Mortgage Price War Heats Up: Consider The Term, Not Just The Rate
The price war amongst mortgage lenders has heated up as HSBC and TSB have launched new mortgages with historically low rates of 0.94%
HSBC’s 0.94% mortgage, fixed for two years, is the lowest rate the bank has ever oﬀered. Its mortgage comes with a £999 fee and is available to homebuyers and remortgagors. TSB’s deal is available to remortgagors only and it has a £995 fee.
These headline grabbing mortgage rates are fixed for just two years, but prospective borrowers need to be thinking about their long-term financial plans, not just the short-term savings that can be made.
At the end of the two year fixed rate period, interest rates are unlikely to support the maintenance of these deals, which means transferring onto a higher rate and a subsequent rise in mortgage repayments. Should there be any concerns about future aﬀordability, then it may be better to opt for a mortgage with a slightly higher rate, but which is secure for a much longer time frame. The good news is that longer term fixed rate mortgages are oﬀering very attractive interest rates.
What are the benefits of a two year fixed rate mortgage?
- They often oﬀer cheaper interest rates than a five or 10-year deal, because the lender faces less risk as the loan is for a shorter term.
- They can be a good idea if you are thinking about moving house in the next few years as you won’t need to break an existing mortgage
- If interest rates fall significantly you can secure a cheaper mortgage This is unlikely to happen with any significant swing because current mortgage oﬀers and interest rates are at historically low levels.
- They typically have lower penalty fees if you pay the mortgage loan oﬀ early.
What are the benefits of a longer term mortgage?
- They make budgeting easy: as your monthly repayments are the same for the length of the mortgage deal and you can budget reliably for the long term.
- If you secure a good low rate, you don’t have to worry if interest rates start to climb as you will be locked into the lower rate for a longer period of time.
- You don’t pay the fees of remortgaging which you can’t avoid if you regularly choose a short two year mortgage.
Should I be remortgaging now?
Mortgage interest rates are very low at the moment, so it is worth speaking to a mortgage adviser to see if you could save money. If you are coming to the end of your current mortgage deal or you are on the standard variable rate then locking in to a new mortgage arrangement with a low interest rate could save you money. If you are in a mortgage arrangement at the moment then you should check to see if there are any penalties for leaving the deal early.
Moving your mortgage to a new lender who is oﬀering a lower interest rate does not mean you have to move house or borrow more money. You can simply move the existing debt and take advantage of lower repayments.
Why are lenders slashing mortgage rates?
Banks and mortgage lenders are competing aggressively for good remortgage business. They are especially keen to attract borrowers who have equity in their home: those who own at least 35% or more of their property are seen by lenders as a safer borrower and they are oﬀered cheaper mortgage deals.
Borrowers looking to gets quotes for a new mortgage are likely to find navigating the complex options diﬃcult and will find it easier if they seek advice from an independent financial adviser. At Furnley House we are here to help.
Our team of qualified advisers will use their knowledge to provide you with comparison mortgage repayment quotes. They will also highlight any associated costs such as lenders fees, legal or conveyancing fees and factor these into the comparable figures. They will help you find the best deal for your circumstances and help you to decide if it will benefit you to move your mortgage.
To speak to a Furnley House adviser to talk about mortgages, call 0116 269 6311 to get a no obligation quote or email email@example.com
Your home may be repossessed if you do not keep up repayments on your mortgage.