Personal Finance News

Bank base rate has been sitting at a record low of 0.50% since last March, but with all the current political uncertainty and higher than expected inflation, some experts now believe that rates may start to rise again before we reach the autumn.


Whilst low interest rates have been bad news for savers who are struggling to get a decent return on their money, the situation for some mortgage customers has become much better over the last few months.

Whilst people looking for an 85% or 90% loan to value (LTV) mortgage won’t find as many competitive deals available the choice is far better than it was a year ago, if on the other hand, you’re looking at a 70% to 80% LTV mortgage, then recent competition has forced mortgage interest rates much lower.

Many people will be coming off their existing 2 year or 3 year fixed or discounted rate mortgage in the next few months and will need to decide what to do next.

The standard variable rate (SVR) that your lender will put you on when your current deal expires will, in many cases,
turn out to be a reasonable rate when compared to the one you opted for two or three years ago. However, you may not feel comfortable with your mortgage on this variable interest rate, particularly if rates start to increase later this year. The alternative is to look for a new fixed rate, where at least you know what your repayments will be each month.

But it’s not just the interest rate to take into account; you will also have to consider the costs associated with switching your mortgage. The advantage of doing nothing and staying put on your lender's SVR is that you don’t have to pay a penny, plus you are not tied in with any early repayment charges.

If you remortgage to a new fixed or tracker rate with another lender you will have to pay your lender an exit fee to leave the mortgage, which in some cases may be as much as £200 to £250. Then you will pay your new lender’s mortgage arrangement fees, which could cost you anything from around £100 to £1,500 or more, depending on the particular deal you move to.


However for some people, rates have fallen by such an extent that if you have a low LTV, and depending on the size and term of your loan, it may even be worth exiting your current deal before the maturity date.
Although the size of the early redemption charges payable in some cases may make the prospect of switching a non starter, for others it may make financial sense to pay the penalty on your existing fixed rate mortgage and to take advantage of one of the new lower rate deals.

Here’s a taste of some of the deals available at the moment:

·







Newcastle BS 2 Year fixed at 3.95% plus fee £995 (Max 80% LTV)
·







Co-operative Bank
5 Year fixed 4.49% plus fee £999 (Max 75% LTV)
·







Nationwide BS
5 Year fixed 6.09% plus £999 fee (Max 90% LTV)

Whatever decision you decide to make regarding your mortgage, it’s important that you weigh up all the facts and the costs and choose a product that is right for you. Don’t rush in without doing your homework as it could turn out to be an expensive mistake.

So rather than getting your calculator out and struggling to see if the numbers add up for you, why not let moneynet help you search for the best deal for your circumstances by entering your requirements here with the option to speak to a mortgage adviser if you so choose.

If it’s not right for you to move now, don’t give up, check again on moneynet.co.uk in a couple of months time as rates are changing pretty frequently and there may soon come a point when it does makes sense for you to switch your mortgage.