Best odds on short or long-term home loans
THE Labour Party’s new poster boasting about the lowest mortgage rates in 40 years does not tell the whole story.
The Government was certainly in charge during a halcyon period when you could pick up a tracker loan with a rate of 3.19 per cent. But that was nearly 18 months ago, in the summer of 2003, when the Bank of England base rate stood at 3.5 per cent.
Since then, the Bank of England’s Monetary Policy Committee has increased the base rate on five occasions to 4.75 per cent. Homebuyers can no longer pick and choose from mortgage deals at below 4 per cent, despite what the poster may suggest.
However, the news is not all bad for house-hunters and homeowners. You might not have the pick of rock-bottom prices, but some lenders have kicked off the year by cutting their mortgage rates.
Halifax, the UK’s largest lender, lowered the rate on its two-year fix for remortgages by two tenths of a percentage point to 4.99 per cent yesterday. It also reduced the pay rate on its tracker loan for remortgages to 4.84 per cent on loans worth 75 per cent of the value of a home.
Yet there is a sting in the tail for borrowers as Halifax increased the arrangement fee for remortgages by £100 to £499. James Cotton, of London & Country, the mortgage broker, says: “In many cases this will have more of an impact on the value of the deal than any new rate.”
Borrowers who want to avoid paying this fee will have to pay a higher interest rate of 4.99 per cent.
Lenders have also cut rates on longer tied-in deals. While Nottingham Building Society launched a three-year fix at 4.84 per cent, Leeds & Holbeck came up with a five-year fix at the same rate.
However, Ray Boulger, of Charcol, the mortgage broker, says that medium-term loans may not be the best choice. “For those who want the security of knowing what their mortgage payments are, this is a good time to choose a fixed rate. However, short-term and long-term deals currently offer the best value for borrowers.”
Northern Rock and Leeds & Holbeck both offer ten-year fixes at 4.99 per cent. But Mr Boulger says that the Northern Rock loan is the best of the two. “Leeds & Holbeck calculates interest annually, which adds to the cost of the loan.”
Lenders who calculate their interest just once a year, rather than adjusting the payments in line with the Bank of England base rate, effectively overcharge their borrowers if interest rates rise.
Northern Rock, which also offers a 15-year deal at 4.99 per cent, calculates its interest charges daily. The loan is also flexible, allowing borrowers to overpay or take repayment holidays. Borrowers that move home while tied in to Northern Rock’s ten or fifteen-year deal will also be able to borrow more money at the same rate of 4.99 per cent.
Mr Boulger says: “This is a particularly competitive rate, especially for those with large loan-to-value loans who are looking for peace of mind.”
You'll get it immediately to help you get the best valuation possible.
We value your privacy and will not share your details
