Latest news with #DavidHollingworth
Daily Mail
a day ago
- Business
- Daily Mail
Should I remortgage with my existing bank to avoid paperwork? DAVID HOLLINGWORTH replies
I'm remortgaging for the first time and am set to switch from my current mortgage with Halifax to NatWest in September. However, it's proving more taxing than I thought. I applied for the mortgage and had the offer, but am now faced with a huge amount of admin which I didn't expect. I've just had a baby and this is hard to manage. The lawyers that have been assigned my case have been sending email after email relating to various documents and costs. They say I need to pay £90 to deal with a Land Registry anti-fraud restriction on the title deeds. They want me to sign and witness a mortgage deed and to also send proof of ID and address that have been certified by a solicitor. On top of that they need me to sign and return their terms of business and fill in a 20 page questionnaire which requires me repeating most of the stuff I have already filled in for my application. They have also sent emails requesting a copy of the lease. Would it make sense to just stick with Halifax and move to a new product with them to avoid this mountain of paperwork? Someone told me lenders sometimes offer preferential rates to their existing customers. Is that true? David Hollingworth replies: A mortgage is likely to be the single biggest cost that you face each month, so it makes sense to keep it as low as possible. Failing to be proactive could easily result in you spending thousands of pounds more than necessary each year. Most deals will revert onto a higher variable rate at the end of any incentive period, such when a two or five-year fixed rate ends. This rate could easily be two or three per cent higher than the rates on offer elsewhere. Shopping around for a better deal is important and with thousands of different products you should include all options, whether from another lender or your existing lender. I'll explain what the process involves, whether you switch to another bank or building society or stay put. Remortgaging to another lender: What it involves The process of remortgaging to a new lender is in essence a simple one, but if you're not prepared for what's coming your way it can feel like a lot to take on board. As well as applying for the mortgage itself, there will also be a valuation of the property by the lender and some legal work to put the new mortgage into effect. In theory the valuation and legal work could add more cost, although many lenders will often provide incentives to counter those costs, providing a free basic valuation and help with the basic remortgage legal work. That could either be through the lender's nominated solicitor, or through a cashback on completion designed to cover all or most of the cost of using your own solicitor. While basic legal work is covered, there can be other costs depending on the circumstances. Leasehold title is certainly something that can add cost, as the freeholder may charge a fee for providing any necessary responses to the solicitor's enquiries. The solicitor will ask you for a copy of the lease in an effort to speed things up and potentially limit charges from the freeholder. The anti-fraud restriction you have been asked to pay for is something that you will have opted into. It means a solicitor has to sign off any attempted change to your property's information on the Land Registry. However, it does also mean that there's a need for enhanced verification of ID, leading to the need for solicitor certification and added administration costs. Finally, there will be a need for some form filling and there could be a feeling of déjà vu. There's plenty of moving parts in what is a relatively straightforward switch and that can lead to duplication of requests. What about a product transfer? It's always worth considering what your existing lender will offer when shopping around, and lenders have got a lot better in offering customers new deals to switch to. It's understandable that, with the arrival of your new baby, this admin may all feel too much when you have so much on your plate. Staying with the existing lender and switching on a like-for-like basis with no change to amount or term won't require a new affordability check or proof of income. There's also no legal work, as you're not taking a new mortgage with a different lender and are simply switching rate. That will reduce the paperwork but also the choice, so you need to consider the rate compared to the NatWest deal and others in the market. Some lenders can offer existing customers rates on par or even a little better than for new customers, but that doesn't mean they are the best on the market. You will need to specifically check what Halifax will offer, as it's a lender that offers rates set depending on the individual customer. Advice will help Using an adviser will offer benefits whichever path you go down and help cut through some of the jargon. They will also be able to consider other elements, such as reducing the term or overpaying to cut your total interest bill. That may not be high on your priority list now but could be relevant in coming years. Importantly, they will be able to access the Halifax product transfer rates and give a clear comparison to the NatWest deal and others on the market. This will give you clarity of the cost, which will help you decide whether the remortgage option will offer bigger savings and potentially make the form-filling worthwhile. GET YOUR MORTGAGE QUESTION ANSWERED David Hollingworth is This is Money's mortgage expert and a broker at L&C Mortgages - one of Britain's leading specialists. He is ready to answer your home loan questions, whether you are buying your first home, trying to remortgage amid the rates chaos or looking to plan further ahead. If you would like to ask him a question about mortgages, email: editor@ with the subject line: Mortgage help Please include as many details as possible in your question in order for him to respond in-depth. David will do his best to reply to your message in a forthcoming column, but he won't be able to answer everyone or correspond privately with readers. Nothing in his replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons.
