15 April 2021
Competition hots up on the high street as mortgage rates fall
With one building society launching a discounted variable rate at sub-1 per cent and another introducing a five-year fixed-rate mortgage pegged at just over 1 per cent, there are plenty of competitive deals to attract borrowers. What’s more, the Bank of England Credit Conditions Survey points to a narrowing of overall spreads on secured lending relative to Bank Rate or the appropriate swap rate in the first quarter of this year, with spreads expected to narrow further in the second quarter. This suggests mortgage pricing could become even more attractive.
Hinckley & Rugby building society’s two-year discounted-variable rate, aimed at those who already own a home and are remortgaging, with at least 40 per cent equity in that property, is priced at 0.99 per cent with a £999 fee. While most borrowers have opted for the certainty of a fixed-rate mortgage in recent months, to counteract wider uncertainty caused by the pandemic and because they are so cheap, this sub-1 per cent deal may entice some homeowners. While there is a risk that interest rates could rise, particularly as they are currently at a rock-bottom 0.1 per cent, there is little sign of that happening anytime soon. However, those who would not be able to afford their mortgage if rates were to rise should consider opting for the security of a fixed-rate deal.
For those looking for a fixed rate, Nationwide is the latest lender to cut its pricing, launching a five-year deal at 1.19 per cent. This will only be available to those with a significant amount of equity but as long as you are happy to fix for this length of time, it could save you money on remortgaging every couple of years.
Finally, for those who don’t have much in way of a deposit but have found a property they want to buy and would like the certainty of a fix, Halifax is the first Budget-named lender to launch its 95 per cent mortgage guarantee offering next week. With several other lenders launching 95 per cent deals recently, Halifax’s pricing is in line with what else is on the market, with two-year fixes from 3.73 per cent and five-year equivalents from 4 per cent, both with a £999 fee. There are higher rate options for those who prefer not to pay a fee. While it is clear that first-time buyers will pay more for the higher risk associated with these products compared with those with much bigger deposits, those who are keen to get on the housing ladder may feel it is a price worth paying.
As always, it is important to seek advice from a mortgage broker beforehand to ensure you understand the lending you are taking on and get the right deal for your circumstances. Please get in touch with SPF Private Clients for more information.