MARTIN Lewis has urged homeowners to check their mortgage deals immediately as rates have fallen to record lows.
Mortgage holders could save thousands of pounds by switching deals – but make sure you check out these top tips before making the move.
Why have mortgage rates fallen?
Two-year fixed rate mortgages are down to 0.95% and five-year fixes are at 1.17%- although homeowners should watch out for fees.
Lenders are competing to offer the best customers the best deals, Martin said in his latest MoneySavingExpert weekly newsletter.
This is due to low UK interest rates, an active housing market and banks that have cash to lend as many consumers have built up savings during the pandemic.
However, new economic data released today showed that low interest rates could be short-lived.
The best mortgage deals available now
WITH mortgage rates at a record low, now is a good time to take a look at your deal to see whether you could save money…
These are the best rates currently available at each loan to value level, according to Money.co.uk.
Remember, you should do your own research before switching deals and always account for any additional fees.
- LTV 95% – Darlington Building Society 5 year fixed
Maximum LTV: 95%
Initial rate: 2.99% fixed until 31 Jul 2026
Subsequent rate (SVR): 5.3% variable
Overall cost for comparison: 4.3% APRC`
(Monmouthshire Building Society and Virgin Money offer lower interest rate for 95%, however only to existing borrowers) - LTV 90% – Vernon 2 year discount Maximum LTV: 90%
Initial rate: 2.35% for 2 years (2.85% discount on SVR)
Subsequent rate (SVR): 5.2% variable
Overall cost for comparison: 4.9% APRC - LTV 80% – Furness Building Society 2 year discount
Maximum LTV: 80%
Initial rate :1.49% for 2 years (3.65% discount on SVR)
Subsequent rate (SVR): 5.14% variable
Overall cost for comparison: 4.6% APRC
(Leek United offer lower interest rate for 80%, however only to existing borrowers) - LTB 50% – The Cumberland 2 year fixed remortgage
Maximum LTV: 60% (The lowest LTV requirement is generally 60% , so in answer to the 50% question will be the same as those up to 60%)
Initial rate: 0.98% fixed until 01 Jul 2023
Subsequent rate (SVR): 4.09% variable
Overall cost for comparison: 3.8% APRC
Existing borrowers
- LTV 95% – Monmouthshire Building Society 2 year discount for existing borrowers
Maximum LTV: 95%
Initial rate: 2.59% for 2 years (2.15% discount on SVR)
Subsequent rate (SVR): 4.74% variable
Overall cost for comparison: 4.5% APRC
This product is only available for product transfers with your existing lender and not available for purchasing a new home. - Leek United 2 year discount for existing borrowers
Maximum LTV: 80%
Initial rate: 1.29% for 2 years (3.9% discount on SVR)
Subsequent rate (SVR): 5.19% variable
Overall cost for comparison: 4.5% APRC
Available to existing borrowers not moving only.
UK inflation reached 2.1% in May driven by higher clothing fuel and dining out prices, sparking fears of an interest rate rise.
Experts have warned this unexpected bounce back could be a sign of the market overheating and will squeeze household finances.
The Bank of England could now raise the base rate much higher than planned.
This would cause lenders to hike interest rates on things like personal loans and mortgages.
How to find the best deal
The mortgage deal you're offered will depend on several factors including the size of your deposit, how much you want to borrow and your credit score.
First of all, you should check your current deal and contact your lender to see whether you can be switched to a better deal without going to a different firm.
Alternatively, You can use an online mortgage comparison tool to see whether you could save money by switching.
Your loan to value (LTV) is the biggest factor that will impact the mortgage rates you pay.
How do you find the best mortgage deals?
WE explain how to ensure you get the best deal on your mortgage or remortgage:
Websites such as MoneySuperMarket and Moneyfacts have mortgage sections so you can compare costs. All the banks and building societies will have their offers available on their sites too.
If you're getting confused by all the deals on the market, it might be worth you speaking to a mortgage broker, which will help find the best mortgage for you.
A broker will typically cost between £300 and £400 but could help you save thousands over the course of your mortgage.
You'll also have to decide if you want a fixed-deal where the interest you're charged is the same for the length of the deal or a variable mortgage, where the amount you pay can change depending on the Bank of England Base Rate.
Remember, that you'll have to pass the lender's strict eligibility criteria too, which will include affordability checks, and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month's payslips, passports and bank statement.
LTV means the ratio of your mortgage compared to the value of your property.
For example, if you have a deposit of £10,000 and you have your eye on a £100,000 home, you’ll need a 90% LTV mortgage.
Mortgages start at 95% LTV – but you can get better deals at lower LTVs.
Martin said: “It's still usually far cheaper at 90%, again at 80%, 75% and then bottoms out at 60% of a home's value. There can also be minor gains at each 5% in between."
Be aware that there are other costs to consider when making the switch – such as additional fees to take out the deal.
Fees are usually higher for the mortgages with the lowest rates.
Also bear in mind that if you’re currently locked into a mortgage deal you may have to make an early exit payment before you can change.
Lenders will look at two key criteria before they allow you to remortgage.
Firstly, they will check your credit history. If it's poor they may block your application or lock you out of the cheapest deals.
You can check your creditworthiness online – and there are ways to improve your score.
Mortgage providers will also check whether you will be able to keep up with your repayments – at current rates and also if they skyrocket.
They will check your income, bills and expenses for evidence that you will keep up with your payments.
If you have build up savings during the pandemic, Martin Lewis recommended using the cash now so you need to borrow less for your mortgage.
James Andrews, senior personal finance editor at money.co.uk said: "Getting the cheapest mortgage for your deposit isn't only about the rate.
"You need to think about the fees too. This is especially true for shorter offers.
"On a two-year mortgage deal, for example, you might find it's cheaper to take a higher rate with a lower fee than just apply for the one with the smallest APR.
"On the flip side, getting a lifetime tracker deal can save you thousands in fees over the course of your mortgage as you only need to apply once.
"It's also notable how much cheaper mortgages become when you cross one of the LTV thresholds – meaning if you're close to a boundary and able to save up that little bit more before you apply, or negotiate a little bit off the asking price, you can make substantial savings over the course of the loan."
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