Warning about ‘blink and you’ll miss it’ mortgage deals – how to get cheap rates
Homebuyers are being warned of ‘blink and you’ll miss it’ mortgage deals as interest rates continue to rise.
Mortgage interest rates have risen slightly under uncertain market conditions.
Swap rates, which underlie fixed-rate mortgages, have fluctuated in recent months, causing lenders to adjust their interest rates.
As a result, the shelf life of a mortgage product has fallen from 28 days in February to 15 days in March – a six-month low.
But mortgage choice recorded its biggest month-on-month increase in six months and the number of options for borrowers reached more than 6,000 – the largest number in 16 years.
Deals available on the open market can be taken off the market and repriced at any time.
The rates offered when deals are revised may fall or rise from previous levels, but this all depends on the current financial climate.
Currently, the average two- and five-year fixed rates rose to 5.76% and 5.34% respectively between early February and early March.
Halifax, Santander and Co-op all announced last week that they would increase their rates.
It comes after lenders including HSBC and Natwest signed cheaper deals only to come back with higher rates.
Rachel Springall, financial expert at Moneyfacts, said: “Lenders responded to the change in swap rates, which led to numerous repricings of fixed rate deals, undoubtedly making it a challenging situation for borrowers and brokers to keep abreast of the changes.
“Interest rate volatility led to a rise in both the overall average two- and five-year fixed rates, the opposite direction that borrowers may have hoped for following the positive rate cuts recorded a month earlier.”
Nicholas Mendes, of mortgage adviser John Charcoal, said deals appear in such a way that you “blink and miss it”.
He added: “As mortgage rates are constantly being revised, so much so that we have seen lenders repricing twice a week, with some lenders having little to late notice of a rate change.”
It comes ahead of the Bank of England’s interest rate decision, which will be announced on Thursday.
The central bank is expected to keep interest rates stable at 5.25%.
But the Bank has indicated at recent meetings that cuts are likely in the future.
How can I secure a cheap interest rate on my mortgage?
respond quickly
In a competitive market, good mortgage deals can disappear quickly.
Nick said it’s best to act quickly once you’ve found a suitable mortgage rate.
He said: “To avoid delays, please submit your application immediately and provide all requested documentation.”
Check your credit score
If you have bad credit, the first thing you can do is find out what your score is.
Nick said: “Your credit score plays an important role in the mortgage approval process.
“Check your credit score beforehand and take steps to improve it if necessary.
“A higher credit score can help you qualify for better mortgage rates.”
Nick said this should better enable you to get a mortgage that suits you.
You can check your credit file for free at websites like ClearScore and Credit Karma.
If you find that you have bad credit, it doesn’t mean that providers won’t lend you money.
Basically, get a mortgage
A mortgage is basically a lender’s official estimate of how much they are willing to lend you based on what you can afford.
It can be quite useful for those looking for a first home as it shows that you are a serious buyer.
Nick said: ‘Keep this in mind before you start house hunting, as it will not only speed up the process when you find the right property.
“Pre-approval shows sellers that you are a serious buyer and can give you a competitive advantage. It will also flag any problem.”
To get an agreement in principle, you can go to a mortgage broker and see what deals are available that you might qualify for.
It is important to remember that a broker may charge a fee to prepare an agreement in principle for you. So ask about this first.
You can also go directly to the lender offering a deal you are interested in.
Going to a lender doesn’t mean you have to borrow from them when it comes to applying for a mortgage, so you don’t have to worry about getting stuck with one.
Gather the necessary documents
When you apply for a mortgage, you must be honest and upfront with the mortgage broker and the lender.
Gather all your personal information and be sure to avoid disclosing any information that could deter a lender from closing the mortgage at the last minute.
For example, if you have recently gone on maternity leave and do not disclose this to the lender, this will likely be reflected on pay slips and bank statements, which could negatively impact your application.
For example, working shorter hours should also be made public for the same reason.
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.
Nick said visiting a real estate agent six months in advance can be helpful in helping you determine what your maximum purchase price will be.
Nick said: “Mortgage brokers can help you navigate the mortgage market and put you in touch with lenders offering competitive rates.
“They have access to a wide range of loan products and may be able to find deals you wouldn’t discover on your own.
“They will also be aware of any market changes or repricing from lenders.”
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 charge a fee for their services, so you should factor that into your costs.
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.