ANOTHER three lenders are hiking their mortgage rates today in a huge blow to first-time buyers and those needing to remortgage.
NatWest, Nationwide and Santander have announced that they are upping their rates following a series of increases from other lenders.
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Barclays, HSBC, Accord and The Co-Operative Bank all increased their rates last week.
Nationwide is increasing rates on deals by up to 0.25 percentage points today.
Meanwhile, Santander said rates for new customers and those doing product transfers could go up by 0.2 percentage points.
Mortgages for buyers will rise by between 0.18 and 0.21 percentage points at NatWest.
Rates for remortgage customers are going up by between 0.21 and 0.22 percentage points.
It is the second time in the period of a week that NatWest has upped rates on its products.
Swap rates had come down this year in anticipation of the Bank of England (BoE) lowering rates, and mortgage lenders were in a price war to reduce rates and attract customers.
Mortgage rates have increased since the beginning of the year when lenders were announcing rate reductions.
This because experts had predicted rate-setters at the BoE would start cuts in June, but they are now expecting this to happen later this year.
And with a rate cut looking a long way off, lenders are once again increasing their rates.
Karen Noye, mortgage expert at Quilter, said: “We are continuing to see lenders increase mortgage rates due to an uptick in swap rates, which could come as a blow for those prospective buyers who have been holding out in the hopes of lower rates.
“When combined with ongoing cost of living pressures, many prospective buyers will continue to face an uphill battle when it comes to affordability, particularly those first-time buyers who will also likely have found it much harder to save enough money for a deposit.”
The average two-year fixed residential mortgage rate today is 5.90%, according to financial website Moneyfacts.
This is up from an average rate of 5.87% yesterday.
Plus, average five-year fixed residential mortgage rate has also increased from 5.44% yesterday to 5.48% today.
Nicholas Mendes, from mortgage advisers John Charcoal, said: “Lenders in recent days have been quick to adjust there pricing in line with competitors to avoid being an outlier and impact on service levels.
“Also, Swaps are influenced by market sentiment, until we see a bank rate reduction, we will likely see further periods of changes.”
The Sun asked Karen and Nicholas Mendes, technical manager at broker firm John Charcol, how budding buyers, and those looking to remortgage, can still bag a good deal in today’s mortgage market.
Tracker vs. fixed-rate mortgages
It’s important to make sure that you choose the right kind of mortgage for you.
Tracker mortgages are linked to the Bank’s base rate of interest – so when it goes up, so do your monthly repayments.
Where as a fixed rate mortgage is a type of mortgage where the interest rate on your mortgage stays the same, for the duration of the deal.
Nick said that while each borrower’s situation is unique, fixed-rates are “often the best choice”.
“Fixed-rate mortgages give stability typically over two or five years.
“Tracker mortgages are less favoured currently due to the widening gap between the initial rates offered.”
Longer mortgage terms can make monthly payments more manageable, but borrowers can end up paying more in interest.
But more budding buyers are choosing longer mortgage terms as a way of coping with interest rate hikes.
However, it is important to consider the longer term as if rates drop in the coming years then you could end up paying more than is necessary in the longer run if you lock in for a longer initial term when rates are elevated.
How to get the best deal on your mortgage
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.
Beware of standard variable rate (SVR) mortgages
If you’re looking to remortgage, locking in a deal before your current fix comes to an end could stop you being pushed onto a costly standard variable rate (SVR) mortgage.
An SVR goes up or down depending on what the lender decides.
However, SVR’s tend to rise when the BoE base rate does, although not by a set amount.
Homeowners roll onto their lender’s standard variable rate when their fix ends if they haven’t bagged a deal in time.
Nick said it is “not advisable” to stick or switch bank to an SVR as they can be very costly.
He said: “SVRs are usually 3-4% higher than fixed rates. There will likely be alternative deals with the existing lender which would be more cost effective.”
Save for a larger deposit
To buy a house or flat, you’ll need to pay a chunk of money upfront – this is called a mortgage deposit.
A deposit is usually 10% of the purchase price, you will then take out a loan on the remaining sum.
The more money you have, the less money you’ll need to borrow and the more attractive you are to a lender as a first-time buyer.
This is because the loan-to-value ratio is smaller and makes you less of a risk to lenders.
So if you’ve managed to save more money than expected, stick to your budget rather than take out a bigger mortgage.
And if you’re in a position to be able to put down a bigger deposit, this could help you in the long run.
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