Now may be time to strike a deal as rates creep up­wards

The Sunday Post (Dundee) - - Advice -

It’scrunch time for bor­row­ers con­sid­er­ing tak­ing out a new fixed-rate mort­gage deal.

Lenders have been tweak­ing the rates they are of­fer­ing up­wards in re­cent weeks, lead­ing to some of the low­est of the low deals dis­ap­pear­ing. So, if you’ve been con­sid­er­ing tak­ing out a new deal for a while but haven’t got round to it, now might be the time to have a closer look.

Swap rates, which lenders use to price their loans, have been head­ing up­wards amid spec­u­la­tion about a pos­si­ble base rate rise. And some ul­tra-low fixed rates have been pulled off the mar­ket al­to­gether.

David Holling­worth, from bro­ker Lon­don and Coun­try Mort­gages, said: “This acts as a re­minder that rates won’t stay low for ever and ac­tu­ally they’re al­ready on the move.”

The rate in­creases have been made across large chunks of lenders’ ranges, he says, so many peo­ple could be af­fected, whether they have big­ger or smaller de­posits.

Holling­worth adds: “Right the way through the loan-to-value range now, from the low­est of the low all the way up, you’re see­ing in­creases in fixed rates.”

Com­pared to pre­vi­ous years, the rates on of­fer are still low, so there are still many good deals out there. But Holling­worth said: “The very low­est rates are rapidly dis­ap­pear­ing.

“This is some­thing that will trig­ger peo­ple to take ac­tion if they haven’t al­ready, be­cause they are go­ing to miss out on the very low­est rates, po­ten­tially.

“But there’s still a lot of com­pet­i­tive rates out there, so it’s not too late if they are able to get their skates on.”

If you’re won­der­ing how long to fix your mort­gage rate for, it de­pends on your in­di­vid­ual cir­cum­stances and how far into the fu­ture you feel com­fort­able be­ing locked in.

A longer-term fixed deal means you have cer­tainty over your pay­ments, but a shorter term may have a lower rate, and will also free the bor­rower up more quickly if cir­cum­stances change – so the pros and cons need to be weighed up.

Longer-term deals could last up to 10 years, so you must care­fully de­cide whether you’re happy be­ing locked in for such a lengthy term.

But Holling­worth sug­gests more peo­ple will be quite will­ing to com­mit to long-term, fixed-rate deals to in­su­late them­selves from po­ten­tial in­ter­est rate rises.

He says: “The ques­tion will be whether they go for the very cheap­est rates, which are the shorter-term fixes, or con­sider longer-term.”

For bor­row­ers want­ing longer-term cer­tainty, Holling­worth sug­gested a pos­si­ble com­pro­mise could be a seven-year fix, with Coventry Build­ing So­ci­ety hav­ing brought out these deals.

When choos­ing the right mort­gage, Holling­worth said it’s im­por­tant to fac­tor in any fees and in­cen­tives, such as cash­back or free le­gal pack­ages, as well as the rate.

Peo­ple near­ing the end of their cur­rent mort­gage deal should also bear in mind that some lenders an­nounce of­fers which are valid for up to half a year, and it could be worth their time lock­ing into a deal months in ad­vance.

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