Mortage rates are on the move
Is your fixed rate deal coming up for renewal? Our personal finance expert surveys the mortage market
FIVE YEAR fixed rate mortgages have fallen below four per cent for the first time in around six months, giving breathing space to the 1.4 million households whose fixed rate deals come up for renewal in 2023.
With many experts believing inflation has peaked, reducing the need for the Bank of England to raise the base rate above the four per cent announced earlier this month, longer term mortgage deals are getting cheaper.
David Hollingworth, associate director, communication at mortgage broker London & Country says: “Being able to fix for five years below the base rate is good news. With so much other financial insecurity around, knowing how much your mortgage payments are each month can give peace of mind.”
Depending on your view of whether the base rate will rise or not, the other option is to take a tracker mortgage which will fall, but also rise, with the base rate. But, says David Hollingsworth: “A tracker with no early redemption penalties is worth considering if you want flexibility, but prepare yourself that the expectation is there may still be increases in the base rate before it starts falling again.”
The top five year rate is Virgin Money available through brokers, offering a 3.95 per cent deal for those borrowing up to 60 per cent LTV with a £995 fee. London & Country has a 3.8 per cent deal but with a £1,300 fee. A five year tracker costs a bit more with Barclays offering 0.6 per cent above base — so 4.6 per cent - but with no redemption penalties. This allows you to take advantage if rates fall further over the five year period. With bank’s standard variable rates (SVRs) likely to rise to between 7-8.5 per cent once the latest base rate rise is taken into account, a discounted rate is not likely to be cost effective.
If you want to fix for the shorter term, rates have not fallen nearly as quickly as lenders think rates will stay higher for a while yet. A top two year fix is offered by Newcastle Building Society at 4.35 per cent with a £999 fee for loans of up to 60 per cent of the house value. A two year tracker from Barclays again costs 0.26 percent above base, so 4.26 per cent, with no charges so a comparable cost.
● National Savings & Investments (NS&I) is offering a new tranche of green bonds paying 4.20 per cent fixed for three years. The minimum investment is £100. Money invested goes into green projects chosen by the government.
If you prefer a higher rate without the environmental slant, Union Bank of India is offering 4.4 percent on its Fixed Rate Deposit account, minimum £5,000 and Zenith Bank is paying 4.3 percent on a minimum of £1,000 deposit on its Fixed Term Deposit Account. Two year rates are a shade lower at 4.35 percent also from Union Bank of India. The top one year bond pays 4.17 percent through SmartSave.