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How low can mortgage rates go?


Just when we thought mortgage rates could not get any cheaper, lenders prove us wrong. The five-year fix from Atom Bank pegged at just 1.29 per cent and 0.89 per cent two-year discount from Yorkshire Building Society – the lowest ever mortgage rate – prove that lenders are determined to lend and prepared to reduce their margins to do so.

While these cheap deals tend not to last long – the Atom Bank rates were pulled less than a week after launch as the challenger bank was inundated with applications – the good news is that the general trend for mortgage rates seems to be downwards. Just this week, Santander and Accord have reduced their mortgage rates; Nationwide offered its lowest ever 90 per cent loan-to-value mortgages; Leeds launched a record low five-year buy-to-let rate; and Kensington cut over 70 per cent of its residential rates. With a range of lenders keen to compete – not just the biggest banks – the outlook for borrowers is encouraging.

It is possible that we will see more headline-grabbing rates such as those offered by Atom Bank as a lender tries to get some attention and drum up some business. But borrowers cannot take this for granted. Even if it were to happen, these deals soon disappear so anyone hoping to get in on the action would have to act extremely quickly. And with tougher affordability criteria since the Mortgage Market Review was introduced in 2014, there is no guarantee that borrowers will be able to qualify for a deal anyway, which is where good advice is crucial.

We are close to the bottom of how low mortgage rates can feasibly go so there is not much point in borrowers trying to ‘time’ it so that they get the very cheapest deal, particularly if they are sat on an expensive standard variable rate in the meantime. There is so much potential uncertainty with the Brexit negotiations that it is hard to predict what will happen over the next few months.

The total cost of any deal is also important – those with the cheapest rates also can also have the heftiest of fees and a broker will keep an eye on the overall cost when deciding which is the most suitable mortgage for your circumstances. Please get in touch for further information.

Jonathan Harris
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Jonathan Harris

Could an offset mortgage work for landlords?


Offset mortgages – where you offset your savings against your mortgage to reduce the interest you pay – have been around for ages in the residential market. But one lender has launched an offset for buy-to-let landlords to help them mitigate the tax changes that came in from this month.

With a rate of 2.99 per cent and £999 fee, the rate is not bad in itself but landlords should beware as it is discounted so it is linked to the lender’s standard variable rate (SVR) rather than the base rate. The SVR is set at the landlord’s discretion so even if interest rates don’t rise, the rate on the mortgage could. After two years at the discounted rate, the deal reverts to the SVR, which is currently a rather high 5.29 per cent. It might be even higher at that time.

An offset mortgage could work for landlords if they have significant savings as by offsetting these against their loan, they can reduce the interest charged. This won’t cut their costs as such but does mean at a time when many landlords are looking at ways to maximise the return on their investments, the mortgage may cost them less.

Any landlord considering this deal should compare it to what else is available on the market, ideally using the services of an independent mortgage broker such as Anderson Harris who is well placed to advise as to the best mortgage for your circumstances. Offsets tend to be priced higher than standard deals so unless you have considerable savings to offset – so can effectively bring the rate down – you might be better off going for a standard deal. With buy-to-let fixes starting at 1.54 per cent for two years with £1,995 fee, for example, with the added advantage is that the rate is fixed, there are some very competitive rates out there.

Adrian Anderson
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Adrian Anderson

What does Brexit mean for your mortgage?


Article 50 has been triggered and the process of Britain leaving the European Union has officially begun. Many borrowers are understandably concerned about how exiting the EU will affect their mortgage and the value of their property but there is no need to panic.

In the short term at least, there is unlikely to be any real change. Swap rates may have risen in recent weeks on the back of the US Federal Reserve raising interest rates by a quarter point and rising inflation in the UK, but mortgage rates have not risen accordingly.  Indeed, there continues to be a real appetite for banks to lend and in order to compete for business they need to keep rates low. There are still plenty of high loan-to-value mortgages and with one lender launching a two-year fix at sub 1 per cent recently, it appears as though we haven’t seen the back of the cheapest mortgage rates just yet.

If interest rates were to rise, this would have an impact on mortgages but it looks unlikely that this will happen in the foreseeable future. While the Bank of England needs to keep an eye on inflation – which at 2.3 per cent is higher than the 2 per cent target – the economic recovery is still tentative. With potentially tricky Brexit negotiations on the horizon it is possible that we may not see a rise in interest rates for a good while yet.

Of course, mortgage rates can still rise even if interest rates do not but those who are worried could consider taking a longer-term fixed-rate mortgage to ride out any uncertainty. With five-year fixes pegged at less than 2 per cent and ten-year fixes pegged at less than 3 per cent there are plenty of cheap options when it comes to longer-term fixes. However, borrowers must be careful about fixing for longer than they are absolutely sure about as these deals carry early repayment charges, often for the length of the fix, so if your circumstances change and you need to get out of the mortgage early, it may cost you dear.

As with anything to do with mortgages, it makes sense to speak to an independent broker for guidance as to the best course of action for your circumstances.

Please get in touch for more information.

Adrian Anderson
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Adrian Anderson