Halifax has become the latest lender to cut rates on some of its mortgage deals, following a string of major lenders slashing rates in recent weeks.
Explaining what this means to homeowners and those looking to get on the ladder, Claire Flynn, Confused.com mortgages expert, commented:
“Halifax is the latest lender to announce that they plan to reduce rates across a range of their products. This includes some fixed-rate deals, and follows HSBC, TSB and Nationwide reducing rates this week.
“This is despite the Bank of England increasing the base rate for the 14th consecutive time just a week ago. While inflation has slowed to 7.9%, it’s still far above the Bank of England’s target of 2%, meaning it could increase further over the next few months.
“While mortgage borrowers might be relieved to hear some of the UK’s biggest lenders are reducing rates, those due to remortgage still face much more expensive deals than in recent years.
“If you’re in this position, while you remain likely to face a rate increase, there are a few steps you can take to improve your chances of getting the cheapest deal possible:
Look into remortgaging options early
“Mortgage offers are usually valid for around 6 months. You can secure a new deal now and switch automatically when your current deal ends, avoiding early repayment charges. This also stops you moving to your lender’s standard variable rate, which is normally more expensive than other deals in the market.
“If you opt for a fixed-rate mortgage, this also means you won’t be impacted by any further rate increases. And if rates reduce before you change to the new deal, you can switch again.”
Consider overpaying your mortgage if you can
“If you’re currently on a low rate and can afford to pay more, doing so might allow you access to lower loan-to-value deals when you remortgage. This normally means better rates. You can do this monthly or in a lump sum. But lenders usually have a limit on how much you can overpay before they charge a fee.
“If you’re on your lender’s standard variable rate, or certain tracker deals, you usually don’t face early repayment fees so can overpay as much as you like. Contact your lender or check the terms and conditions of your deal to find out your overpayment options.”
Speak to a whole-of-market mortgage broker
“An independent adviser can compare mortgage deals from across lots of lenders to find the best deal for you. While it can be tempting to stick with the same bank or building society, it’s worth looking at all of the options.
“In the current market, there can be significant differences in the rates on different mortgage deals. So, getting expert advice could help you find the best deal and save you a lot of money.
“If your mortgage rate has increased and you’re concerned about making your mortgage payments, speak to your lender. Due to the increases in rates, many UK lenders have signed up to the mortgage charter to support borrowers. Measures of this charter include the option to extend your mortgage term or switch to interest-only payments for a temporary period of time to reduce monthly payments.
“But there are a number of aspects to consider before taking either of these routes. For example, you might end up paying more in interest overall. Make sure you speak to your lender and consider all the potential impacts before making a decision. You may also want to consult a third party charity who can offer impartial debt guidance, such as Citizens Advice.
“For those planning to buy their first home, you might be wondering if now is a good time. While mortgage rates are much higher than they have been in recent years, this has also resulted in reports of house prices falling.
“If you’re thinking about buying your first home, you should:
Think carefully about your property budget
“With rates much higher than in previous years, it’s more important than ever to make sure you only take out a mortgage you can afford. Look at your income and outgoings to work out what you can realistically pay each month, and make sure you factor in room for unexpected costs.
Keep an eye on the local property market
“Report of house prices falling might have encouraged you to start house hunting. But be aware that the property market can vary in different parts of the UK. Keep an eye on prices in the area and property type you’re interested in, to see if you can find what you’re looking for at the price you want.
Use a mortgage broker
“As it’s your first time going through the mortgage process, expert advice is really important. A broker can help explain all the jargon and documents required. And they can make sure you apply for deals suited to you. This limits the chances of your mortgage application being rejected, which can negatively impact your credit score.”
