Homeowners Could Save Thousands Of Pounds On Mortgages As Lender Price War Drops Rates To All-Time Highs
Homeowners could save thousands of pounds on their mortgage, as a price war between lenders drives rates to record highs. HSBC and TSB have just unveiled two-year fixed rate deals with an interest rate as low as 0.94%. And a number of lenders have launched eye-catching deals below 1% in recent weeks to tempt borrowers.
The real estate market has soared this year, thanks to the return of post-pandemic confidence and the stamp duty holiday. Although house prices edged down in May, according to the latest data from Halifax, they still rose more than eight percent year-on-year.
While the stamp duty holiday began being phased out earlier this month, homebuyers will still pay reduced stamp duty rates until October, when they will finally return to normal. Lenders are scrambling to come up with the most eye-catching deals to attract this expected continuing wave of buyers and movers.
Get a good deal: A number of lenders have launched eye-catching deals under 1% in recent weeks to tempt borrowers
Laura Howard, real estate and mortgage expert on comparison site Forbes Advisor UK, says signing up to one of these new, low-cost deals could save borrowers hundreds of pounds each month.
She calculates that paying 0.94% interest, instead of a standard 4.4% variable loan rate, would save more than £ 350 per month. This is a 25-year £ 200,000 repayment mortgage. “It’s money that could go right back to your pocket with nothing less to show,” Howard adds.
But mortgage experts warn that these offers aren’t for everyone. For example, the TSB loan is only available to those who wish to remortgage and have 40 percent of the equity in their home. The HSBC deal is available to homebuyers as long as they have a minimum deposit of 40% – a big demand for a first-time buyer in particular.
Even if you are eligible for these extremely low rates, they may not turn out to be the best deal, says Eleanor Williams, finance expert at Moneyfacts, who specializes in financial data. Both of these deals come with a fee of £ 999, and it’s not uncommon these days for lenders to charge fees of up to £ 1,500. Some borrowers may find that it is better to go for a higher interest rate with lower fees.
“Potential borrowers shouldn’t be swayed by just a low temptation interest rate,” Williams says. “It’s important to compare the options available and consider the overall cost of a new mortgage transaction. Borrowers should balance the initial rate against any costs such as fees – as well as any incentives that might be available. ‘ These can include free evaluation fees or cash back rewards.
While these interest rates are not available to everyone, most borrowers should find that they can get a better rate than their current rate when they proceed with a new mortgage, especially if they don’t have to. not shopped for a while.
David Hollingworth, London & Country Mortgage Broker, said: “All rates are low at the moment.
“Competitive pressure spills over into all areas of the market, including borrowers with small deposits and those who want to repair for five years or more. For years, we thought mortgage rates couldn’t go down any further, and they do.
He adds that even borrowers who only have a 5% deposit benefit from historically low rates.
A few months ago, there was no agreement for these borrowers. But today the Coventry Building Society is offering a two-year fixed rate of 3.25% with a fee of £ 999 for those with a 5% deposit. Leeds offers a two-year fixed rate of 2.47 percent with a fee of £ 999 for borrowers with a ten percent deposit.
GO TO A NEW RATE IF YOU HAVE AN OFFER
If you haven’t looked for a new loan offer for a long time, there’s a good chance you can save money by switching contracts. If you’re on your lender’s standard variable rate, you can even save thousands of pounds a year in repayments.
However, if you’ve made a deal recently, it may be best to wait until it’s about to expire before looking for a new one.
Most fixed rate mortgages have a prepayment charge, which in some cases can be as high as five percent of the value of the mortgage. It’s worth doing the math to see if the savings from the switch outweigh the fees you would have to pay by switching lenders. David Hollingworth of London & Country Mortgage Broker warns that it rarely makes financial sense to go halfway through a loan deal.
There is another option, however. “Some lenders allow you to enter into a new contract up to six months before the end of your current contract,” says Hollingworth. “If you only have a few months left on your current mortgage, you might consider shopping now for a good rate. “
He adds that it is recommended that you start looking for a new deal at least three months before the existing deal expires so that everything is in place and you can seamlessly change when the time comes.