5.40% Offset Tracker until 31/05/09 helps with ups and downs of home-owning
House-hunters peering in estate agents' windows and seeking advice from mortgage brokers this spring are likely to face a financially fraught first year - shocked by basic financial oversights, unexpected bills and even babies.
According to new research conducted as part of Clydesdale Bank's development of its 5.40% Offset Tracker until 31/05/09, far from ending when the 'sold' sign goes up, many homeowners discover the drain on their pocket has only just begun. Almost one in two (44%) admit they forgot to factor in legal fees, stamp duty and even a property survey. Fewer than one in ten (8%) put any money aside for moving costs.
But the expenses of a new home do not end when the boxes are unpacked. One in three new home owners (33%) was totally unprepared for the large amounts of cash they would have to continue to splash out over the coming months - which is why brokers should find Clydesdale's Offset Tracker has particular appeal for clients. With a competitive rate of just 5.40%, that will remain at just 0.15% above the Bank of England (BoE) base rate until 31/05/09, when it reverts to 0.65% above BoE base rate, the Offset Tracker mortgage can help minimise the cost of settling into a new home.
And when homeowners' financial position starts to improve in the long-term, it also provides the flexibility to make overpayments. Because it is an offset mortgage as well, for those lucky enough to have savings put by, it will also minimise the interest paid on the home loan.
Clydesdale Bank's research shows that within the first year, one in three homeowners (32%) have had to replace or repair a broken cooker and one in eight (14%) have faced even larger bills when their boiler blew up. Adding to the expense, one in 10 women (10%) have become pregnant soon after moving in to their new home.
Fred Sharp, Clydesdale Bank's head of third party distribution, said: "Our survey highlights how important it is for brokers to look at their clients' entire financial position - not just the immediate costs of the mortgage. Overlooking costs such as surveys and stamp duty is asking for trouble when, as our survey suggests, there are likely to be less predictable expenses as well.
"Arranging an Offset Tracker mortgage with an initially lower rate can help new homeowners to deal with the short and long-term costs involved with homeownership. Brokers can assure clients that it will not out pace the Bank of England base rate and its flexible options of overpayments once their financial position improves can mean homeowners are able to make plans for the future with a little more certainty - whether it's home improvements or starting a family. Being an offset mortgage, brokers will also be in the positive position of being able to let homeowners know that any savings they can build will proportionately minimise the interest they will pay on their home loans.
Clydesdale Bank's research also found that many brokers' clients may also be saddling themselves with high expenses more than a year after moving in. Despite the overhaul of the council tax bandings, only two in five (45%) found out which band their would-be-home was in before they bought it. Perhaps more surprising, with higher fuel bills and energy efficiency measures being brought into HIPs (Home Information Packs), only 25% of homebuyers enquire what the previous occupant paid in utility bills.
Fred Sharp said: "No adviser can predict what one-off costs a client may face after moving in to their new home. But our survey does suggest it might be helpful to point out many of the significant, predictable long-term costs they could be letting themselves in for - such as utility bills or council tax."
Making your mark
Clydesdale Bank Mortgages' survey found that more than one in three new homeowners (39%) don't want to live with the reminder of the previous owners decor, therefore paying to redecorate is a price they are willing to pay as soon as they move in. Within the first year of living in a property, 76% of homeowners splash out on both a new kitchen and a new bathroom - at an average cost of £6,500.
Fred Sharp said: "Most homeowners are eager to make a mark on their property as soon as they move in. But it's important to include decorating costs in your budget before you start peeling off the wallpaper or ripping out a kitchen, otherwise you may not be able to afford to finish the job you started. To help avoid the short-term financial hassles and the larger long-term expenses, it's important for homebuyers to get their finances in order before they even start to look to move home."
Brokers can get further details from their relationship manager at Clydesdale Bank, by telephoning its Intermediary Support Team on 0800 678 3066 or visiting its website at www.CBISonline.co.uk. The Bank's consumer website - www.cbonline.co.uk - offers Home Information Guides, which are written especially for those thinking about buying a home, selling or renovating. There are useful hints on where to begin, what to avoid and the sorts of things which need to be considered.