Are Home Loans Getting Cheaper – What’s Happening in the Mortgage Market?
Mortgage rates for first-time-buyers and movers are falling, with a better choice of deals than at any time since before the pandemic. The number of mortgages available has risen by 56% in the past six months, to a total of more than 4,500, according to analysis of Moneyfacts data by consumer association, Which?.
Rates of below one per cent are being offered to borrowers with a large deposit. In May, TSB launched a 0.99% product for 60% loan to value mortgages, leading competitors to enter the market with rates as low as 0.94%.
There is good news too for buyers with lower deposits – the people who felt the biggest hit when 95% deals were withdrawn from the market early in the pandemic. Following the introduction of the government-backed mortgage guarantee scheme, 61 new 95% mortgages have been launched in the past month. Rates include 3.25% (on a two-year fix) and 3.59% (fixed for five years).
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Borrowers are, however, warned to look beyond rates when choosing a loan. Some cheaper rate deals come with bigger upfront fees, meaning the overall cost of your mortgage may be more than if you settled on a slightly higher rate.
And while five-year fixes allow you to secure a low rate for longer, regardless of the ups and downs of the wider economy, early repayment charges, if you pay off your mortgage, can be as much as 5% of its overall value.
Most loans are offered at up to four-and-a-half times annual household income, depending on factors including the size of your loan and the nature of your profession. However, this may be changing, after Nationwide announced loans for people with a 10% deposit, of up to five-and-a-half times their salary.
Read more about the current mortgage market on the Which? website.