Seven tips to help negotiate the mortgage maze
FINDING the right mortgage deal is not always easy and new research from the City regulator suggests that many borrowers are getting it wrong.
With a mortgage being the most costly regular outgoing for many people, this can be an expensive mistake to make.
Three in 10 customers fail to find the cheapest mortgage deal for them, according to the Financial Conduct Authority (FCA), which is looking at potential ways to make it easier for mortgage borrowers to shop around.
In the meantime, however, there are several factors to consider – and pitfalls to avoid – to boost your chances of finding a good deal and saving some cash.
First, weigh up what kind of interest rate package would be most suitable for your needs.
Fixed rates give borrowers certainty over what their payments will be for a certain period while, as their name suggests, variable rates can increase and decrease depending on what happens with the base rate.
Also, while practically all lenders will increase their variable rates when the base rate goes up, not all will bring them down when the base rate decreases.
While a fixed rate may, therefore, be preferable, if you are taking out a longerterm fixed deal you will also need to be sure that you are able to lock yourself in for that length of time.
Online tools are a great way for customers to compare the different mortgage products available to them.
While price comparison sites allow you to compare products from lots of different providers, they do not all feature everything that is available in the market. It is therefore sensible to check for deals on several comparison sites too.
Always consider the whole package when weighing up a mortgage deal and not just the interest rate to work out the overall cost.
Some mortgages will come with fees that negate the effect of a lower interest rate, while some may have perks such as cash-back that may be worth considering.
There has recently been a surge in the number of cashback deals on offer, according to financial information website Moneyfacts, which said that by mid-may there were 1,315 mortgage deals on the market offering cashback.
That represents just less than one-third (28 per cent) of the mortgage market.
It is also worth bearing in mind that mortgage rates have been edging upwards recently.
While the Bank of
England base rate remained
at 0.5% in May, Moneyfacts said that 27 providers increased their rates in April, with some doing so more than twice.
Charlotte Nelson, a Moneyfacts finance expert, said: “It is important for borrowers to note that there does not need to be a base rate rise for mortgage rates to increase.”
David Hollingworth from broker L&C Mortgages added that lenders have been tweaking and repricing their rates, although rates remain low by longer-term standards.
“Although shorter-term deals remain popular, more borrowers have elected to lock their rate in for longer in a bid to keep tighter control of their mortgage costs,” he said.
If you do not feel confident about choosing a mortgage product yourself, think carefully about going to a broker. Mortgage brokers have their fingers on the pulse when it comes to scouring the market for a good deal and they understand key details about lenders’ criteria.
However, choosing the right broker for you is vital. One question to ask could be whether they look at the whole of the market or make a selection from a panel of lenders.
You may also want to consider recommendations from friends if they have used someone who was particularly helpful.
While shopping around for a new deal can often save you a lot of cash, you will need to keep an eye on when your existing mortgage deal is coming to an end to make sure you are ready to switch at the right time.
If you allow yourself to roll on to your provider’s standard variable rate your monthly repayments could increase by several hundred pounds. Research from price comparison site Moneysupermarket found that one in six people on a fixed-rate mortgage claims to have no idea what will happen to their repayments once their fixed-term period comes to an end.