Interest rates mortgage

Better rates, cheaper deals and more incentives in UK mortgage market

The ups and downs of the past few months haven’t gone unnoticed in the country’s housing market. But for borrowers and buyers, there’s certainly some positive news right now.

Mortgage rates have been on a downward trajectory since the beginning of March, with fixed rates in particular benefiting from the best reductions, according to the latest data from Moneyfacts. Added to this is an increase in the number of fee-free deals and other incentives for borrowers, making the landscape increasingly attractive to property owners and investors.

Since the coronavirus outbreak in the UK, the Bank of England has reduced its base rate twice. It now sits at just 0.1%, a record low, so it is unsurprising this has fed into UK mortgage rates. For mortgaged homeowners, or those looking to invest in property, now is a good time to look into borrowing options.

Cheap time to borrow

Moneyfacts has compiled comparison data looking at a range of changes between March and 19th June. Positive trends have been found across the board, starting with a significant reduction in average rates.

The average rate for fixed-rate deals with a fee has reduced from 2.89% in March to 2.30% in June. Similarly, the average fixed rate for fee-free products has fallen from 2.8% to 2.28%. Even standard variable rates, which are normally the most expensive way to borrow, have fallen from 4.9% to 4.48%.

What incentives are available?

Most mortgage providers offer a range of products with certain incentives and ‘added bonuses’ for the borrower. The rate on offer should always be considered in conjunction with the incentive, of course. However, depending on your individual situation and needs, these offers can be worth considering.

Some lenders offer to waive or refund legal fees with certain products. This can save the borrower a good chunk of money at the outset of their property purchase. According to Moneyfacts, the number of deals available with free or refunded legal fees has increased by 5% between March and June.

Likewise, the number of options with a free or refunded valuation has increased by 7%. The number of deals offering cashback has also risen by 2%.

However, Eleanor Williams, finance expert at Moneyfacts, advises some caution.

“While the increase in proportion of products that carry an incentive package is inherently positive and can alleviate some of the upfront cost associated with a new deal, borrowers do need to be aware that these incentives are likely to only cover the basics,” she says.

“Typically, free valuations tend to be basic and it is possible to instruct a surveyor to ensure a more comprehensive survey is completed. Free legal fees will generally cover just the standard conveyancing but, for anything more complicated, there would usually be further charges or the option to appoint your own solicitor.”

Savings for homeowners, buyers and investors

The Moneyfacts data demonstrates how fixed rates across the UK mortgage market have fallen to “attractive lows” over recent weeks. As such, customers who are on lenders’ standard variable rates are strongly urged to fix if they can. There is also the possibility that rates could begin to rise, adding further impetus to taking action now.

Eleanor Williams comments: “The potential savings for those looking at a new deal are clear, as those remaining on their SVR could be paying out as much as £182.58* more per month than those who have secured a new deal.

“Another consideration for those debating whether or not to look for a new mortgage deal is that the low initial rates we are currently seeing may potentially increase once lenders are able to return traditionally higher rated, higher LTV products to their ranges.”

In the buy-to-let space, while the figures do not touch on this directly, rates have seen similar reductions. Product numbers have also increased as lenders are keen to get more borrowers on their books. Therefore, property investors seeking new additions to their portfolio or looking to reassess their finances are also likely to benefit from the current landscape.

Eleanor Williams concludes: “Deciding on the right mortgage deal comes down to more than just the initial rate available. Seeking independent financial advice would be wise to ensure the overall cost can be considered and to ensure the best option for individual circumstances is pursued.”

At BuyAssociation, we can put you in touch with our independent UK mortgage partners to help you find the right deal. We also have a range of property investment opportunities available across the UK. Get in touch or sign up for free for more information.

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