TWO top mortgage lenders have kick-started the New Year by cutting rates as experts say there could be more price falls to follow.
Halifax has chopped rates for remortgages by up to 0.35% while deals for new borrowers have fallen by up to 0.15%.
The lender offers home movers a two-year fixed rate starting from 4.49% for someone with a deposit of 40% or rates are as low as 4.23% if you want to fix for five years.
At the same time, Leeds Building Society trimmed rates by 0.21% this week.
Rates now start from 4.53% or 4.25% on five-year fixes.
And there could be further reductions to come, according to experts, especially if the Bank of England base rate continues to come down.
Rachel Springall, from comparison site Moneyfactscompare.co.uk, said: “Mortgage holders will be hoping that the Bank of England base rate will fall further in 2025, and if swap rates calm, this can lead to lower fixed mortgage rates.
“Cuts to the base rate may also delight borrowers who are stuck on a variable rate deal or are soon to come off their low-rate fixed deal, indeed there are estimated to be millions of borrowers due to refinancing in 2025.”
There could be some other key changes with five-year fixes becoming cheaper than two-year deals, according to Nicholas Mendes, mortgage technical manager at broker John Charcol.
He said: “Currently two-year fixed rates are about 0.15% higher than five-year fixes but I expect this to be reversed in 2025, with two-year fixes becoming the cheaper product.
“However, the type of mortgage rate I expect to fall most in 2025 is the tracker mortgage as, by definition, these rates will fall exactly in line with cuts by the Bank of England. “
Anyone on a standard variable rate (SVR) could be paying much more each month than on a fixed rate.
Someone on an SVR pays £300 more per month compared to a typical two-year fixed rate, according to Rachel Springall.
A fixed rate deal also offers peace of mind over monthly payment as you know what they will be for the term ahead – you can fix for different lengths of times with some deals going up to 10 years.
Your repayments won’t change for the duration of the deal so you can budget with confidence.
Most fixed-rate mortgages come with large early repayment fees, so if you think you could want to exit the deal before the term ends – for example, if you move home – a variable rate without exit fees may be a better bet.
A good independent mortgage broker can help you weigh up the pros and cons of different mortgage options.
These professionals should be able to calculate the overall cost of a mortgage helping you to work out when a high fee but lower rate may work or a lower fee and slightly higher rate is better.
IF you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.
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