This week has seen a variety of competitive new mortgage deals unveiled across the markets as lenders battle to reach the top of the congested best-buy mortgage tables.
The introduction of the Bank of England’s Funding for Lending Scheme (FLS) has seen lenders bid to outdo each other in offering competitive rates to all types of buyers.
18 months ago it was very difficult for a first-time buyer to get a mortgage of any kind but since the introduction of the FLS and the announcement of the ‘Help to Buy’ scheme, the number of competitive mortgages for potential new homeowners has improved.
Just six months ago, the best five-year fixed rate deal was at 3.19 per cent. Since then there have been more than a dozen lenders offering rates below three per cent and you can even get a 10-year fixed rate deal at less than four per cent now.
Ray Boulger of mortgage adviser John Charcoal said: “Despite swap rates following gilt yields upwards the cost of fixed rate mortgages has continued to fall over the last month. This says a lot about the margins lenders had in hand and also reflects a much stronger appetite to lend compared to a year ago.”
Along with this trend, fixed rates have been coming down across the board and this week saw the Post Office and Tesco add to the options with some cheap new mortgage deals.
The highlights amongst Tesco Bank’s new offers for borrowers with a 40 per cent deposit include a two-year fix at 1.74 per cent, a three-year deal at 2.29 per cent and a five-year fixed rate mortgage deal at just 2.49 per cent, all with total fees of £1,495.
However, the Norwich & Peterborough Building Society offers a tempting alternative with a slightly higher rate of 2.74 per cent balanced against a lower fee of £295. Which deal works out better for you depends on how much money you owe on your mortgage. If you owe more than £150,000 the cheaper rate at Tesco will mean you pay less over the course of the mortgage term.
The Post Office offers market-leading products at 3.19 per cent for 80 per cent loan-to-value (LTV) borrowers and 3.49 per cent for 85 per cent LTV borrowers, both with no fees, whilst a five year fixed rate, that does have a fee of £995, will be at 2.85 per cent for 75 per cent LTV borrowers.
Meanwhile, the Chelsea Building Society cut rates on its two-year fixed rate mortgage down to 1.69 per cent with a fee of £1,545 for borrowers with a 40 per cent deposit.
Mr Boulger said: “As the cost of fixed rate mortgages, especially 5 year fixes, continues to fall, their attraction increases. Therefore, those who qualified for a mortgage a year ago can now benefit from rates about 1% cheaper.”
However, though this is a great time to remortgage to a cheap fixed rate deal, don’t automatically go for the cheapest rate. As the Tesco and N&P example above shows, sometimes a higher rate and a lower fee is the best option, especially of your mortgage is relatively small.
Lenders are fighting to get to the top of the best-buy tables, so lower rates and products with higher fees are becoming more common.
Calculate the overall cost of a mortgage to find the best deal for your own individual circumstances.
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