mortgage interest

How homebuyers and property investors can find the best mortgage deals

As the number of mortgage deals is rising, average rates and fees are also increasing. Here’s some advice for homebuyers and property investors seeking mortgages.

With the UK property market performing at record levels, the mortgage market has also remained busy. As lenders saw mortgage borrowing growing in demand, the number of mortgage deals has been increasing. At the same time, average rates and fees are also on the rise, according to data from Moneyfacts.

In the past few months, mortgage choice has been continuing to increase, particularly for 90% and 95% loan-to-value (LTV) mortgages. Recently, the number of products available even reached the highest level since last spring. This has been welcome news for homebuyers and property investors alike.

Average mortgage rates and fees on the rise

The average fee for a fixed-rate mortgage has increased by £57 year-on-year. This is up from £1,018 in June 2020 to £1,075 June 2021. However, this is £6 less than April’s average of £1,081, which was the highest on record since November 2012.

While the average product fee has risen in the past year, the percentage of the mortgage market offering fee-free deals has decreased by 5% annually. In June 2020, these products made up 40% of the market, and now that’s down to 35%.

Additionally, average interest rates for fixed mortgage deals across all LTVs, both with and without a fee, have risen by 0.65% and 0.55% respectively year-on-year. During the last two months alone, average rates increased by 0.16% and 0.08%.

Some borrowers will be disappointed to hear the average fixed mortgage rates have continued to rise. However, this could be due to the return of higher LTV mortgage deals, which traditionally come with higher rates.

Eleanor Williams, finance expert at Moneyfacts, comments: “Despite increases to rates and fees alike, there are clearly still great deals out there for borrowers to consider.”

Tips for homebuyers and property investors

In the past two years, there has been stability in the proportion of fixed deals offering incentives. This shows lenders are offering a range of products to entice customers, so it’s important to effectively compare all of the costs involved and incentives being offered with a mortgage.

In the past year, saving for a deposit has been particularly challenging. Savings rates have been low, and house prices have continued to increase. This has made the average deposit required for a property in the UK to increase by more than £11,000, according to Keller Williams UK.

“Cash-strapped prospective borrowers may therefore have limited funds available to meet the costs associated with taking on a mortgage, so comparing upfront costs is vital,” says Eleanor Williams.

With mortgage fees and rates on the rise, it can be challenging to find the best deal – and to know what is best for you and your financial situation. But there are still competitive deals out there.

She further explains: “These changes strengthen the need for borrowers to secure the support and advice of a qualified broker who can help to assess the true cost of a deal, carefully looking into whether or not it is beneficial to pay a fee or to stomach a slightly higher initial rate and consider what, if any, incentives may be important for their customer.”

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