10 January 2022

New year, new mortgage?

The start of a new year is as good a time as any to look at your finances, checking to ensure that you aren’t paying more than you need to for what is many people’s biggest outgoing – the mortgage. This is even more the case this year with soaring inflation, rising energy bills and higher taxes coming into play, as the cost-of-living edges ever upwards.

The good news is that while the Bank of England raised interest rates in December for the first time in over three years, mortgage rates remain low. The very cheapest, sub-1 per cent rates may have disappeared but there are still two- and five-year fixes available at below 1.5 per cent. For borrowers worried about the potential of further interest rate rises, a fixed rate buys certainty and helps with budgeting for a set period of time.

As always, it is important not to fix for longer than you are absolutely sure about, as most deals come with hefty early repayment charges if you need to get out of the mortgage early. In theory, many of these mortgages are portable so you can take them with you should you move during the fixed term but that depends on the lender agreeing to the new security or property, and there is no guarantee that it will. There is an increasing number of longer-term fixed-rate mortgages, which may be worth a look as long as you are confident that you won’t be moving for a long time.

If your fixed or tracker rate comes to an end this year, it is worth making a note of when this happens and then starting to search for a new mortgage up to six months beforehand. Mortgage offers tend to last between three and six months, depending on the lender, so you can secure a rate ahead of when you need it. This is also the case if you are buying a new property. If interest rates rise during that period, you will be glad of your foresight, while you also avoid moving onto your lender’s higher standard variable rate while you try to find a mortgage once yours expires.

The best way to find a new mortgage is to use a mortgage broker such as SPF Private Clients to do the legwork for you. They will find the most competitive deal for your circumstances, giving you peace of mind that you are not paying more than you need to.