Top Mortgage News

Derin Clark

Derin Clark

Online Reporter
Published: 17/05/2019
This week has seen only a little movement in terms of the best mortgage rates available. In the two-year fixed rate mortgage chart, the best rate being offered was still 1.54%, while those wanting to fix their mortgage term for longer could again get top rates of just 1.74% in the three-year fixed rate Best Buy chart or 1.89% in the five-year and over fixed rate best Buy chart. The remortgage chart also remained unchanged yet still highly competitive this week, with a rate of 1.43% (variable) topping the Best Buy chart.

A selection of the best two-year fixed rate mortgages

In the Best Buy two-year fixed rate mortgage chart this week:
Yorkshire Building Society – 1.54%
NatWest – 1.60%
Ffirst direct – 1.64%
There was no movement at the top of the fixed rate mortgage Best Buy charts this week, with Yorkshire Building Society remaining at the top of the two-year fixed rate chart offering a rate of 1.54% on a 35% deposit/equity (65% LTV). This rate is fixed until 30 June 2021 and charges a completion fee of £995. It does however come with the incentives of free valuation and £250 cashback, while also allowing underpayments, overpayments and payment holidays.
NatWest remained in second place in this week's Best Buy chart with a rate of 1.60% on 20% deposit/equity (80% LTV) that remains fixed until 31 October 2021. A fee of £995 is required, but this product includes the incentive of £250 cashback and allows overpayments. Meanwhile, first direct continued in third place with a rate of 1.64% that is fixed for two years for those with a 25% deposit/equity (75% LTV). This deal charges a booking fee of £490, which increases depending on the amount borrowed, but does offer the incentive of fees valuation and, for remortgagors, free legal fees, while also allowing overpayments.

A selection of the best three-year fixed rate mortgages

In the Best Buy three-year fixed rate mortgage chart this week:
•HSBC – 1.74%
•Barclays Mortgage – 1.79%
•Yorkshire Building Society – 1.89%
HSBC was again offering the top rate in the three-year Best Buy chart this week with 1.74% on a 25% deposit/equity (75% LTV), which is fixed until 31 July 2022. The product carries a fee of £999, but it includes the incentive of free valuation for all borrowers and free legal fees too for remortgage customers. Barclays Mortgage took second place again this week with a rate of 1.79% on a 25% deposit/equity (75% LTV), which is fixed until 31 July 2022. A fee of £999 is charged, however it includes the incentive of free valuation for properties valued to a maximum of £2m and again, legal fees are free for remortgagors. Both these deals have the flexibility of allowing overpayments too. In third place this week was Yorkshire Building Society offering 1.89% fixed until 30 June 2022 for a 15% deposit/equity (85% LTV). This deal charges a completion fee of £995 but does offer free valuation as an incentive. This product also allows underpayments, overpayments and payment holidays.

A selection of the best five-year fixed rate mortgages

•Santander – 1.89%
•Sainsbury's Bank – 2.01%
•Yorkshire Building Society – 2.10%
As is normal, those wanting to fix their mortgage for a term of five years or more had to compromise with the highest fixed term rates again this week. Santander offered the most competitive rate in this Best Buy chart of 1.89% that is fixed until 2 August 2024. This deal requires a 25% deposit/equity (75% LTV) and charges a fee of £999. It does however include the incentive of free valuation up to £1,190 for all borrowers and free legal fees or £250 cashback for remortgage customers too, as well as permitting overpayments. Sainsbury's Bank was offering a rate of 2.01% that is fixed until 30 June 2024, which put it in second place in the chart this week. This rate requires a 20% deposit/equity (80% LTV) and charges an arrangement fee of £995. However, it includes the incentive of free valuation and allows underpayments, overpayment and payment holidays. Yorkshire Building Society featured strongly in the charts this week and could be found in third place in the long-term fixed rate chart offering a rate of 2.10% for a 15% deposit/equity (85% LTV). This rate is fixed until 30 June 2024 and charges a completion fee of £995. It offers the incentives of free valuations and £500 cashback. Underpayments, overpayments and payment holidays are also allowed.

