With interest rates falling below 1 per cent, homeowners are being urged to check they are on the best possible deal, which could see tens of thousands of people see their monthly costs fall as a result
This Is Money reports that mortgage rates have reached record lows, with some five-year deals now as cheap as 1.19 per cent for those with 40 per cent deposits, dropping from 1.32 per cent a year ago.
Checking your mortgage deal, and then going on to find better mortgage deals, could be extremely advantageous to homeowners at a variable rate, meaning they can be paying excruciatingly high rates for their loan each month.
Anyone who is approaching the end of their fixed-term should also start comparing rates six months ahead due to delays due to the pandemic and the pressure on banks and brokers at the moment
Money-saving expert Marin Lewis said: “Rates have dropped below 1 per cent – check urgently if you can switch & save £1,000s. Acceptance isn’t always easy, but don’t just accept the status quo.”
He explained that a combination of ‘ultra-low UK interest rates’, as well as the stamp duty holiday, and people saving more during the lockdown, means that there is a lot of competition between mortgage providers that customers can take advantage of, including both buyers and anyone planning on remortgaging.
It’s important to act quickly to avoid any standard variable rates, typically the default rates to be paid once your initial term comes to an end
To get started, check out any deals that your current lender is offering, and use a mortgage comparison tool to see if you can find a cheaper rate elsewhere.
The first questions to ask yourself when you find a deal are:
- What is the interest rate and what does that amount to in monthly payments?
- What type of mortgage deal is it? Most people will opt for fixed or tracker deals.
- How long does the introduction period last and what are the upfront fees of the deal?
- Will you be penalised to switch? Are there early repayment/exit penalties during your fix or tracker deal?
- What’s the loan to value (LTV) – how much of your home’s value do you need to borrow
Most rates fluctuate because of the loan to value (LTV) on the mortgage. Mortgages start at 95 per cent LTV but are usually far cheaper at 90 per cent or less than the home’s value
You should also factor in any savings if you’ve been fortunate enough to be able to put some money away during the pandemic, and put it towards your mortgage to potentially save tens of thousands of pounds in the long run by reducing your loan to value ratio.
For example, if you had a £150,000 mortgage, and used an extra £1,000 of savings to get you to 75 per cent LTV, the top two year fixed deal drops to 1.18 per cent. That means you would pay £580 a month, as opposed to 1.79 per cent, which was £625 a month.
If you’re looking for mortgage brokers in Twickenham, talk to us today.
