Today’s UK mortgage market has recently become more competitive than ever before with lenders fighting it out to attract business, whether it’s from those looking to buy their first home, moving house, or looking to switch to get an improved deal.
Not so long ago it was looking as if the era of record low rates was coming to an end, but the recent rate cuts by a number of the UK’s biggest lenders suggests that the competition is well and truly heating up again.
How does this competition between lenders benefit me?
Right now, borrowers with equity in their current home are in a very good position to take advantage of some of the best ever deals to help bring their repayments down even further, with Britain’s biggest bank HSBC, and Yorkshire Building Society reigniting a price war with the launch of new ultra-low mortgage rates.
HSBC’s recently launched five-year fixed rate mortgage at 1.69% is the banks cheapest ever and is available for those with deposits of 40% and has a fee of £999, the rate is the best five-year available on the market and replaces Yorkshire Building Society's 1.74% deal.
The high-street giant also made cuts across its other range of home loans, including a two-year fix for 10% deposits which fell to 1.94% with a £999 fee, and 10-year fixed deal at 2.69% for deposits of 30% with no fee and free valuation.
This launch by HSBC comes less than a month after mobile-only lender Atom Bank pulled the cheapest-ever five-year deal, at 1.29% after only nine days due to excessive demand.
These ultra-low mortgage rates are set to continue as banks battle to remain competitive, with fixed-rates continuing to fall since the Bank of England cut the official interest rate to 0.25% in August last year.
However prices, as measured by the consumer prices index, rose by 2.3% in the year to March with economists predicting inflation will top 3% in the next few months.
If prices continue to rise over the longer-term, the Bank of England will come under increased pressure to raise rates, and this will quickly be passed on to mortgage borrowers.
Many borrowers have remained on their banks' "standard variable rates" after their fixed-term deals have ended, despite lenders' own borrowing costs falling, and these rates have remained stubbornly high. For those in this position it would seem that it would certainly pay to look around in order to secure a better deal.
First-time buyers fail to benefit from the new low rates.
For buyers looking to buy their first home the low rates price war is not the welcome news it is for more established borrowers, as to be able to take advantage of the low rates you need to have a large deposit or equity already in a home.
The average two-year fixed rate for borrowers with a 5% deposit is now 4.18% which is up from 3.97% six months ago. Contrast this with the average rate for those with a 40% deposit, which is now 1.81%, down from 1.91% in October last year. In fact, borrowers with this size deposit could pay as little as 0.89% by shopping around for the best deal.
That means there is a 2.37 percentage point gap in rates on offer to borrowers with small and large deposits. Five years ago, this gap was just 1.42%.
Charlotte Nelson, of moneyfacts.co.uk, says the increase is 'disappointing'.
"First-time buyers will feel hit twice,' she adds. 'Not only do they have to struggle to get a deposit together, they also face a rate that could see them pay an extra £185 a month on a £150,000 loan."
How Contractor Mortgages Made Easy can help.
If you would like to take advantage of the current price war between lenders to secure a better rate, or simply want to save money by moving away from your current lenders SVR, Contractor Mortgages Made Easy have access to many exclusive rates.
Whether you want to fix the rate for a specific period of time or offset your existing savings our Senior Mortgage Consultants have the expert knowledge to deal with your situation as a contractor, whilst ensuring you get the best deal from the whole of the current market.
With Contractor Mortgages Made Easy, you’ll be able to borrow up to 5.49 times your annualised contract rate, with no company accounts needed.
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