Telegraph
30-05-2025
- Business
- Telegraph
Five clever tactics to pay off your mortgage early
Mortgages are the one financial service you spend years trying to get, but then want to be rid of as soon as you can. For most of us, a mortgage is the key to getting on and climbing up the property ladder, but they can also be your biggest monthly expense. With recent rate volatility in mind, it's hardly surprising that becoming mortgage-free often becomes the next financial goal. David Hollingworth, of mortgage broker L&C, says: 'Having a mortgage is a necessary part of making the dream of home ownership become a reality for most people, but from then on, the focus will usually shift to being rid of what will generally be the biggest debt we'll ever have.' Overpaying your mortgage is one way to do this, but if you're faced with the prospect of trying to chip away at a six or even seven-figure sum it can be rather daunting. However, there are several tactics you can adopt that will see you pay little and often, which can shrink your borrowing without dramatically affecting your budget. Here Telegraph Money, shares five tips to help pay your mortgage off early, and potentially save thousands. Five ways to pay off your mortgage faster 1. 'Round up' your monthly payments The 'round up' idea has been popularised by the many banks that offer the service to help boost savings – when you make a purchase, say, for £3.50, the money that leaves your current account will be rounded up to the nearest pound and the remainder sent to a savings pot – in this case, 50p. The same theory can be applied to mortgage overpayments. 'If your mortgage payment is £842, round it up to £850 or £900,' suggests Ying Tan, chief executive at mortgage broker Habito. 'The extra goes straight towards your remaining balance.' Rounding up by just £50 a month – an amount you might not miss from your bank balance – on a £200,000 mortgage over 25 years could knock one year and 11 months off your term and save over £13,000 in interest, he adds. 2. Overpay by £100 a month There is also merit in keeping this simple, and sticking to paying a little bit extra each month (whether that's £50, £100, or more), as this can be a great way to chip away at your mortgage over time. Mr Tan says: 'On a £200,000 mortgage over 25 years at 5pc, overpaying £100 a month could save around £24,000 in interest and shave off over three years from your term.' You might want to think about setting up regular overpayments at those occasions where you feel able to loosen the financial purse strings – such as getting a promotion or pay increase at work. 'Earmark a portion of salary increases or reduced expenses, like childcare costs dropping, towards your mortgage,' says Aaron Strutt, product and communications director at Trinity Financial. 3. Maintain your repayments when your mortgage rate drops If you're on variable-rate mortgage and your repayments drop when interest rates fall, you could ask your lender to maintain your repayments at their former level. This can be easier to budget for, as you'll already be used to paying your mortgage at the higher rate. Mr Hollingworth points out that you can also do this if you have slipped into paying your lender's standard variable rate (SVR) before remortgaging on to a more competitive deal. 'This could be a great way to make the most of a lower interest rate,' he says. 'For example, if a £200,000 repayment mortgage was originally at 5.25pc, the monthly payment would be £1,198.50. Switching to 4.25pc would cut the payment to £1,083.48 a month, but maintaining the original payment would lock in an overpayment each month and would ultimately pay the loan off three years, 10 months early [and save £21,950 in interest].' 4. Make bi-monthly payments We're all used to paying our mortgages once a month, but another option is to make two smaller payments each month instead. 'The concept is to effectively overpay by an extra month's payment each year by making payments every two weeks,' explains Mr Hollingworth, but he warns not every lender will oblige. 