A selection of the best remortgage deals

In the Best Buy remortgage chart this week:
•NatWest – 1.43%
•Lloyds Bank – 1.63%
•Mansfield Building Society – 2.05%
NatWest remained at top of the Best Buy remortgage chart this week with their 1.43% variable rate offer. This deal requires a 60% LTV and charges a booking fee of £995. It includes an incentive package of free valuation, no legal fees and £250 cashback and allows overpayments. Also offering a remortgage rate below 2.00% this week was Lloyds Bank offering 1.63% fixed rate until 31 August 2021. This rate requires an 80% LTV and charges an arrangement fee of £999. It offers the incentives of free valuations and no legal fees, while also permitting overpayments and payment holidays. Mansfield Building Society was third in the remortgage Best Buy chart this week offering a discount variable rate of 2.05% for three years on an 80% LTV. This deal charges a completion fee of £300 and a booking fee of £199. It does however include the incentives of no legal fees, free valuation and allows overpayments.

Fixed rate mortgages tend to be the product of choice for the majority of borrowers, but the latest Moneyfacts UK Mortgage Trends Treasury Report may cause some to think again, with the figures showing that the average two-year variable tracker mortgage rate has fallen substantially in the last month.

The average now stands at 2.02%, a drop of 0.08% from April (when it stood at 2.10%) and down 0.15% from the rate seen in September last year, a month after the Bank of England base rate increased to 0.75%. Given that tracker mortgages typically "track" base rate, the latest reductions may be particularly surprising given that base rate hasn't changed in the months since.

Further research shows that there are currently 203 variable tracker rate mortgages available, an increase of 18 products from last month (185). Of those currently on offer, 123 products are available to borrowers who require a maximum loan-to-value (LTV) of 75% and below, while the remaining 80 products are available to borrowers who require a mortgage of between 80% LTV and 95% LTV, offering plenty of choice for all sectors of the market.

Two-year variable tracker rate mortgages Sep-18 Apr-19 May-19
Average rate 2.17% 2.10% 2.02%
Products at 75% LTV and below 120 104 123
Products at 80% LTV and above 86 81 80
Total number of product available 206 185 203

"It appears that the increasing number of products this month, and subsequent intensifying competition, has driven the average two-year variable tracker rate down," said Darren Cook, finance expert at Moneyfacts.co.uk. This arguably goes against recent trends, as attention has up until now been more focused on driving rates down in the fixed sector of the market, signalling a potential change of direction among providers.

There are wide variations depending on loan-to-value, too, with it often possible to find rates that are far lower than the average – and they typically beat fixed rates as well. "As expected, the best two-year variable tracker rates can be found at a low-risk tier of 60% LTV, where the average rate currently stands at 1.72%, which is 0.30% below the overall average two-year variable tracker rate of 2.02%," said Darren. "In comparison, the average two-year fixed mortgage rate at 60% LTV is currently 1.90%, which is 0.18% higher than its variable counterpart average.

"Of course, it is to be expected that the average fixed rate will likely be greater than that of the average variable rate, as borrowers pay more for the certainty of monthly payments with a fixed deal. The amount of interest a borrower is required to pay monthly on a variable tracker rate mortgage could of course change over time, but any fluctuations in rate are likely to be linked to external factors such as the Bank of England base rate – and markets are forecasting just a single interest rate increase by 2021."

However, it can't be denied that with current economic conditions so unpredictable, this timescale may shorten, and variable mortgage rates could increase sooner as a result. Therefore, a variable rate of interest may not suit those who are risk-averse – but it all comes down to personal choice. Ultimately, those considering a variable rate tracker mortgage should always factor in any rate rises that could affect whether they can afford the monthly repayments for the length of their term, so as to avoid any nasty surprises later on.

The landscape of buy-to-let has changed dramatically in recent years, with various Government interventions arguably making it more difficult for landlords to make a profit – and causing some to look at other ways of operating (as we'll discuss more below). Yet those seeking real returns from their property portfolios may still be able to find them, but for many, it all comes down to one important factor – location.

That's according to the latest Landbay Rental Index, which revealed that although the average rent for a UK property grew by 0.96% in the year to April, far better rental growth could be achieved in certain locations, particularly by looking beyond the former hotspot of London and going north instead.

Nearly half of first-time buyers would consider taking out a 40-year mortgage to get onto the property ladder, according to research from Santander Mortgages.

This could prove a successful strategy, as the bank also found that choosing a 40-year mortgage over a 25-year term could help 3.25 million more first-time buyers get onto the property ladder as it would make monthly repayments more affordable. Indeed, the analysis revealed that the cost of an average monthly repayment for a 25-year mortgage falls by £263 when spread over a 40-year period, and not only that, but buyers could save £178,500 – or 77% of the average UK house price – by buying a property rather than renting over 40 years.

