You know the story. Commentators, banks and even friends round the dinner table or at the pub have all been saying that you should be fixing your mortgage for, well several years now. However, for whatever reason nothing has been done and to be honest, you have probably played it right up to now apart from a little scare towards the end of last year.
However, in the aftermath of the Brexit vote and the recent Bank of England Base Rate cut we have been approached by many borrowers who want to investigate what all this means for their mortgage and whether they can save money by switching on to a new deal.
As ever the biggest question is around timing; is it best to act now or wait a bit longer? To take a famous Peter Sellers quote in vain, “Now is not the time Cato…Now is the time!”
For me though, the answer is that it is very much the time. With almost half of lenders still not passing on the full quarter point rate cut, it does seem that we are close to the point where lenders are loath to, or unable to, reduce rates too much further.
The effect of recent events has seen SWAP rates, upon which lenders price their fixed rates, fall dramatically. At the end of April 5-year money stood at 1.14% and 10-year money at 1.55%. Now they are 0.52% and 0.76% respectively! That is some fall and they are now at levels that have not been seen before.
As a result, we are seeing some extraordinary product offerings with 2 year fixes available at just 0.99% (3.35% APRC), whilst 5 year fixes are now available from just 1.89% (3.42% APRC).
Even those with only 10% deposit or equity have seen the cost of rates fall and it seems remarkable that borrowers can now obtain a 90% Loan-To-Value mortgage from just over 2%.
Perhaps the most interesting change however, is where longer term fixes are concerned and specifically the 7 year and 10 year fixed market. This week a brand new 7-year fix has just hit the market priced at just 1.99% (3.14% APRC) whilst 10 year fixes have fallen dramatically and are now available from 2.39% (3.08% APRC).
This will appeal to many looking to remortgage who have no intention of moving within that time period as it compares very favourably with even 5 year fixed rates at this level.
Whilst there has been a lot of talk about the difficulties of remortgaging in the aftermath of the Mortgage Market Review and the extra hoops borrowers now have to jump through, the reality is that for those with a good job, credit record and equity in the property there really is no reason to worry. Obtaining a remortgage is still straightforward with lenders falling over themselves to get this type of quality business.
For those who think they are in a more difficult position it is still worth taking professional advice on your options as lenders are starting to ease criteria a touch and there are many more options open for those that, for example are self-employed or work on a contract basis.
For those on a tracker rate or Standard Variable Rate still waiting and expecting a further cut, there are some points to note if Bank Base does get cut further.
Borrowers should check the small print of their mortgage product, as some lenders have a “collar” or floor below which they will not reduce rates further. Some other lenders use their own version of Bank Base Rate which, although it always has historically, does not have to mirror the Bank of England.
Lenders may also not be quick to reduce their Standard Variable Rates as many stopped passing on cuts the last time Base Rate fell further in order to protect their margins and ensure they remain profitable.
Either way, the rates available from mortgage lenders across the board are worth paying special attention to and for those coming to the end of their current deal or who have not done anything recently, the decisive moment seems to be upon us.
Borrowers looking at switching on to a new product should first find out exactly what their existing lender would offer them and then speak to a professional broker to compare that to the rest of the market.
With most remortgage products offering a free valuation and free legals, plus the ability to switch on to a cheaper product if one appears prior to completion, it looks like a good opportunity to lock in now.
After all, rates cannot get too much lower now – can they?
Your home may be repossessed if you do not keep up repayments on your mortgage.
A fee of up to 1% of the mortgage amount may be charged depending on individual circumstances. A typical fee is £495.