All things being equal, I can see very little reason not to opt for a 5 year fix over a 2 year. After 2 years, rates will almost certainly be a fair bit higher than they are now, so the 5 year fix will prove good value over the term.

The economy is still relatively weak and the Government cuts will only depress demand in the short-term, but on the other hand inflation remains high and is not dropping anywhere near quick enough to meet the Bank of Englands 2% target. So raising rates will tackle inflation but harm the economic recovery.

My feeling is that a 2 year fix and a 2 year tracker will offer roughly the same cost over the 2 years, but a 5 year fix now will work out cheaper than a tracker over the 5 years. So I am leaning towards recommending five year fixed rates, although this would obviously depend upon peoples circumstances, so do not take it as a recommendation!

The effect will surely be to stop house prices taking off as they have previously. With lenders cracking down on interest-only mortgages at the same time, I expect the effect will be that house prices will not only cease to rise as much as they have done, but quite possibly result in prices actually falling again, especially when interest rates are eventually increased, which I expect to start in early 2011.

This should see a return to the days of buying a property as a home, rather than as an investment. So if you are planning on buying soon, be aware that your home may end up being worth less than you paid for it for a few years to come.

This is the opposite of what has been said previously and leaves those customers will no choice but to have to pay redemption penalties.

Northern Rock should be ashamed.

This is an excellent deal and I do not expect it to last long!

Contact us for further details.

Currently profits are charged at 18%, after allowing for an allowance of £10,100 per person. So a couple will be able to make £20,200 profit without paying tax.

They intend to charge CGT at the same rate as you pay on income tax. So it would be at least 20%, perhaps 40% if you earn over £42,000 a year or so – 50% if you are lucky enough to earn over £150,000  a year. If you fall between these figures, some of your profit will be taxed at the lower rate, some at the higher rate.

So if you earn over £42,000 a year, you will pay 40% tax as opposed to 18% tax, if you sell the property.

The fear is that this could force house prices down in one of 2 ways – forcing those who own a BTL and are sat on a large profit to sell now to keep their tax bill low.

For instance, say you earn £45,000 a year and bought a house, some years ago, and it is now worth £110,000 more than you paid for it. Subtract the £10,000 CGT allowance and you pay tax on the £100,000 profit at 18% = £18,000 cheque to the Government.

If you wait until next year to sell, the tax will jump to 40% = a total of £40,000 would be payable in tax, an extra £22,000 in tax.

So, you can sell now and save £22,000 in tax. The concern is that many people will do so, flooding the market and forcing prices lower.

Secondly, potential BTL buyers will be put off from investing – why invest if I only get to keep 60% of the profits? The lack of demand will also push prices lower.

The net effect is that BTL has suddenly become less attractive an investment. I’m not sure this will be the case – anyone with money to invest will still have the same level of CGT to pay regardless of where the money in invested – but at the very least it will upset an an awful lot of people with BTL’s that they were planning on selling soon…..

They are currently only offering this concession until 30 June 2010 – so your new mortgage must be in place by then in order to get the ERC’s refunded from Northern Rock.

This may be extended – Northern Rock are refusing to comment on it – but do not count on it, so to see if you are eligible contact us – phone 0800 019 8534 or email us or go to our Contact Us page and complete the enquiries form.

Not a moment too soon. Expensive, worthless and a drag on the house selling process.

So if you are about to sell, wait a little while until they are formally abolished and save yourself at least £500.

Until now they have accepted them below a certain loan-to-value. This will change.

They now propose to not only insist on repayment only above £500k, but also intend to increase the interest rate by 0.20% for those who take interest-only compared to repayment.

Why would they do this? A few reasons.

First, a repayment mortgage allows them to reduce the amount they lend each year in line with the mortgage repayments. So the liability on their balance sheet declines and allows them to lend more money to other people.

Secondly, it reduces the risk they are exposed to. A repayment mortgage has a declining amount owed each year compared to an interest only mortgage.  So as time progresses, the equity in the property will automatically increase, regardless of house price movements. Hence the risk to the bank decreases because, should they have to repossess the house, they have a greater chance of selling the property for more than the mortgage. Compare this to interest-only, where the amount owed stays exactly the same.

Finally, it reduces the banks exposure to any legal action in the future from borrowers who may argue that they have been miss-sold a mortgage.

If you have a proper repayment vehicle, such as an ISA, endowment or pension plan, you may continue with an interest-only mortgage – it is only aimed at new borrowers with no repayment vehicle.

The effect of this policy, if copied by other lenders, may well be to force property prices lower. This is because there are people who borrow on an interest-only basis in order to increase their affordability. For instance, borrowing £250k over 25 years at 5% will cost £1,461 a month repayments, as opposed to £1,041 interest-only. So if your budget is £1,040 a month, you will be forced to reduce your maximum loan to around £180,000. This is a big difference and it’s not hard to imagine that, if duplicated across the whole market, the effect would be to force people to pay less for houses and hence bring prices down.

It’s a difficult question to answer at the moment. It depends on the size of your mortgage, whether you are happy to accept the risk of higher mortgage payments, your income and your attitude to future possible income tax rates.

My advice would be to seriously consider a fix if you find that you are struggling with your current mortgage repayments, or if a small rise will result in a big increase in your repayments. If your mortgage is within your budget, and you have spare money to pay any increases, you may be happy to accept the lower tracker rates immediately available, but with the knowledge and ability to meet higher payments in the future should you need to.