The property market is still a bit tricky these days but if you are still keen to buy or you now need to remortgage, then there is some encouraging news.
This is due to a price-cutting war breaking out among the mortgage lenders. If you are first time buyer then you will still struggle to get the best rates available, but if you have the capital, there are some good offers if you act now.
Cheltenham & Gloucester, (Lloyds TSB’s mortgage arm) has started the rate war by launching a range of mortgages with a wide variety of rates and fees.
If you have a 40% deposit to put down and you can afford the £2,094 fee, you can now get a 2 year fixed rate mortgage from C&G at 5.65%. This is much lower than the best rates available two months ago and one of the best deals on offer if you have enough money to qualify. The fee is reduced to £1,094 if you opt for the slightly higher rate of 5.75%.
Following C&G's move, Abbey then cut its rates by up to 0.25%. This means that if you have 30% equity in your home, a 2 year fixed rate mortgage has fallen to 5.89% with a £995 fee, while 25% equity will secure you a rate of 5.99% with a £995 fee and a 3 year fixed rate for 5.94%.
- Smaller lenders following suit
The big-name lenders (Halifax, C&G, Abbey, Nationwide and the Woolwich) are the ones fuelling the rate-cut war but a number of the smaller lenders are following suit.
Last week the Yorkshire Building Society relaunched a range of 2 year fixed rate mortgages appealing to those of you with a 25% deposit. Its rate now stands at 5.54% with an £895 fee. It also offers you a 4.89% rate on a 2 year fixed rate if you are willing to pay a fee of 2.5% of your mortgage.
The Newcastle Building Society is one lender that is strong across all its fixed rates, offering a 5 year fixed rate 5.6% if you have a 25% deposit. You can also get a similar mortgage with Market Harborough Building Society for 5.75% with a £690 fee.
The C&G rates also remain attractive if you have a 25% deposit at 5.75% or 5.84% depending on the fee. However, the rate shoots up to 6.25% if you only have a 10% deposit to put down. The fee for that will cost you £1,094.
Generally speaking, if you are looking to buy with less than a 10% deposit, you still have very little choice of where to borrow.
However, there is some good news in that Direct Line and Royal Bank of Scotland are among the few mortgage lenders that will still lend you up to 95% of the value of a property; bear in mind that the rates start at an eye-watering 6.89% on a 2 year fixed rate mortgage and that both lenders also charge a higher lending fee on top of their other mortgage fees.
According to Melanie Bien of mortgage brokers Savills Private Finance;
'First-time buyers will increasingly have to return to old-fashioned values and save up for a deposit. Unlike in the past, where the danger of saving was that you would be priced further off the housing ladder, the situation has changed; with prices falling, you could argue that there is more reason than ever to hold off to ensure you don't pay more than you need to.'
For first time buyers with a 10% deposit, she points to Yorkshire building society, which is offering 6.09% fixed for a choice of 2, 3 or 5 years, with a £995 fee.
Nationwide is also recommended for those of you with a 10% deposit, though its remortgage rates are better than its rates for new buyers. For purchases, its 2 year fixed rate from Thursday is at 6.53% with a £599 fee, while for remortgages the same mortgage is 6.33%. Nationwide also has a 2 year tracker mortgage rate at 6.13% and it comes with a £1,499 fee.
Bien points to Lloyds TSB's lifetime tracker at 1.35% over Bank base rate for the term, giving a current rate of 6.35% with a £995 fee, while Hollingworth mentions HSBC's lifetime tracker of 0.99% over base rate, which requires no fee.
- Don’t be complacent about your remortgage
While it is good news that rates have begun to come down (with the possibility of further to go) those of you coming up to remortgage shouldn't be complacent with the current volatility of the mortgage market.
You should also double check your mortgage lenders policies on fees. Many now charge part of the total application fee up front (typically between £100 and £200) but some ask for all of it. This is unlikely to be refunded even if you spot a better deal during the application process and even if that deal is with the same lender. Some lenders will even ask for the rest of the fee, which can be up to £2,000, to be paid if the application process falls through.
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(Please note that articles on Money Hospital do not constitute regulated financial advice. The articles are intended to provide general personal financial information. We urge you to consult an Independent Financial Adviser (IFA) before making any important decisions about your finances. All rates are correct at time of printing but are subject to change without notice)