Archive: MoneySavingExpert's Money Tips Email

5yr fixed mortgages at their cheapest since March 2018 - many below 2%, offering certainty in an uncertain time. Can you save £1,000s?

A message from Martin:

 Our country is in an unprecedented state of political and economic uncertainty due to the Brexit stalemate. In most cases, that's negative for our personal finances, and in all cases, it makes planning your financial future more difficult. Yet there is one silver lining, as the uncertainty has helped ramp down fixed mortgage rates.

"It's happened partly as the markets don't view the UK economic future with much glee, and weak growth tends to mean a lower interest rate policy. Thus predictions of the UK's long-term interest rates have dropped - and those predictions are roughly what mortgage fix rates are based upon.

"On top of that, there's currently fierce mortgage competition, so the cheapest 5yr fixed-rate mortgage is 1.79%, which is seriously cheap, and 2yr fixes are as low as 1.39%. 

"Of course that doesn't mean they can't drop further, but there's not that far to go, whereas there's a lot of room for them to rise. So this is likely to be a great time to get a new mortgage deal and everyone with an existing mortgage should check now if you can save £1,000s.

"Yet that's not the same as saying it's a great time to buy or change a property - uncertainty could see property prices swing. Though as no one has a crystal ball, if you're buying your first home, provided you're not overstretching and it's the right property, you may as well get on with it. Now over to the team, for the practicals of checking & getting a deal.

• Know your mortgage deal. If you're remortgaging, it's wise to understand how your current deal works to see if it's worth switching. If buying a home, it's also important to know the following about your prospective deal to help compare:
                                                       
  a) What's the rate? Plus monthly payments & outstanding debt.
  b) What type is it? Is it a fix, tracker, SVR etc? See Fixes v variables.
  c) When's the intro deal over? Eg, when does the 2yr fix end?
  d) When must it all be repaid? Eg, in 10, 20, 25yrs?
  e) Will I be penalised to switch? Any early repayment/exit penalties?
  f) What's the loan to value (LTV) - the proportion of the home's value you borrow? Eg, £180k on a £200k home is 90% LTV. See LTV help.
  
  
• Compare your deal to the market's best. Put your info into our mortgage comparison tool (which also factors in fees) to get a benchmark for your best deal, then read on.

• HUGE savings are possible if you're one of 2m languishing on your lender's standard variable rate (SVR). This is the rate most fixes and trackers revert to after an intro deal. They're often exorbitant, and to show the size of possible savings, here are some major lenders' main SVRs (also see SVR help).
  
  
  Barclays 4.24% | Coventry BS 4.99% | HSBC 4.19% |
  Lloyds & Halifax 4.24% | Nationwide 4.24% | RBS & NatWest 4.24% | Santander 4.99% | Virgin Money 4.99% |
  Yorkshire BS 4.99%
  
  Note: some have lower rates for long-standing customers, so check.
  
  So someone moving from a £150k mortgage with 20 years remaining at 4.24% SVR to a 5yr fix at 1.79% will save about £10,000 over 5yrs - even after taking £1,500 fees into account. See how this works for you: Compare Mortgages Calc.
  
  
• Remortgaging? We've a FREE 60-page booklet with everything you need to know. Your mortgage is likely your biggest expenditure, and just because you've done it once, it doesn't mean it's the same again. Our guide helps you know what you're doing.
  
  - Remortgage Booklet: Download instant PDF or order printed version.
  - Remortgage-help 5-min video: Sometimes it's easier to watch than read. See Martin's remortgage help video.
  
  MSE user @Barry_Carter tweeted us: "Your remortgage guide did the business for me as always... locked in a good 5-year deal."
  
  
• First-time buyer? We've a separate guide. While much of the info above remains the same - eg, fixes vs trackers or how LTVs work - our First-Time Buyers' Guide has specific help, incl how to boost your acceptance chances and save for a deposit.
  
  
• Look for a deal 3-6 months before your current mortgage ends. Many lenders let you lock in a rate this far ahead, so you could grab one now while cheap. But there are risks of paying possible advance fees if rates fall again. See Long lock-in mortgage help for full info.
  
  
• It isn't just about the best deal, it's about getting accepted, and a broker can often help. There are a few possible hurdles, incl:
  
  - A rotten credit report can torpedo a home loan application. So double-check yours ASAP - here's how.
  
  - Lenders must also obey strict rules to check if you can afford mortgage repayments - not just at current rates, but if they rocketed to 6-7%. They want evidence of income, bills, expenses and sometimes even eating out. So being frugal in the months before will help.
  
  - You may also be frozen out of some deals if you're buying or live in certain properties, such as high rises or above a shop.
  
  All this complexity means it can be difficult to find who will accept you, if anyone, which is why we suggest you use a broker. They've all that info, incl criteria that's not easily available to the public, to match you with the right deal. See Top mortgage brokers.
  
  However, some lenders only sell direct to the public. So some brokers can and do exclude them - we suggest you use one with our mortgage comparison, which has broker and direct deals.
  
  
• Use savings to bag a better mortgage. The lower your LTV, the better the deal. Rates tend to improve as you move down to 90%, 80%, 75% and 60% LTV, so savings could get you into one of these lower bands. For example:
  
  If you've a £150k home, and want a £137k remortgage, that's 91% LTV, and the top 5yr fix is 2.99%. But use £2,000 of savings to reduce the borrowing and you'd be at 90% LTV - where the top 5yr fix is 2.25%, so you pay about £700/yr less in repayments. See how pumping more savings into your mortgage can help you save.
    
  
• Can I afford it? What will it cost? We've an array of calculators to help. Try the following:
  
  Basic mortgage calc - incl what it'll cost? | Compare two mortgages | Compare fixed-rate mortgages | Ditch your fix? | How much can I borrow?