- Written by Kevin Beachy
- Cost of Living Reporter
Image source, Getty Images
Competition has intensified among mortgage lenders for people looking for a new deal, bringing some relief to those facing higher bills.
Brokers say some lenders now have better options for those remortgaging than those buying a property.
This will help people whose relatively cheap fixed rate deals are coming to an end and are looking for a new deal.
Two major lenders, Barclays and Santander, announced further deep cuts.
The companies said they would reduce interest rates on some of their products on Wednesday by up to 0.82 percentage points.
Bills went up
The interest rate on a fixed mortgage does not change until the deal expires, usually after two or five years, and a new one is chosen to replace it. Doing nothing would leave people on a variable rate, which is very expensive – with an average rate of over 8%.
About 1.6 million of their current borrowers have relatively cheap fixed-rate deals expiring this year. While their next deal is very likely to be more expensive, a series of interest rate cuts by major lenders since the start of the year is set to mitigate some of this financial impact.
“It’s interesting to see that some lenders are offering cheaper remortgage products than buying property, which shows where they think the market is at the moment,” said Andrew Montlake of real estate brokerage Coreco.
“This is excellent news for those who have been concerned about moving out of very low mortgage interest rates into a higher interest rate environment, and will help ease the pain with the jump being smaller than they feared.”
Financial information service Moneyfacts said the latest average price for all new two-year fixed mortgage deals has fallen sharply since the start of the year.
It now stands at 5.76%, down about a percentage point from last year’s peak.
For five-year deals, the average rate is now 5.37%.
The impact of relatively high mortgage rates is still likely to push down house prices and increase arrears through this year, according to forecasters.
What happens if I miss a mortgage payment?
- If you miss two or more months of payments, you’re officially delinquent
- Your lender must then treat you fairly by considering any requests to change your payment method, such as reducing repayments for a short period.
- They may also allow you to extend the term of your mortgage or allow you to pay only the interest for a certain period
- However, any arrangement will be reflected in your credit file, which may affect your ability to borrow money in the future