Scrutinise small print on those tempting mortgage deals
ANSWER: There is no doubt what we are witnessing is a price war between mortgage providers. HSBC, NatWest and Santander are offering record low five-year fixed rates below three per cent. These rates certainly come as a surprise as many of us believed rates would continue to climb, leaving many consumers extremely cautious.
There really hasn’t been such a tempting offer and it looks like they are set to stay. Natwest, HSBC and RBS, to mention a few, are all offering exciting deals to prompt you to consider your options. However, the saying “if it sounds too good to be true it probably is” springs to my mind and my recommendation would be you that you must read the small print.
It is true that five-year fixed rates below three per cent have never been seen before. So if you are on a tight budget, a fixed rate provides you with the luxury of knowing precisely what money you need and when – which is a real luxury in today’s uncertain climate. However, the small print is important and with such a good deal comes hefty conditions.
The catch is you are looking at a loan to value percentage of 60 per cent at the least, some are stipulating 75 per cent. With such big deposits of at least 40 per cent coupled with the huge arrangement fees and you can see why these tempting deals aren’t available for everyone.
Still, it’s fair to say the market is certainly shifting; just this month the supermarket giant Tesco launched its own mortgage product, which they claim will be linked to your Clubcard points if you are a Clubcard member. My point is ultimately it pays to shop around and take the best advice you can because you never know what will be on offer this time next week. ANSWER: There is a lot you can do here and it’s mainly concerned with tightening your belt and proving to a lender you are the sort of responsible customer they want.
Your credit score is really important and if you have a history of bad debts, an abundance of credit cards at their limit and various other store credit and loans, then forget it.
This simply illustrates that you spend beyond your limits or, more importantly, that you have too many financial commitments making you unable to accommodate a mortgage payment.
Pay off your debts or reduce them. Pay off the balance of your credit cards and then cancel the cards. Failing to cancel them means your borrowing facility is still live and is still on your record – this is viewed negatively when scoring your financial ability to pay a mortgage.
If you are fortunate enough to have parents who will provide you with a deposit then you are blessed. The rest of us shouldn’t dismiss the Bank of Mum and Dad, as there are a select number of mortgage deals where your parents’ equity in their own home can act as a guarantor on your mortgage. Some lenders also offer offset deals, where parents use their own savings to reduce the deposit you need.
Without wishing to sound like older family members, it really is a case of looking after your pennies and the pounds will look after themselves. Save as much money you can, consider what you are really spending your money on. Saving money and using that to invest in a mortgage at a time when property prices and mortgage rates are low is setting you up for the future. Take advice, speak to an independent mortgage broker who can help you focus on what sort of deals could be available to you.
Franz Muelthaler is a mortgage adviser for Holroyd Miller, Wakefield, www. holroydmiller.co.uk.