'Most lenders will take payments through direct debit so be sure that you check on whether it's even possible. Some may not be able to accommodate it and you also need to be careful that you would be hitting the required monthly payment on time.' If your lender is willing, it might be worth the effort. Mortgage broker Mojo says this strategy could save the typical borrower £49,118 in interest and knock four years and nine months off a 30-year term. 5. Pay in a windfall 'Putting your annual bonus, inheritance, or even cashback into your mortgage can make a huge dent,' says Mr Tan. He explains that paying £5,000 off a £150,000 mortgage could save you £11,710 in interest and let you pay it off one year and seven months early (based on a 5pc mortgage rate and a 25-year term). Adding this 'extra' money to your mortgage repayments mean your usual budget won't be affected, but you'll need to make sure such one-off sums don't cost you in early repayment charges (more on these later). You'll also need to be sure to tell your lender that you want to shorten your mortgage term – otherwise it may keep the term the same and reduce your monthly repayments instead. How to overpay your mortgage Most lenders will let you overpay by 10pc of the original loan amount a year without incurring any penalties, but some – such as NatWest – will allow you to overpay by up to 20pc. Just how easy it is to set up regular or one-off overpayments will depend on your lender, and what you want to do. For example, if you want to keep your repayment the same after a rate reduction, you might need to ask your lender to manually set up a monthly overpayment each time rates change – it may not be able to automate this. However, setting up simple overpayments is normally pretty straightforward as Mr Strutt notes: 'Most of the bigger lenders have apps their customers can download so they can go online and set up, then manage, their overpayments. 'It's surprising how many people with mortgages do not know about these apps and just how easy it is to make overpayments. Once you get in the habit of making overpayments then you get used to it, and you can adjust the payment to suit your budget.' The benefits of overpaying There are three key benefits of paying your mortgage off early: You'll save on interest: 'Often tens of thousands over the life of your loan,' Mr Tan points out. You'll be mortgage-free faster: Once you have paid off your mortgage you can use the cash you had been paying out to step up your retirement saving, help the kids or just enjoy the benefits of your hard work. Peace of mind: 'No more rate hikes to worry about. It's a big psychological win,' Mr Tan adds. Find out how much you could save with our mortgage overpayment calculator. What to think about before making overpayments While there are financial and psychological benefits to paying off your mortgage early, it's still important to think carefully before you plough all your spare cash into overpayments. Look out for early repayment charges (ERCs): These are essentially penalties for paying off your mortgage too quickly, and are common on fixed-rate mortgages. They could hit you hard if you overpay more than the allowed amount. Mr Hollingworth advises: 'Before overpaying it makes sense to check that an ERC will not be incurred. If so, it will put a big dent in – or even wipe out – the benefit of overpaying.' Could you get a better return on your cash elsewhere?: If you're lucky enough to still be paying ultra-low mortgage rates, you may be better off earning interest on your cash in a savings account, rather than prioritising mortgage overpayments. Depending on your attitude to risk there may also be an argument for investing your spare cash, using a stocks and shares Isa, for example. Do you have other expensive debts?: If you have any outstanding personal loans or credit card debts, it makes sense to pay them off first as they typically charge a higher interest rate than mortgages. Are your retirement finances on track?: It's great to pay as much off your mortgage as you can, but it shouldn't be at the expense of your retirement pot. It's also important to pay as much as possible into your pension to get the benefit of tax relief on contributions and the compounding of returns over time. Make sure you still have emergency savings: 'Always think about a rainy-day fund, as overpaying the mortgage will usually mean that it's hard to get hold of the cash at a later date,' says Mr Hollingworth. 'In most cases, it will require a remortgage or a further advance to be able to be able to access the overpaid funds, so make sure there is cash available to deal with unexpected expenses.' Experts typically recommend you keep around three to six months' expenses in an easy access savings account.
