MSE News

Martin Lewis: 'Mortgage rates drop below 1% – check urgently if you can switch & save £1,000s'

Image of keys with house keyring on wooden table

This is warning to EVERYONE with a mortgage. Rates have dropped below 1% – check urgently if you can switch & 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 0.95% and five-year fixes at 1.17% (though in some cases they load the cost in the form of hefty fees).

The cause? A perfect storm of...

  • Ultra-low UK interest rates
  • A house-buying boom boosted by a stamp duty cut
  • Banks with a glut of cash to lend as so many people built up savings during the pandemic

The result is ferocious lending competition for the best customers. That means, for some, remortgaging - switching deal without moving property - can result in phenomenal savings. As Martin Evans tweeted me: "@MartinSLewis I'm fortunate I've been able to work at home through the pandemic. I've been able to remortgage and my payments are over £150/mth cheaper." A £1,850/yr saving.

Yet while on the surface it looks like a boom time for mortgage holders, you needn't be Bob Geldof to smell a rat. Getting accepted for super-cheap mortgages ain't easy, especially if you've received Covid support. Therefore my aim isn't just to show you 'the cheapest mortgage' – it's really about 'the cheapest mortgage you can get'.

Delays are rife right now – act in time to avoid moving to the SVR 

The stamp duty deadline and house-buying boom means brokers, lenders and conveyancing solicitors are in massive demand. This means things are taking longer, sometimes months right now.

Those on fixed or discount deals ending this year, beware. When they end you're usually bumped on to lenders' far more expensive standard variable rates (SVRs). To avoid that, you'll need to start earlier than normal, three to six months before it ends, particularly if you're self-employed or have complicated circumstances.

This article was originally written by MoneySavingExpert founder Martin Lewis for our weekly email on Wednesday 16 June.

12 cheap mortgage finding need-to-knows

The aim is to see if you can find a far cheaper mortgage, including help through the substantial acceptance pitfalls that many are facing right now.

Download our much raved-about free PDF booklets:

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The perils of remortgaging after coronavirus financial support

It feels unjust. Yet if you have been a recipient of personal Covid-based financial support, both furlough and the self-employment grant, remortgaging can at best require more paperwork, at worst be kiboshed entirely.
 

  • Furlough - expect scrutiny or even rejection. For those who were on furlough, but are now fully back at work, the lender will want to see proof of your return to work, usually via at least one month's payslips. That should be enough, and things will then work as normal.

    It's trickier if you're still on furlough or part furlough. It doesn't automatically exclude you, but of those we checked only three of 13 lenders accept furlough income as part of a mortgage application - the rest ignore it for their calculations, meaning rejection or a smaller mortgage offer.

    See our How much can I borrow? guide for more on how furlough can affect your ability to remortgage.

  • The self-employment grant is a hurdle for remortgagers. While receiving a SEISS grant in the past isn't an automatic reason for mortgage rejection, sadly some have been told it is evidence of business viability problems (as by applying you declared you needed help) and have been rejected.

    Though receiving an earlier grant but not a later one can sometimes be viewed as evidence of a turnaround.

    For those still receiving SEISS grants, of the 13 lenders we asked, six explicitly said they don't take money received from a SEISS grant into account, while only two said they would - the rest were vague. There are no hard and fast rules.

    As for whether those who are eligible, and struggling, should still apply for SEISS 5 when it comes out, my view is if you need the cash, do it - mortgage savings are usually no substitute for direct cash being paid into your account.

For those struggling to get a mortgage due to these schemes, product transfers from your existing lender, and using mortgage brokers, are the best routes to navigate through this.

A final word about mortgage prisoners

Sadly, 200,000+ people are trapped in extremely costly mortgages as long-term victims of the financial crisis. I do worry the cladding crisis and pandemic will see their numbers swell too.

Campaigning to help mortgage prisoners is a priority for me personally and MSE. While we've been quiet in the last few months (see the most recent mortgage prisoner update), we are still working on it and committed to pushing and lobbying Government for a solution.

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