Mortgage rates fall to record lows – but you need to act fast

the sign outside of a NatWest branch, UK

As the so-called “mortgage wars” rage on, you may be wondering how you can make the most of the competitive mortgage deals currently on offer.

Interest rates have continued to drop during 2021, as lenders have attempted to compete and one-up each other by offering the most attractive deals.

As a result, there are now a range of cheap mortgage deals on the market, with many lenders offering sub-1% interest rates.

Of course, your personal needs and circumstances will determine whether you’re able to grab one of these deals.

Even more importantly, these deals are unlikely to last forever, so you may need to act fast to capitalise on the situation.

Low mortgage rates available across the market

Interest rates have been low across the economy for many months now, ever since the Bank of England (BoE) cut its base rate to just 0.1% in 2020 to bolster economic growth during the uncertainty of the pandemic.

This low-interest environment has very much translated into the mortgage market, with lenders continuously dropping rates to compete for business.

Rates typically depend on what percentage of the property’s value you need to borrow, known as the “loan-to-value” (LTV).

These rates also tend to be lower for those who are remortgaging or have large deposits, with many of these deals falling below 1%.

Below are just a few of the best deals separated by which type of borrower you are:

Source: Moneyfacts, as of 19 October 2021

Rates may rise again soon

Currently, the low mortgage rates are as a result of wider economic circumstances. However, an internal BoE panel, known as the “Monetary Policy Committee” (MPC), regularly reviews the base rate throughout the year.

The MPC has scheduled its next review for 4 November 2021. This means rates could rise even before the end of the year.

Indeed, at the start of October, the Times had already reported that the super-cheap mortgage deals may start disappearing from the market moving forwards.

Similarly, the Evening Standard reported on 19 October that some banks had already started to pull their cheapest deals from the market in preparation for rises in interest rates.

This, according to the Mirror, could lead to the fastest increase in rates since the 2008 financial crisis.

That means, if you want to make the most of the ultra-low mortgage rates currently available, you may need to do so as soon as possible.

Requirements for some deals

It’s worth noting that some of the low-rate deals may require you to meet certain criteria. In particular, this may include the size of your deposit, and what type of buyer you are.

For example, the Barclays remortgaging deal in the table above is also available to both first-time buyers and those moving home, provided that they have a 40% deposit.

However, the next best remortgage deal on Moneyfacts is for a two-year fixed with NatWest at 0.87%. This deal is exclusively for remortgagers and is not available to other buyers.

Other factors you may want to consider when choosing a deal are product fees, variable-rate collars, and the lender’s standard variable rate (SVR) that you’d move onto at the end of a fixed-rate deal.

The product fees for the deals in the table above go up to £999, although Which? found that some upfront product fees for sub-1% deals can be as high as £1,499.

Meanwhile, lender’s SVRs for when fixed-rate deals come to an tend to be upwards of 3.5%.  Similarly, the variable-rate Barclays deal has a bottom “collar” of 0.75%, meaning your mortgage rate is guaranteed not to fall below that level, no matter what happens.

It’s important to factor in all these costs before you take out your mortgage.

Working with a mortgage broker

If you want to capitalise on the best deals available right now, the most sensible course of action is likely to be to work with a mortgage broker.

A broker will be able to scour the market on your behalf, looking across a range of deals to find the one that works best for you. They may also have access to deals that are only available by working with them, giving you a wider range of options to choose from.

Crucially, a broker will take a variety of factors into account, looking at more than just the mortgage rate to help you make a decision.

For some buyers, taking a flexible, variable-rate deal may be suitable, such as if you only have a small amount left to pay on your home.

Meanwhile, others may prefer the idea of knowing exactly what their payments will be, and so may be better off prioritising a fixed-rate deal with a slightly higher interest rate.

A mortgage broker can provide indispensable advice here, finding the right mortgage deal for your personal circumstances.

Work with us

At Edinburgh Mortgage Advice, we have years of experience in helping people just like you to find the right mortgage deal that’s most suitable.

If you’d like to find out more about how we could help you, please get in touch.

Email [email protected] or call 0131 339 2281 to speak to us.

Please note

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Buy-to-let (pure) and commercial mortgages are not regulated by the FCA.

Think carefully before securing other debts against your home.

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