Yahoo
29-05-2025
- Business
- Yahoo
Half a million UK households face £510 monthly mortgage increase
Mortgage deals under 4% are quickly vanishing as lenders adjust to higher inflation and lower expectations that the Bank of England (BoE) will cut rates aggressively this year, while almost half a million homeowners face a £510 monthly rise as five-year fixed mortgage deals end. The average rate for a two-year fixed mortgage stands at 4.90%, while five-year fixed deals average 5.24%, according to data from Uswitch. The Bank of England has cut interest rates from 4.5% to 4.25%, meaning the average homeowner on a tracker mortgage will see their monthly repayments fall by nearly £29, after the quarter-point snip to the base rate. However, nearly half a million UK homeowners who secured mortgages at the height of the pandemic are now bracing for a steep rise in monthly payments, as their five-year fixed-rate deals end amid significantly higher interest rates. Research from price comparison site Compare the Market shows that 469,192 borrowers who took out mortgages in 2020, when the average fixed interest rate stood at 2.11%, could see their monthly repayments surge by hundreds of pounds if they revert to their lender's standard variable rate (SVR). Based on current market conditions, borrowers transitioning to an SVR, now averaging 7.13% according to the latest Bank of England data, would face average monthly payments of £1,227. That marks a £510 increase from the £717 they paid under their original fixed-rate terms, assuming an average mortgage debt of £178,523. Annually, this equates to a jump from £9,195 to £15,319 — an increase of nearly 67%. For many, the transition to higher monthly payments is expected to strain household budgets grappling with rising living costs. Financial advisers are urging borrowers nearing the end of fixed-rate periods to explore remortgaging options and avoid automatically slipping into more expensive SVRs, which are often significantly higher than alternative deals available on the market. L&C Mortgages associate director David Hollingworth said: 'There could be temptation to wait in the hope of lower rates to come but that carries the risk of falling onto a sky high standard variable rate. With uncertainty in the market, rates are constantly moving and some have edged back up, so it can be a confusing time for borrowers.' 'Seeking advice in good time will allow homeowners to secure a deal, protecting against any turnaround in pricing but still having the chance to review before the switch and take advantage of lower rates, if there is further improvement.' Read more: The pros and cons of getting a mortgage in your 70s The primary inflation measure, the Consumer Price Index (CPI), stood at 3.5% in the 12 months to April, a higher-than-expected increase from the previous month. That means price increases are moving away from the BoE's 2% target. This week, no major lender cut rates, with the majority hiking mortgages for first-time buyers as the market moves away from the mini price war that pushed deals deep into under-4% territory. A new mortgage has been launched offering the chance to borrow 100% of a property's value. Gable Mortgages provides home loans that don't require the borrower to deposit. It follows April Mortgages' launch of a similar 100% product. HSBC (HSBA.L) has a 3.93% rate for a five-year deal, unchanged from the previous week. For those with a Premier Standard account with the lender, this rate is 3.90%. Looking at the two-year options, the lowest rate is 3.86% with a £999 fee, also unchanged from the previous week. Both cases assume a 60% loan-to-value (LTV) mortgage, meaning buyers need to have at least 40% for a deposit. HSBC offers 95% LTV deals, meaning you only need to save for a 5% deposit. However, the rates are much higher, with a two-year fix at 4.97% or 4.81% for a five-year fix. This is because their financial situation and deposit size determine the rate someone can get. The larger the deposit, the lower the LTV, allowing buyers to access better deals because lenders consider them less risky. NatWest's (NWG.L) five-year deal is 3.99% with a £1,495 fee, higher than last week's 3.88%. The cheapest two-year fix deal is 3.94%, again higher than last week's 3.88% deal. You'll need at least a 40% deposit to qualify for the rates in both cases. At Santander (BNC.L), a five-year fix is 3.93% for first-time buyers, higher than the previous 3.91%. It has a £999 fee, assuming a 40% deposit. Read more: Average first-time buyers in London need almost £140,000 for a deposit. For a two-year deal, customers can also secure a 3.90% offer, with the same £999 fee, higher than the previous 3.87%. Barclays (BARC.L) was the first among major lenders to bring back under-4% deals and currently has a five-year fix at 3.89%, unchanged from last week. For "premier" clients, this rate drops to 3.88%. The lowest