by Mark Johnston
Now that the government has set out its spending review, borrowers are rushing to fix their mortgage in order to protect themselves from future increases in the base rate whilst giving themselves the peace of mind of knowing their monthly repayments.
Many lenders have seen a large increase in the number of enquiries regarding fixed rate mortgages in a bid to secure a deal before prices go up. The Chelsea Building Society is one such lender who has seen increases since the announcements in the coalilition’s spending review.
Barclays mortgage arm, The Woolwich have also seen a massive increase in the number of re-mortgage applications ever since it announced that it would allow its Customers to move from a tracker mortgage to a fixed rate without incurring any sort of penalty.
Even mortgage brokers are predicting an increase in the number of fixed rate mortgages sold as they advise their customers to lock themselves into deals to protect themselves from base rate changes. As always, they also pointed out that this might not save everyone money in the long run. No one can be sure of when an increase will happen or to what level the increase will be. Because of this, many may lock themselves into deals that will cost them more in the long term and save them little.
For borrowers who have decided that a fixed rate product is for them and don’t mind risking the fact that the security may cost them a little more over the period there are a few things to consider.
There are lots of headline rate fixed rate mortgages out there but borrowers shouldn’t just compare solely on the rate itself. Its always worth considering any future moves or whether it would suitable to be tied into a rate long term. Some of the cheaper rates lock borrowers in long term and can have high early redemption fees making it costly or impossible to change providers.
Always find out the what fees are charged. This may seem obvious but done are they days of fee free mortgages or low charges. Lenders have been stung during the credit crunch and want to make as much money as they can if they are to take risks. Some providers like HSBC offer £99 fees whilst others can be up to £1,995.
In today’s climate, equity is king, the larger the deposit or equity the better the rate. Those with a good deposit can get deals as low as 2.79% from the likes as HSBC, Skipton Building Society and ING Direct.
To further reduce the rate, try shopping around a longer term fixed rate. Instead of the usual 2 year, take a look at three and five year options. Against HSBC has a great deal but their sister company First Direct, Barclays Woolwich brand and Yorkshire Building Society all has similar offers. The golden rule is look around, try a mortgage broker as well as going direct to lenders. Get plenty of quotes and make an informed choice.
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