"The possibility of owning a property may seem like a distant dream to some aspiring buyers, many of whom have found themselves locked in a 'rent trap' and unable to get onto the property ladder," said Miguel Sard, managing director of Mortgages at Santander UK. "By offering buyers the option of a longer-term mortgage, our aim is to address some of the affordability restrictions they face and support them in buying a home with more manageable monthly repayments."

40-year mortgage increase

The good news for first-time buyers is that the number of 40-year mortgages available has increased significantly over the last five years. Last month Moneyfacts.co.uk reported that 50.89% of all residential mortgage products have a standard maximum mortgage term of up to 40 years, up from 35.93% five years ago.

"Historically a standard mortgage term generally amounted to a period of 25 years, but most products are now available to be extended for a period of 40 years," said Darren Cook, finance expert at Moneyfacts.co.uk. "By extending their mortgage term, borrowers may be looking to reduce their monthly repayments and therefore are more likely to meet strict affordability requirements."

It is important to remember that although 40-year mortgages reduce monthly repayments, it does mean borrowers will have to wait longer to pay off the mortgage, which could mean some borrowers are making repayments into retirement. Therefore, those considering a 40-year mortgage should think about if they will still be able to continue making repayments towards the end of the mortgage, or may want to consider overpaying when their financial situation improves to help shorten the mortgage term. Another option could be choosing a shorter term when they remortgage; hopefully, they'd have built up some equity and could potentially move to a lower loan-to-value bracket, which means their repayments may not have to rise excessively, if at all.

Happily, these are options many borrowers are already considering. The Santander data went on to reveal that 23% of respondents would remortgage to a shorter term if their finances improved and 37% would overpay whenever they could, and another 18% would shorten the term when they moved house. Any one of these could help ensure affordability for the long term, but it's important to remember that finding the best mortgage rate can be just as important – use our mortgage search tool to get started, and see how low your repayments could be.

It can be difficult for first-time buyers to take that initial step on the ladder, but happily, they could now find it easier to secure a low-cost mortgage to suit, with the latest research from Moneyfacts.co.uk revealing that the number of providers offering mortgages to those with a 5% deposit has risen substantially in recent years, and rates have plummeted as a result.

Boost for first-time buyers

The data shows that 60 providers now offer residential mortgage products at up to 95% loan-to-value (LTV), up from 53 a year ago and a sharp rise from just three in April 2009, when providers turned away from this sector in the aftermath of the financial crisis. The number of 95% LTV products available has risen just as dramatically over the same period, and in turn, this boost in competition has forced rates downwards.

As the table below highlights, the average two and five-year fixed mortgage rates at 95% LTV have fallen by 0.73% and 0.71% respectively in just 12 months to stand at 3.28% and 3.73%, both of which are record lows, which means first-time buyers have never had it better if they want to take that first step.

Maximum 95% loan-to-value residential mortgages

 


Number of providers


Number of fixed rate products


Number of variable rate products


Average two-year fixed rate (95% LTV)

Average five-year fixed rate (95% LTV)


April 2019


60


338


67


3.28%


3.73%


April 2018


53


246


58


4.01%


4.44%


April 2014


47


153


28


5.31%


5.48%


April 2009


3


3


0


N/A


7.09%


Source: Moneyfacts.co.uk

"A decade ago, borrowers who could only raise a 5% deposit had just three products from three mortgage providers to choose from," said Darren Cook, finance expert at Moneyfacts.co.uk. "Today, a borrower can choose between 405 products available from a total of 60 providers. As more firms become willing to lend at this higher-risk tier, it means that potential homeowners have a greater choice of products, incentives and service, which can only be good news for borrowers."

Mortgage certainty

The fact that 83% of mortgages at this level (338 of the 405 currently available) are fixed rate deals is particularly notable, but it also isn't that surprising; Darren explains that these deals "enable borrowers to have the certainty of knowing their monthly repayment amount, which is perhaps of particular importance to those taking their first steps on the property ladder.

"There clearly seems to be a positive drive by mortgage providers to try and secure the business of potential first-time buyers, the lifeblood of the mortgage market, and it is encouraging to see rates decrease because of this healthy competition."

The fact that rates have fallen to record lows will come as particularly welcome news to those now searching for their first home, and means now could be a great time to take the plunge. Of course, first-time buyers will still need to jump through several affordability hoops to prove they can afford their preferred mortgage, but with average rates lower, things should hopefully be slightly easier. Start the process by comparing the best first-time buyer mortgages available and see if you can make it onto the first rung of the ladder.

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