Mortgage Rates

Martin Lewis points pressing warning to owners as mortgage charges plummet

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Martin Lewis has warned all homeowners that mortgage rates have fallen below 1% and that it could bring monthly costs down.

The financial guru said households should see if they have the best deal and if they can switch as that is the lowest thing they have lost.

Those who have a floating rate should listen as they could be paying an excruciatingly high interest rate on their loan every month, reports Der Spiegel.

Due to the delays caused by Covid and the pressure on banks, households reaching the end of their term should also start comparing interest rates six months earlier.

“Prices have fallen below 1% – urgently check if you can upgrade and save £ 1,000. Acceptance is not always easy, but don’t just accept the status quo, ”the consumer expert told MoneySavingExpert readers this week.

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He said a combination of “extremely low UK interest rates, a boom in home purchases due to stamp tax cuts” and people saving more during the pandemic has created huge competition that customers could take advantage of.

This includes both buyers and those in debt repayment who can potentially cut their costs overnight.

Martin Lewis points out that while it looks like a “boom for mortgage holders,” getting a cheap mortgage is not easy, especially if you’ve received Covid support. So the trick is to figure out how to get the cheapest mortgage that is available to you.

He urged buyers to act now to avoid standard floating rates – often the standard rates you pay when your original term ends.

The consumer expert says it’s best to apply for a cheaper offer three to six months before the time limit expires, especially if you are self-employed or have complicated circumstances.

To start, check the deal your current lender is making, then try a mortgage comparison tool to see if you can get a cheaper rate elsewhere.

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The first questions to ask yourself when you find an offer are:

  1. What is the interest rate and what are the monthly payments?
  2. What kind of mortgage business is it? Most people opt for fixed or tracker deals.
  3. How long does the introductory phase take and what are the upfront fees for the deal?
  4. Will a move be penalized? Are there any prepayment penalties / exit penalties during your fix or tracker deal?
  5. What is Loan-to-Value (LTV) – How Much of the Value of Your Home Do You Need to Borrow?

Most interest rates fluctuate based on the mortgage lending value.

Mortgages start at 95% LTV but are typically far cheaper at 90% or less than the home value.

Think about your savings too. If you’ve been fortunate enough to save money during the pandemic, reducing your Lending Ratio could save you tens of thousands of pounds in the long run when you put it on your mortgage.

For example, if you had a mortgage of £ 150,000 and used additional savings of £ 1,000 to achieve an LTV of 75%, the top two-year contract drops to 1.18%. That means you’d be paying £ 580 a month, as opposed to 1.79% which is £ 625 a month, explains Lewis.

He also encourages homeowners to try and go over £ 100 above any LTV threshold. Martin explains that if you’ve worked hard to get enough together to hit the next LTV band, say 90% or 75%, try pushing past £ 100 beyond that. It means that it no longer looks like you’re going to the limit and making adoption easier to mortgage lenders.

You can use MoneySavingExpert’s handy mortgage calculator to find out what your repayments would be.

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