7 steps to securing the right mortgage
- Credit: PA
Here’s what to consider - and avoid - when looking for a new mortgage deal
1. Weigh up whether you want to go for a fixed or variable rate
Fixed rates give borrowers certainty over what their payments will be for a certain period - but if you’re taking out a longer-term fixed deal, you’ll also need to be sure that you’re able to lock your-self in for that length of time.
2. Make the most of online tools
There are tools out there which can help you see what’s available quickly and easily - for example, MoneySavingExpert.com has a Mortgage Best Buys tool (moneysavingexpert.com/mortgages/best-buys/).
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3. Don’t just be seduced by a low rate
Always consider the whole package when weighing up a mortgage deal, not just the rate, to work out the overall cost. Some mortgages will come with fees, while some may have perks such as cash-back which may be worth considering. There has recently been a surge in the number of cashback deals on offer. Moneyfacts.co.uk says by mid-May, there were 1,315 mortgage deals on the market offering cashback - representing just under a third (28%) of the mortgage market.
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4. Bear in mind mortgage rates have already been edging up
While the Bank of England base rate remained at 0.5 per cent in May, mortgage rates have already been edging up a bit recently. According to Moneyfacts, 27 providers increased their rates in April - some doing so more than twice.
Charlotte Nelson, a Moneyfacts finance expert, says: “It is important for borrowers to note that there does not need to be a base rate rise for mortgage rates to increase.”
David Hollingworth from broker L&C Mortgages says lenders have been tweaking and repricing their rates, although rates remain low by longer-term standards. He adds: “Although shorter-term deals remain popular, more borrowers have elected to lock their rate in for longer in a bid to keep tighter control of their mortgage costs.”
5. Consider brokers carefully
Mortgage brokers have their fingers on the pulse when it comes to scouring the market for a good deal, and they understand key details about lenders’ criteria. But choosing the right broker for you could be vital. One question to ask could be whether they look at the whole of the market or make a selection from a panel of lenders. You may also want to consider recommendations from friends if they have used someone who was particularly helpful.
6. Find out what re-mortgage deals are available
If your existing mortgage deal is coming to an end soon, make sure you don’t just end up sitting on a higher rate by default. Research from MoneySuperMarket found one in six (16.6%) people on a fixed-rate mortgage claim have no idea what will happen to their repayments once their fixed term period comes to an end. Meanwhile, online mortgage adviser Dynamo and mortgage broker Coun-trywide have tracked the proportion of mortgage borrowers who ended up on their lender’s stand-ard variable rate (SVR) after their initial introductory deal came to an end.
Seb McDermott, chief executive at Dynamo, says: “The research shows that far too many people are not switching mortgage deals in time. Last year, one in three mortgage holders ended up on their lender’s SVR rate for an average of 42 days after their existing deal expired. This can prove costly - to the tune of nearly £62 a week for the six-week period.”
7. Finally, don’t forget about what else is vital while you’re thinking about the mortgage
Buying a new house can be a stressful time, with the mortgage being one important aspect to con-sider. But insurer LV= has found 27 per cent of home owners didn’t spend any time researching which buildings insurance would be best for them, meaning they might not have had the right cover in place.