Bank Rate of just 0.5% for the last two years, the equivalent lending
rate is now 14.4%. Tax payers, who own 83% of Royal Bank of Scotland, may well
see a return as our clever friends have been able to turn in bumper profits
justifying bumper bonuses for them. If you and I could borrow at 3-4% or less
and lend it out at usury rates we too could be financial wizards!
Some 7 million
borrowers in the UK have had the comfort of mortgage rates of 2.5% or less.
The chart herewith assesses whether the borrowers on differed variable rates
should fix or stay in their current deal. This would indicate that only
borrowers paying a relatively high standard variable rate in the 4%+ would
benefit from switching to a fix.
[Assuming
interest rates rise in line with the Bank of England’s inflation report – Bank
rate rises 0.75% Aug, 1% Nov and then in stages to 3% by Nov 2013]
Adapted from The
Times
QROPS ABUSE
Deviating
from our normal mortgage focus it seems sensible to pass on the news that the
Government has established a specialist fraud unit to monitor QROPS due to
concerns about fraudulent activity and irresponsible transfers. The UK HMRC
has established a dedicated team to monitor QROP activity. This will be an
anti-fraud unit working closely with the pensions regulator and the FSA.
From our own
contact with expatriates around the world it would seem there are a lot of
people offering QROPS who are bending the rules. In 2008 HMRC de-registered
all Singapore based QROPS leaving members vulnerable to a 55% unauthorised
payment charge on their transfer value. Last September HMRC revoked the status
of one of Hong Kong’s leading QROPS providers.
Recent changes
in UK pension rules have had the effect of diluting some of the benefits which
had made QROPS particularly attractive. Whilst IMP do not advise on this
particular vehicle we do have arrangements with specialist tax and pension
advisers who will be able to keep abreast of a changing situation.
Likewise the
Government and Revenue are showing interest in the expansion of Stamp Duty
mitigation schemes.
Adrian
Wright
April 2011
Mortgage Enquiry Form
Back to IMP Homepage |
