Mortgages are getting cheaper, but can you get one?
Fixed-rate mortgages have hit record lows in recent weeks but fewer people are likely to benefit.
The launching of a succession of cheap mortgages has been followed by the news of a lending slump and tighter restrictions to come. Cheaper home loans are being given with one hand, while the other grabs our chances of securing a cut-rate deal.
Another week and another mortgage sale. NatWest has pushed a five-year fixed deal down to a crazy 2.95% and the range of Halifax mortgages available through brokers has been refreshed, knocking down rates by up to 0.5% or wiping product fees from first-time buyer deals.
Meanwhile, First Direct has cut the rates on all five-year mortgages by 0.5% and current account customers can get a two-year fixed-rate of 2.64% with a 35% deposit (and a huge £1,999 fee).
Earlier this month HSBC set the ball rolling, launching the lowest ever five-year fixed-rate mortgage at 2.99% for a deposit worth 40% and a fee worth £1,499. On the opposite end of the spectrum RBS is offering fee-free mortgages for people with only a 5% deposit at a fixed-rate of 4.79% for five years.
There seems to be plenty of choice for deals at decent rates – but what are your chances of snagging one?
Who gets the best deals?
Buyers with big deposits, sound finances and a good credit history. If you haven’t got two pounds to rub together and you owe money here, there and everywhere – forget it. Of course there are grey areas in between these two scenarios, so you shouldn’t lose hope altogether if your situation isn’t perfect.
If your finances are in rude health and you’re ready to buy, then use our mortgage tool to compare mortgages.
Even though there are low-cost mortgages on the market, particularly for fixed rate deals, fewer people are likely to benefit if banks aren’t lending as much.
Mortgage lending slumped in June according to the Bank of England. Home loan approvals fell to 44,192 from 50,544 in May. This is the lowest level since December 2010 and significantly short of analysts’ forecast of around 49,000.
The figures echo a report from the British Bankers’ Association, which showed a slump in June with mortgage approvals at the lowest level for 15 years.
Do you stand a chance?
All hope is not lost. Lloyds TSB has pledged to lend £5 billion to first-time buyers by the end of 2012, which is expected to help more than 50,000 people to step onto the property ladder.
If you have hopes to buy a property then pay off any debts and start saving as much as you can for a deposit. For tips on how to manage your money effectively read our guide on how to set a budget and stick to it.
Check your credit file with Experian, Equifax or Callcredit (or even all three, as lenders don’t all rely on the same credit reference agency). Read more in how to build an excellent credit history, to ensure you present yourself to the lender in the best possible light.
If you think you might be overstretching yourself to get the cheapest mortgage on the market, consider paying a higher interest rate for a lower fee or perhaps look for a fee-free deal. In some cases this can actually prove cheaper over the term of the mortgage, which is why it’s important to calculate exactly what you will pay over the term including any extra fees.
If you have a good deposit and enough earnings to cover the mortgage but you think something else might hinder your application, such as existing debt or if you’re self-employed, seek help from a mortgage broker. He or she could point you towards deals more suitable for buyers in your position. You can get free advice from our mortgage centre.
Remember that the best mortgages up for grabs right now will probably be reserved for applicants who look best on paper, so do all that you can to appear the model candidate. Check out How to stand the best chance of getting a mortgage for more.
More on mortgages:
t lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free lovemoney.com broker. Call 0800 804 8045 or email firstname.lastname@example.org for more help.
This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article.
Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term may revert to the lender's standard variable rate or a tracker rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.
Your home or property may be repossessed if you do not keep up repayments on your mortgage.