To fix or not to fix! Top tips for choosing a mortgage
Unbiased.co.uk’s media mortgage advisers offer their tips for getting a mortgage in the current climate
Visit Unbiased.co.uk to find a local whole of market mortgage adviser for help and advice on choosing a mortgage deal
In a low interest rate environment it can be hard to know what mortgage deal is best for your circumstances so Unbiased.co.uk, the professional advice website, brings you three top tips on choosing a new mortgage deal.
1. Jane King, Mortgage Adviser - Ash-Ridge Private Finance
“With interest rates currently at 0.5% there is really only one way to go in the future - up! My top tip for any purchase is to select a tracker with the option to switch to a fixed rate later. This will offer the best of both worlds. A very competitive rate for as long as rates stay low with the option to lock into a fixed rate later if base rates start to rise. Although there is normally a booking fee to pay for the switch, I feel it is worth paying for the option of being able to take advantage of low tracker rates now, and possibly for several more months to come.”
2. Rob Simpson, managing director at Simpson Financial Services Limited
“Hedge your bets on future interest rate movements. Did you know that some lenders will let you have part of your mortgage on a fixed rate and part of your mortgage on a tracker rate? You have to be careful you don’t end up paying too much in arrangement fees but that’s all part of the value of advice. We only charge a fee for our mortgage advice which means that if a lender is offering a better product for “direct customers only” we’re happy to advise you accordingly.”
3. Peter McGahan, Independent Mortgage Broker, Worldwide Financial Planning
“Last month most lenders withdrew their fixed rate offerings and replaced them with higher rates. This is in anticipation that rates will begin to rise, which is peculiar, given that we have benign inflation. In fact the retail price index is still at -1.1%. Either way the anticipation is that rates will rise and fixed rate mortgages are now 20% more expensive than they were last month. Should you fix now? It very much depends on what your current mortgage deal is. For example, some lenders set their own standard variable rate and that is typically around 4.8% today whilst others track the base rate and that’s down at 0.5%. For some it would be quite a leap to hop from 0.5% to today’s typical fixed rates. The typical fixed rates are: two year 3.98%, three year 4.99% and five year is 5.64%. And so it’s a much more difficult decision for you if you are on a lower tracking rate as above but a sure fire winner if you are on a standard variable of around 4.8%. Much also depends on the impact of quantitative easing. If the extra money in the system bites, inflation is a real risk and interest rate rises will be the quickest way to slow down the economy. With that in mind, a three year deal at 4.99% looks like a bargain with the safety of knowing what you will be paying for the next 36 months. The better rates are still being offered to those who borrowed less in relation to the value of the property (i.e. loan to value). For example if you are borrowing less than 75% loan to value you could have a two year fixed rate at 3.09% whereas if you are borrowing at 90% loan to value, the best two year fixed rate is 5.99% - almost double! Finally be careful when you are looking at mortgage rates and ensure you look at all the underlying fees as they can soon mount up.”
Following the Bank of England’s decision to hold rates at 0.5% David Elms, chief executive of Unbiased.co.uk, which offers a ‘Find a mortgage adviser’ search, comments: “The decision to keep rates at what is already a record low comes as no surprise however consumers will continue to be unsure of whether they should take a fixed rate mortgage or switch to a tracker. The mortgage market has been going through tremendous change over the past year leaving many potential homeowners unsure of what is the best deal for them. We would urge those who are currently considering their options, whether buying for the first time or remortgaging, to seek professional advice from a local whole of market mortgage adviser.”
ENDS
For further information on Unbiased.co.uk, the professional advice website pleases contact:
David Elms | Anna Schirmer/Jennifer Comerford/ Anna Moulds |
Unbiased.co.uk | Lansons Communications |
020 7833 3131 | 020 7294 3682 |
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