for two-year mortgage deals is 3.87%, also unchanged. Barclays has launched a mortgage proposition to help new and existing customers access larger loans when purchasing a home. The initiative, known as Mortgage Boost, enables family members or friends to effectively "boost" the amount that can be borrowed toward a property without needing to lend or gift money directly or provide a larger deposit. Under the scheme, a borrower's eligibility for a mortgage can increase significantly by including a family member or friend on the application. For example, an individual with a £37,500 annual income and a £30,000 deposit might traditionally be able to borrow up to £168,375, enabling them to purchase a home priced at around £198,375. However, with Mortgage Boost, the total borrowing potential can rise substantially if a second person, such as a parent, joins the application. In this case, if the second applicant also earns £37,500 a year, the combined income could push the borrowing limit to £270,000, enabling the buyer to afford a home worth up to £300,000. Nationwide's (NBS.L) lowest mortgage rate for first-time buyers is 4.19% for a five-year fix, higher than last week's 4.09%. First-time buyers are currently looking at 3.99% for a two-year fix, again higher than the previous 3.94%. Read more: UK sellers offer £16,000 discount on average to secure house sale The lender has announced adjusting its mortgage affordability calculation by reducing stress rates by 0.75 and 1.25 percentage points, helping applicants borrow more, whether buying a first home, moving, or remortgaging. Applicants can borrow, on average, £28,000 more; however, in some remortgage cases, customers could borrow up to £42,600 more. Nationwide is reducing its standard stress rate and the rate applied to eligible first-time buyers and home movers fixing their deal for at least five years. Halifax, the UK's biggest mortgage lender, offers a five-year rate of 4.03% (also 60% LTV), higher than last week's 3.93%. The lender, owned by Lloyds (LLOY.L), offers a two-year fixed rate deal at 3.97%, with a £999 fee for first-time buyers, more than the previous 3.87%. It also offers a 10-year deal with a mortgage rate of 4.78%. Read more: How to choose where to live as you get older Halifax has enhanced its five-year fixed mortgage products by increasing borrowing capacity. This improvement allows borrowers to access up to £38,000 more, enabling them to secure larger mortgages based on individual incomes. Rachel Springall, finance expert at Moneyfacts, said: "The flourishing choice of low-deposit mortgages will no doubt be welcomed by borrowers looking to remortgage or are a first-time buyer. "The government has been clear that it wants lenders to do more to boost UK growth, and so a rise in product availability for aspiring homeowners is a healthy step in the right direction." As providers start hiking rates, prospective homeowners are quickly running out of good options. Barclays' (BARC.L) 3.89% is currently the cheapest deal for five-year fixes, while HSBC (HSBA.L) offers the most affordable deal for two-year fixes at 3.86%, though access requires a hefty 40% deposit. The average UK house price is £297,781, so a 40% deposit equals about £120,000. A growing number of homeowners in the UK are opting for 35-year or longer mortgage terms, with a significant rise in older borrowers stretching their repayment periods well into their 70s. Read more: Odds of more Bank of England interest rate cuts fall as food inflation rises Lender April Mortgages offers buyers the chance to borrow up to six times their income on loans fixed for five to 15 years, from a deposit of 5%. Both those buying alone and those buying with others can apply for the mortgage. As part of the independent Dutch asset manager DMFCO, the company offers interest rates starting at 5.20% and an application fee of £195. Skipton Building Society has also said it would allow first-time buyers to borrow up to 5.5 times their income to help more borrowers get on the housing ladder. Leeds Building Society is increasing the maximum amount that first-time buyers can potentially borrow as a multiple of their earnings with the launch of a new mortgage range. Aspiring homeowners with a minimum household income of £40,000 may now be able to borrow up to 5.5 times their earnings. Mortgage holders and borrowers have faced record-high repayments in recent years, as the Bank of England's base rate has been passed on by banks and building societies. According to UK Finance, 1.3 million fixed mortgage deals are set to end in 2025. Many homeowners will hope the Bank of England acts quickly to cut rates more aggressively. At the same time, savers will likely root for rates to remain at or near their current levels. Read more: 9 coastal homes a stone's throw from the beach How to get your children to move out Home renovation mistakes and how to avoid them
