Four more mortgage lenders slash rates as new home loan price war heats up amid interest rate cut hopes
THE mortgage price war continues to heat up, with four more lenders slashing rates amid hopes of an interest rate cut.
TSB and Santander are the latest big names to reveal a drop in the cost of borrowing, easing the pain for homeowners and first-time buyers.
Mortgage rates remain high as the Bank of England hiked the base rate several times in a bid to tackle inflation
The base rate is used by banks to set interest rates for borrowing, including mortgages.
It has remained at 5.25% since August last year.
Millions of homeowners have faced higher rates after coming off deals they initially fixed when rates were low, and first-time buyers have found it harder to get on the property ladder.
But after it was revealed that inflation remained at 2% in June – the second month in a row- there are expectations that the Bank of England could cut interest rates on August 1.
This has prompted lenders to cut rates, with a flurry of the biggest banks making frequent changes to their mortgage products.
Santander has cut its rates for the second time this month, with fixed rates being chopped by up to 0.14% and tracker rates by 0.15%
Meanwhile, TSB has announced cuts to mortgages of up to 0.2%.
For the second time in a week, small lender MPowered Mortgages has cut rates up by to 0.25%.
Plus, Yorkshire Building Society has reduced its mortgage interest rates by up to 0.25%, for the second time in two weeks.
The exact rates you get can depend on a range of factors though, including your income, amount you borrow and your credit score among other things.
Competition is hotting up in the mortgage market as lenders compete for customers.
A wave of rate drops last week brought good news for homeowners and first-time buyers who have been pummelled by rising interest rates.
First Direct, Nationwide and Coventry Building Society all slashed their rates last week.
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Halifax, HSBC UK, Barclays, Santander, NatWest and Yorkshire Building Society were among those to shake up their ranges just a week earlier.
Simon Bridgland, director at Release Freedom, said: “The regular flow of rate reductions has been keeping the market pretty positive as it holds on for the inevitable base rate reduction.”
While Rohit Kohli added: “The consensus appears to be inflation to hold at 2% and, if that’s the case, the pressure will be on the Bank of England to deliver a rate cut in August.”
The average two-year fixed residential mortgage rate today is 5.91%, according to Moneyfacts.
Meanwhile, the average five-year fixed residential mortgage rate today is 5.49%
Today’s average two-year tracker rate is 5.94%.
How to get the best deal on your mortgage
IF you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.