Indications from the Bank of England that interest rates are set to rise, possibly as early as the beginning of 2016, several lenders have started to increase their mortgage rates.
Research by comparison website MoneySuperMarket suggests that since the bank’s governor
Mark Carney suggested just a few weeks ago that rates could rise by the turn of the year, some of the best mortgage deals have become less favourable.
For example, First Direct offered 1.49% at the start of July on its best price two year fixed, but this now sits at 1.69%.
However the research also shows that there are still some great mortgage offers available, but interestingly, 65% loan to value (LTV) mortgages are now cheaper than 60% LTV mortgages on average.
The current average 60% LTV rate across fixed, variable and discount mortgages is 2.23%, while the average 65% LTV rate is 2.08%. So for example, someone borrowing £150,000 over 25 years would pay less back over the promotional period on YBS’s 65% LTV two year fixed rate of 1.07% with a fee of £1,545 than on Post Office’s 60% LTV two year fix at 1.05% but with a higher £1,995 fee.
‘It’s prime time for those looking for a mortgage as there are still some great deals on the market even if it’s a bit bizarre that you can currently get a cheaper deal with a smaller deposit,’ said Dan Plant, consumer expert at MoneySupermarket.
‘However, the recent rate rise speculation is starting to make providers cautious, and this is being reflected in their offers. We know choosing a mortgage can be confusing but if people can do it now, they avoid the risk of rates rising over the next few months,’ he explained.
‘Many lenders allow mortgage holders to reserve rates available now for up to six months for a small fee, so even those who still have some time left on their current deal can benefit. As always, prospective buyers need to think about the long term and work out the total cost of the mortgage, including both rates and fees, before committing to a deal,’ he said.
He also pointed out that while 65% LTV mortgages are better than the 60% LTV deals at the moment, consumers should be wary of a rate rise and make sure they can afford the repayments if they suddenly shoot up, should they choose a variable rate mortgage.
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Source: Property News Spain