Several mortgage lenders are cutting rates with deals below 4 per cent still available, experts say, as they warn prospective movers not to let Budget speculation affect their plans.
Mortgage rates are lower than the same time a year ago with HSBC cutting rates this week by up to 0.22 per cent.
However, speculation about changes to property taxes in the Budget may have put some off their plans to buy or move home – something brokers are warning against.
Nick Mendes of brokers John Charcol said: “For purchasers, do not let Budget rumours freeze a move that already makes sense. Make sure the numbers work at today’s rates and secure an agreement in principle before you offer.”
Proposals rumoured for the autumn Budget range from abolishing stamp duty and replacing it with an annual property tax on homes sold above £500,000 to a change to the council tax system.
But experts have said, whilst there is expected to be a small amount of fluctuation in the market and the direction of rates, they are still relatively low and so now could be a good time to lock in a deal.
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Rachel Springall, finance expert at Moneyfacts, said: “Even if borrowers only have a small equity or deposit, there are still some attractive deals hitting the market.
“Another base rate cut is looking unlikely for the next couple of months, but if swap rates behave and continue to fall, it should encourage lenders to pass on cuts to fixed rate deals.”
Swap rates are interest rates that lenders exchange with each other as a way of managing risk.
These reflect the market’s view of which direction interest rates will go, so lenders use them to set their own rates.
David Hollingworth of L&C mortgages said: “Rate movement has been mixed, with some lenders continuing to edge rates up while others have been able to readjust some deals and cut them back a bit. Often, the changes will be small and there’s no strong trend in rate movement.
“In fact, it looks like we may be in a phase where rates will bobble around with small changes being made without substantially moving the dial either way across the market.”
What to do if you are thinking of buying or moving
For those who are buying, Mr Mendes suggests comparing the fee as well as the rate and focussing on the total cost for the period you expect to hold the mortgage.
He said: “If you may move within a couple of years, check portability. If you are using a gifted deposit, line up the gift letter, identification, and source of funds now. Stress test your budget a little above the rate you secure and leave a cash buffer for moving costs and repairs.”
For those who are remortgaging, he recommends to start looking at the market about six months before your deal ends.
Mr Mendes said: “Most lenders will allow you to reserve a rate and switch to a cheaper one before completion if pricing improves. Weigh a simple product transfer against a full remortgage since the easiest route is not always the best value.
“If a small capital injection gets you into a lower loan-to-value band, consider it, but keep an emergency fund. Know your early repayment charge dates and your standard variable rate so you do not drift onto it by accident.”
Best deals currently on the market
Lenders are competing hardest in the 60 to 75 per cent loan-to-value (LTV) bands with both two-year and five-year fixes available at 4 per cent or under in many cases.
On remortgages at 60 per cent LTV – or those with a 40 per cent deposit or equity – the best two-year fix is Halifax at 3.86 per cent with a fee of £1,499.
At 75 per cent LTV, HSBC is at 3.99 per cent for two years with a £999 fee, although Premier eligibility applies.
For the best five-year fixes, Santander has a deal at 3.95 per cent with a £999 fee at 60 per cent LTV, and 4.02 per cent with a £999 fee at 75 per cent LTV. Both of those deals come with a free valuation and cashback.
For those with lower deposits or equity, at 90 per cent LTV, one of the best two-year fixes is with Furness Building Society at 4.25 per cent plus a £999 fee on a product that is limited by postcode.
Five-year options are available for 4.34 per cent with HSBC or Scottish Building Society.
For those with the lowest of deposits or equity at 95 per cent LTV, Clydesdale Bank offers a five-year fix for 4.78 per cent with no fee on a professional product, or 4.79 per cent with Furness with a £999 fee.
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