Homeowners ‘should cash in’ as banks reduce mortgage rates

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The coronavirus outbreak may have caused chaos in the property market, but it has also given existing homeowners an opportunity to save thousands of pounds by remortgaging.

While hundreds of house purchase loans have been withdrawn from the market in recent weeks, remortgage deals are still freely available.

The number of new purchases has slowed because they typically require a surveyor to carry out a physical inspection of the property, which is banned during lockdown. However, remortgages can be done without the need for a home visit, as banks use market data to estimate the value.

Market analysis by CACI, a consultancy, has found that 11pc of all mortgage maturities this year will take place in April, with more than £20bn of loans reaching the end of their initial term. Those customers will transfer to their lender’s standard variable rate and can save huge sums by switching.

A homeowner with a £150,000 mortgage outstanding would pay £834 per month on a typical standard variable rate of 4.5pc. By moving to the cheapest rate on the market, a 0.84pc tracker from Barclays, they would pay £555 a month – a saving of £3,348 a year. The Barclays deal has a £1,999 fee. A fee-free equivalent is available with a 1.18pc rate.

Aaron Strutt of Trinity Financial, a mortgage broker, said: “If your mortgage rate is coming to an end you need to act because lenders will still hike your rate, with or without the current crisis.

“Lots of lenders have scaled back their mortgage ranges, but there are still some great deals on offer and they will almost certainly undercut the rate your current lender will offer you.”

Borrowers should be aware that some banks, including Nationwide, NatWest and Santander, will now only lend up to 75pc of a property’s value. This could mean that young borrowers, who typically own a small portion of their home, could struggle to take advantage of low rates.