Get your hands on a bargain home loan

As a base rate rise looms, experts advise fixing a mortgage deal... fast

MORTGAGE borrowers are being urged to grab a new home loan deal before rates rise. The spectre is looming of a fresh base rate increase as soon as May, which along with already higher Swap rates – the rates which banks use to price fixed rate mortgages – means home loans could become more expensive.

Another factor suggesting costs will edge upwards is the closure last week of the Government’s Funding for Lending scheme which enabled banks and building societies to borrow cheap money and, in turn, offer bargain rates to borrowers.

Homeowners coming to the end of fixed rate deals – as well as those with expensive standard variable rate loans who pay on average 4.76 per cent – should move fast to secure a good rate.

These include thousands of borrowers who took out fixed rate loans two years ago to purchase homes in advance of a sharp rise in stamp duty.

In March 2016, the Government introduced a stamp duty surcharge of 3 per cent on purchases of holiday and buy-to-let properties. In response, the mortgage market saw a rush of buyers taking out new twoyear fixed rate deals.

Graham Sellar, head of business development for mortgages at Santander Bank, says: ‘About £30billion worth of loans completed in March 2016, some 50 per cent more than usual. Most were two-year fixes which are now coming to an end.’

He adds: ‘Some of these fixes were arranged over terms as long as 27 months so borrowers still have time to secure a good deal before their current arrangement runs out.’

Many lenders allow borrowers to book a new loan months in advance. Sellar adds: ‘With us it is four months and if the new rate is lower than the one a Santander borrower is already on they can move loan before the old deal expires and take advantage of the cheaper rate.’

David Hollingworth, of mortgage broker London & Country, says those with 40 per cent to put down either as a deposit or equity can bag a great bargain.

He says: ‘Two-year fixed rates can be found at competitive rates. For example, Sainsbury’s Bank has a deal priced at 1.24 per cent with a £745 fee plus free valuation and legal work for someone remortgaging. But rates are changing all the time.’

Chris Irwin, mortgage expert at Yorkshire Building Society, says five-year fixes are becoming more popular.

He says: ‘In the last 12 months we have seen a 21 per cent increase in the number of five-year applications, perhaps unsurprising given the current economic uncertainty.

‘Borrowers value the security of knowing exactly what their repayments will be for a prolonged period of time.’

Hollingworth likes HSBC’s fiveyear fix at 1.74 per cent with a £999 fee and free valuation and legal work. This is for remortgages only.