Mortgage rates hit record low AGAIN as Halifax launches 0.83% two-year fix – how to find the best deal for you
Halifax has launched a two-year fixed mortgage with a record low interest rate of 0.83%. It comes amid a mortgage rate war with five-year fixes also dropping below 1% for the first time EVER last month. It's yet another reminder to check whether you could save £1,000s on your own mortgage now.
Below we've a full rundown of how this new mortgage works, although it won't be right for everyone so use our Mortgage Best Buys tool to benchmark Halifax's deal against other offers. Remember, that when it comes to choosing a mortgage it’s always best to use a broker as the market can be complex. See our Cheap Mortgage Finding guide for help finding a broker.
How Halifax's new mortgage works
Here are the main features of Halifax's new deal:
- It's available to home-movers AND to first-time buyers – but not to those who want to remortgage. Most of the record-low mortgages to appear in 2021 have been exclusive to current homeowners, in other words those who own already but want to move home, or those looking to remortgage. Halifax's two-year fix on the other hand is available to home-movers and first-time buyers – but excludes those looking to remortgage.
- The fee is £1,495 (or £1,499 if you apply via a broker) – much higher than the usual £1,000ish you tend to see. But married with a cheap rate it still might be good for some.
- You can only get it if you have a substantial deposit. You'll need a minimum 40% deposit. This means the amount you can borrow from the bank – known as the loan to value (LTV) – cannot be greater than 60% of the property's value.
- This deal is for those who need a big mortgage. You'll need to borrow a minimum of £250,000 from your mortgage lender to qualify for this rate, so this deal will only be available on properties that cost at least around £415,000. The maximum you can borrow on your mortgage with this deal is £1 million.
- New-build properties are excluded from this mortgage. So check first with a broker whether the property you want to buy is eligible.
- The rate is FIXED for two years at 0.83%. This means it cannot rise or fall over the two years. This'll remain the case even if rates change elsewhere, including the Bank of England base rate; the official borrowing rate. After two years the 0.83% rate will revert to Halifax's standard variable rate (SVR), currently 3.59%.
- You can make overpayments of up to 10% each year. The total maximum overpayment each year cannot exceed more than 10% of amount you owed on 1 January that calendar year.
Rates are 'mind-bogglingly low' right now. So how does Halifax's new mortgage compare?
While not everybody will be able to get Halifax's new deal, it's still a sign of fierce competition between mortgage lenders. Aaron Strutt, of mortgage broker Trinity Financial, told MoneySavingExpert.com: "Mortgage rates are mind-bogglingly low at the moment. If you are looking for a low rate and you have a clear credit history and a decent deposit, there is a lot of choice. Even if you do not have a 40% deposit to access these crazy low rates, there is a wide selection of sub-2% deals."
Yet the market is complex, so there's still plenty of work to do to compare Halifax's mortgage against other deals. Use our Mortgage Best Buys comparison tool to help you benchmark prices and read our First-Time Buyer and Remortgage guides for more help. Here are some of the basics:
- The cost of a mortgage is a mixture of the fee and the interest rate, so a low rate alone doesn't always win. Currently, there are around 50 mortgages on the market at sub-1%, according to comparison site Moneyfacts. But it's not just the rate you need to compare.
Using our Mortgage Calculator, we found that if you're a first-time buyer purchasing a £435,000 home with a £255,000 mortgage over 25 years, Halifax can be beaten on total cost over two years by one of its other mortgages – a 1.16% rate with a lower fee of £200. So make sure to take both the fee and rate into account.
- What type of deal is best for you? Fixes vs variables, two-year vs five-year fixes and more. Fixes are useful if you need surety of your monthly payments as they won't change during the initial term – though fixes come in different lengths. A five-year fix can make sense if you don't plan to move in that time for example, but if you do want to move you'll need to check whether the mortgage you're interested in is portable. See fixes vs variables.
- You can use a mortgage calculator to benchmark the best deals, but unless you're a real expert, use a mortgage broker to actually do the switch – they can explain ALL your options, and lenders' borrowing criteria. To benchmark the best deal, put your info into our Mortgage Best Buys comparison tool and see our Cheap Mortgage Finding guide for help finding a broker.