Western Daily Press (Saturday)
SWITCH & SAVE ON YOUR MORTGAGE
Money saving expert MARTIN LEWIS has invaluable advice for anyone with a home loan
THIS is a warning to everyone with a mortgage. Rates have dropped below 1% – check urgently if you can switch and save £1,000s.
Acceptance isn’t always easy but don’t just accept the status quo.
New mortgage deals are at their lowest ever rates, with two-year fixes down to 0.94% and five-year fixes at 1.14% (though beware of hefty fees).
The cause? A perfect storm of... Ultra-low UK interest rates; A house-buying boom boosted by a stamp duty cut, and
Banks with a glut of cash to lend as many people built up savings during the pandemic
The result is ferocious lending competition for the best customers.
That means, for some, remortgaging – switching deals without moving property – can result in phenomenal savings.
As Martin Evans tweeted me: “@MartinSLewis I’m fortunate I’ve been working at home through the pandemic. I’ve been able to remortgage and my payments are over £150/mth cheaper.”
Delays are rife - act in time to avoid a rate hike
Brokers, lenders and conveyancing solicitors are in massive demand.
This means things can take months longer.
So those on fixed or discount deals ending this year, beware.
At that point, you’re usually bumped on to lenders’ far more expensive standard variable rates.
To avoid that, start earlier than normal to sort this – three to six months ahead – particularly if you’re self-employed or have complicated circumstances.
It isn’t about the cheapest mortgage, it’s about the cheapest you can get
The biggest factor here is your loan to value (LTV) ratio – the proportion of the home’s value you’re looking to borrow, eg, if you owe £180k on a
£200k home your
LTV is 90%.
Mortgages start at 95% LTV – and availability and interest at this level have improved recently – but it’s still usually far cheaper at 90%, again at 80%, 75% and then bottoms out at 60% of a home’s value.
Use any savings to push to a cheaper level if you can. After that, assuming the property is suitable, there are two tests of acceptance. Are you credit worthy? A poor credit history can torpedo a home loan application or mean you don’t qualify for the cheapest deals. Check your credit file for errors, and try to minimise other applications, excess debt and credit (ie, access to borrowing even if unused) in the run-up to getting a mortgage. For how to check your file for free and more tips see my moneysavingexpert.com/ CreditBoost guide.
Can you afford it? Lenders must also do strict checks to see if you can afford mortgage repayments, not just at current rates, but stress-testing how you’d cope if they rocketed.
They want evidence of income, bills, expenses and sometimes even eating out. If you’re likely to be close to the wire, being frugal in the months leading up to application is worthwhile.
Three steps to help you find a cheaper mortgage
1) Check the best deal your existing lender will give you: This is known as a ‘product transfer’. As your existing lender needn’t do affordability checks if you’re not borrowing more, it can work out well for some. Plus there are typically no or lower fees, and less paperwork. So start here, but
ALWAYS carry on to check whether you can take advantage of competition to beat it.
2) Use a whole of market comparison site to benchmark deals:
Use one that covers all deals, including ‘direct only’ (ie, those that aren’t offered by a broker) such as the moneysavingexpert.com/
MortgageComparison which automatically factors in fees too – as the smaller your mortgage, the bigger the impact of fees.
3) Use a mortgage broker: They can guide you and have exclusive deals, plus they know key acceptance criteria unavailable to the public – so can help if you’re struggling with this.
Sites like unbiased. co.uk can help you find a broker near you.
Some top nationwide ‘fee-free’ brokers (paid via commission from lenders) include landc.co.uk and habito.com.
Far more help, picks and explanation at moneysavingexpert.com/ MortgageBrokers.
Remortgaging is more difficult if you’ve had coronavirus financial support
For those previously on furlough, but now fully back at work, the lender will want to see proof of your return to work, usually via one or more months’ payslips.
That should be enough, and things will then work as normal.
If you’re still on furlough or part furlough, lenders won’t automatically exclude you, but many are likely to ignore that income for their calculations – meaning rejection or a smaller mortgage offer.
The self-employment grant can also be a big hurdle for would-be remortgagers.
Some have been told it’s evidence of business viability problems (as by applying you declared you needed help) and have been rejected.
Yet receiving an earlier grant but not a later one can sometimes be viewed as evidence of a turnaround.
For those affected, product transfers from your existing lender and using mortgage brokers are the best routes to navigate through this.
As for whether those who are eligible, and struggling, should still apply for the fifth grant when it comes, my view is: if you need the cash do it – mortgage savings are usually no substitute for direct cash being paid into your account.
There are others who will struggle to remortgage too
It’s always worth checking if you can get a cheaper deal. Yet not all will succeed.
with your current lender for their best deal before you look at the rest of the remortgage market
Some living in flats with cladding may find lenders requiring an EWS1 safety certificate (introduced after the Grenfell disaster). That can be difficult to get, sadly leaving some locked out of remortgaging – more Government help is needed.
Equally, many lenders have tightened criteria for self-employed people since the pandemic. You’ll need rock solid proof of business viability.
Finally, there are the 200,000+ existing mortgage prisoners, trapped on high rates as long-term victims of the financial crisis.
If that’s you: as you’ll know, I’ve been fighting hard to get you released – it isn’t easy, but I’ve no plans to give up.
Martin Lewis is the founder and chair of MoneySavingExpert.com. To join the 7.5 million people who get his free Money Tips weekly email, go to moneysavingexpert. com/latesttip