‘A bitter blow for borrowers’ now that major lenders are raising mortgage rates
BORROWERS are being dealt a “bitter blow” as more lenders prepare to raise their mortgage rates.
Halifax, Santander and Co-op have all announced they will increase their rates in the coming days.
It comes after lenders including HSBC and Natwest signed cheaper deals only to come back with higher rates.
Santander has said some of its fixed rates for purchases and refinancing customers will rise by between 0.06 and 0.43 percentage points.
The free two-year fixed rate deal for purchases with a 40% down payment will increase from 4.77% to 4.92%.
Just three weeks ago, the banking giant was offering interest rates below 4%.
Elsewhere, Halifax has revealed that several of its fixed income deals will rise by up to 0.2% from Wednesday.
The cooperative bank has also said it will increase interest rates.
The product switch fixed mortgages are among those affected and will increase by a maximum of 0.72 percentage points.
Meanwhile, Natwest is increasing interest rates by up to 0.1 percentage points on a range of two- and five-year deals for existing customers looking to switch their mortgage.
According to financial website Moneyfacts, the average two-year fixed mortgage rate is currently 5.78%.
Meanwhile, the average five-year fixed mortgage rate is currently 5.35%.
This is an increase from an average rate of 5.34% on the previous business day.
Justin Moy, director of EHF Mortages, said the move meant “further disappointment in the mortgage market”.
He said: ‘This is a bitter blow for borrowers, especially as we quickly move into the most important time of year for property buying and selling.
“Rates must come down, and quickly, to save both the economy and the real estate market.”
Mortgage interest rates have risen slightly under difficult market conditions.
Swap rates, which underlie fixed-rate mortgages, have fluctuated in recent months.
Karen Noye, a mortgage expert at Quilter, said: ‘There have been some increases in mortgage rates in recent weeks due to higher swap rates, which could pose problems for potential buyers hoping to take advantage of the lower interest rates. seen at the beginning of the year.”
The Sun asked Karen and Nicholas Mendes, technical manager at estate agency John Charcol, how first-time buyers can still get a good deal in today’s mortgage market.
How to get the best deal on your mortgage
If you’re looking for a traditional mortgage type, getting the best rates depends entirely on what’s available at any given time.
There are several ways to get the best deal.
Typically, the larger the down payment, the lower the interest rate you can get.
If you take out a new mortgage and your Loan-to-Value ratio (LTV) has changed, you will have access to better rates than before.
Your LTV decreases if your outstanding mortgage is lower and/or the value of your home is higher.
A change in your credit score or a better salary can also help you access better rates.
And if you’re nearing the end of a standing deal soon, it’s worth looking for new deals now.
You can sometimes lock in current deals up to six months before your current deal expires.
If you leave a fixed deal early, you’ll typically be charged an exit fee, so you’ll want to avoid these additional fees.
But depending on the cost and how much you can save by switching or staying, it may be worth leaving the deal, but compare the costs first.
Use one to find the best deal Mortgage comparison tool to see what’s available.
You can also contact a mortgage broker who can compare a much wider range of offers for you.
Some charge an additional fee, but there are plenty who provide free advice and are paid only on the lender’s commission.
You will also need to consider mortgage costs, although some may not have any costs at all.
You can add the costs (sometimes more than € 1,000) to the costs of the mortgage, but keep in mind that you will pay interest on it and will therefore cost more in the long term.
You can use a mortgage calculator to see how much you can borrow.
Please note that you will also need to meet the lender’s strict criteria, including affordability checks and viewing your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three months’ pay slips, passports and bank statements.
Get pre-approved for a mortgage
A mortgage pre-approval is a document that a lender prepares to tell a home seller how much money you can borrow to purchase a home.
It is also indicated for which mortgage loan you are eligible and what interest rate the lender will charge you once you have submitted a mortgage application.
Nick said: “Getting pre-approved for a mortgage gives you a competitive advantage and shows sellers that you are a serious and qualified buyer.
“It also means you can start comparing mortgage offers from different lenders to get the best terms.”
To get pre-approved, you must submit a mortgage application. So you have to share all your personal information, as well as things like consent for a credit check.
The prior approval is granted in the form of a letter, which is valid for a limited time, usually between 60 and 90 days.
Save for a larger deposit
The more money you have, the less money you have to borrow and the more attractive you are to a lender.
This is because the loan to value ratio is smaller, putting you at less risk to lenders.
So if you were able to save more money than expected, stick to your budget and don’t take out a larger mortgage.
And if you can make a larger deposit, it can help you in the long run.
Nick said: “Determine a budget based on your financial situation, including deposit, monthly mortgage payments and other associated costs.
“It’s important to be realistic about what you can afford to avoid overextending yourself.”
Think about your solution
Longer mortgage terms can make monthly payments more manageable, but borrowers may end up paying more in interest.
But more and more first-time buyers are opting for longer mortgage terms as a way to deal with interest rate increases.
Karen said: ‘The length of time you commit to your mortgage agreement can affect the rate you pay.
‘Many five-year mortgage loans are associated with a lower mortgage interest rate than a two- or three-year fixed deal.
“However, it is important to look at the longer term because if interest rates fall over the next few years, you could end up paying more than you need to in the longer term if you lock in a longer initial term when rates go up.”
Get mortgage advice
It may be tempting to go straight to a bank or building society for your first mortgage, but this can seriously limit your options.
A broker can review a wider range of products and advise you on the right choice for your circumstances, as well as assess any hidden costs that can sometimes be difficult to find.
However, keep in mind that they usually charge a fee for their services, so you should factor that into your costs.
Karen says: “A mortgage adviser can better keep up with changes in the market and can help you explore all the options available, ensuring you get the best possible deal for your personal circumstances.”
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