13 April 2017

HOW LOW CAN MORTGAGES GO?

JUST WHEN WE THOUGHT MORTGAGE RATES HAD GONE AS LOW AS THEY POSSIBLY COULD, PARTICULARLY WHEN YOU CONSIDER THAT SWAP RATES HAVE BEEN RISING, CHALLENGER LENDER ATOM BANK HAS CUT ITS FIVE-YEAR FIXES TO THE PRICE OF TWO-YEAR LOANS. THIS MEANS FIVE-YEAR FIXES STARTING FROM 1.29 PER CENT.

The new pricing makes Atom’s fixed-rate mortgages the cheapest on the market by far and the lowest five-year fixes ever seen. With five-year fixes starting from 1.29 per cent plus £900 fee for someone with a 40 per cent deposit, the nearest comparable rate is First Direct’s five-year fix pegged at 1.74 per cent with £1,450 fee. For someone with a £350,000 mortgage with a 25-year term, that is a saving of circa £4,440 over the term of the fix.

But it’s not just those with a hefty amount of equity in their home or similar level of deposit who can benefit from these cheap rates as the lender is matching its five-year rates to its two-year products across the board. Rock-bottom fixes are therefore also available to borrowers with just a 10 per cent deposit, pegged at 1.99 per cent over five years with a £900 fee. There is also a fee-free option for those for whom cash is tight, with a slightly higher rate of 2.44 per cent. The next cheapest equivalent on the market is from HSBC, which is 2.74 per cent with a £999 fee.

Launched this week for a limited time only, it is safe to say that these deals won’t be around for long. Atom Bank has cash to lend on the back of offering some market-leading savings rates but even so, with mortgage rates this cheap, that tranche of money won’t be around for ever.

Atom Bank is also a digital-only lender, which also helps keep costs down and enables it to offer more competitive rates. These deals are only available via selected mortgage brokers.

Borrowers on the lookout for some certainty and who are happy to commit to a deal for five years may wish to move quickly to secure one of these cheap rates as we don’t expect other lenders to follow suit and launch at similar pricing. However, it is important not to fix for longer than you are absolutely sure about as there are early repayment charges for getting out of the mortgage before the five years are up.

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