Last week saw Bank of England Governor Mark Carney indicate that interest rates could rise from their record low of 0.5% as early as December or January. Although some experts have doubted Carney’s latest prediction, mortgage borrowers may want to think about remortgaging now.
Rate shock
Many homeowners have never experienced a rate rise.
The last time the base rate went up was in July 2007 when it increased from 5.5% to 5.75%. It then remained at 5.75% until December 2007 when it was cut to 5.5%. The following year saw five rates cuts and the final cut came in March 2009 when it was reduced to the current rate of 0.5%.
Borrowers on a variable rate mortgage, such as their lender’s standard variable rate (SVR) or a tracker mortgage, will see their payments increase when rates start to go up.
Take, for example, a borrower on a SVR of 4.5% with a mortgage of £150,000. On a repayment basis they’d currently be paying £834 a month. If rates were to increase by 0.25% the monthly payment would jump to £855.
Another 0.25% rise, a total increase of 0.5%, would see the monthly payment increase to £877. This would add about £516 to the mortgage bill each year.
And the record-low fixed rates that are around at the moment may also soon be a thing of the past.
Book ahead
Back in 2007/08 mortgage lenders were offering ultra-low lifetime tracker rates. Thousands of borrowers secured rates at less than 1% above base rate which means that seven years later they are still paying less than 1.5% interest on their mortgage.
[SPOTLIGHT]But tracker rates are pegged to the bank rate and so are guaranteed to rise when the Bank of England increases it.
Many of these borrowers will be keen to lock into a fixed rate now so they are not exposed to future rate rises.
The good news is that borrowers can ‘book’ a rate up to six months in advance and see what happens. Mark Carney has raised expectations about a rate rise before and it may be the case that, come December, the likelihood of one has diminished once again.
Here are some of the top mortgages available now.
Top two-year fixed rate mortgages
Two-year fixed rate mortgages tend to offer some of the lowest rates. But be warned: nabbing a tiny interest rate usually means you’ll have a stump up a hefty product fee.
|
Lender |
LTV |
Interest rate |
Mortgage fee |
|
60% |
1.05% |
£1,995 |
|
|
65% |
1.07% |
£1,369 |
|
|
75% |
1.19% |
£1,995 |
|
|
Platform |
80% |
1.59% |
£1,499 |
|
85% |
1.79% |
£1,499 |
|
|
90% |
2.46% |
£1,499 |
As you can see, there are some massive fees there. But what if you don’t want to stump up a significant product fee? These are the best two-year mortgages with fees under £500.
|
Lender |
LTV |
Interest rate |
Mortgage fee |
|
65% |
1.44% |
£475 |
|
|
70% |
1.59% |
£475 |
|
|
75% |
1.64% |
£345 |
|
|
80% |
1.79% |
£475 |
|
|
85% |
2.24% |
£475 |
|
|
90% |
2.94% |
£499 |
Top five-year fixed rate mortgages
If you want to go for a longer-term fixed rate deal, then you may prefer a five-year fixed rate deal. While you enjoy that security for longer, you may have to pay a premium in terms of a higher rate. You also have significant Early Repayment Charges to consider should you wish to leave the deal early.
The five-year fixed rates with the lowest initial interest rates are below.
|
Lender |
LTV |
Interest rate |
Mortgage fee |
|
60% |
2.14% |
£1,675 |
|
|
75% |
2.44% |
£1,545 |
|
|
Leeds Building Society |
80% |
2.60% |
£1,999 |
|
First Direct |
90% |
3.47% |
£1,450 |
And now let’s take a look at the best five-year mortgages with fees of less than £500.
|
Lender |
LTV |
Interest rate |
Mortgage fee |
|
65% |
2.39% |
£499 |
|
|
75% |
2.59% |
£345 |
|
|
Newcastle Building Society |
80% |
2.82% |
£0 |
|
Principality Building Society |
85% |
3.05% |
£99 |
|
90% |
3.79% |
£499 |