Yahoo
29-05-2025
- Business
- Yahoo
Half a million UK households face £510 monthly mortgage increase
Mortgage deals under 4% are quickly vanishing as lenders adjust to higher inflation and lower expectations that the Bank of England (BoE) will cut rates aggressively this year, while almost half a million homeowners face a £510 monthly rise as five-year fixed mortgage deals end. The average rate for a two-year fixed mortgage stands at 4.90%, while five-year fixed deals average 5.24%, according to data from Uswitch. The Bank of England has cut interest rates from 4.5% to 4.25%, meaning the average homeowner on a tracker mortgage will see their monthly repayments fall by nearly £29, after the quarter-point snip to the base rate. However, nearly half a million UK homeowners who secured mortgages at the height of the pandemic are now bracing for a steep rise in monthly payments, as their five-year fixed-rate deals end amid significantly higher interest rates. Research from price comparison site Compare the Market shows that 469,192 borrowers who took out mortgages in 2020, when the average fixed interest rate stood at 2.11%, could see their monthly repayments surge by hundreds of pounds if they revert to their lender's standard variable rate (SVR). Based on current market conditions, borrowers transitioning to an SVR, now averaging 7.13% according to the latest Bank of England data, would face average monthly payments of £1,227. That marks a £510 increase from the £717 they paid under their original fixed-rate terms, assuming an average mortgage debt of £178,523. Annually, this equates to a jump from £9,195 to £15,319 — an increase of nearly 67%. For many, the transition to higher monthly payments is expected to strain household budgets grappling with rising living costs. Financial advisers are urging borrowers nearing the end of fixed-rate periods to explore remortgaging options and avoid automatically slipping into more expensive SVRs, which are often significantly higher than alternative deals available on the market. L&C Mortgages associate director David Hollingworth said: 'There could be temptation to wait in the hope of lower rates to come but that carries the risk of falling onto a sky high standard variable rate. With uncertainty in the market, rates are constantly moving and some have edged back up, so it can be a confusing time for borrowers.' 'Seeking advice in good time will allow homeowners to secure a deal, protecting against any turnaround in pricing but still having the chance to review before the switch and take advantage of lower rates, if there is further improvement.' Read more: The pros and cons of getting a mortgage in your 70s The primary inflation measure, the Consumer Price Index (CPI), stood at 3.5% in the 12 months to April, a higher-than-expected increase from the previous month. That means price increases are moving away from the BoE's 2% target. This week, no major lender cut rates, with the majority hiking mortgages for first-time buyers as the market moves away from the mini price war that pushed deals deep into under-4% territory. A new mortgage has been launched offering the chance to borrow 100% of a property's value. Gable Mortgages provides home loans that don't require the borrower to deposit. It follows April Mortgages' launch of a similar 100% product. HSBC (HSBA.L) has a 3.93% rate for a five-year deal, unchanged from the previous week. For those with a Premier Standard account with the lender, this rate is 3.90%. Looking at the two-year options, the lowest rate is 3.86% with a £999 fee, also unchanged from the previous week. Both cases assume a 60% loan-to-value (LTV) mortgage, meaning buyers need to have at least 40% for a deposit. HSBC offers 95% LTV deals, meaning you only need to save for a 5% deposit. However, the rates are much higher, with a two-year fix at 4.97% or 4.81% for a five-year fix. This is because their financial situation and deposit size determine the rate someone can get. The larger the deposit, the lower the LTV, allowing buyers to access better deals because lenders consider them less risky. NatWest's (NWG.L) five-year deal is 3.99% with a £1,495 fee, higher than last week's 3.88%. The cheapest two-year fix deal is 3.94%, again higher than last week's 3.88% deal. You'll need at least a 40% deposit to qualify for the rates in both cases. At Santander (BNC.L), a five-year fix is 3.93% for first-time buyers, higher than the previous 3.91%. It has a £999 fee, assuming a 40% deposit. Read more: Average first-time buyers in London need almost £140,000 for a deposit. For a two-year deal, customers can also secure a 3.90% offer, with the same £999 fee, higher than the previous 3.87%. Barclays (BARC.L) was the first among major lenders to bring back under-4% deals and currently has a five-year fix at 3.89%, unchanged from last week. For "premier" clients, this rate drops to 3.88%. The lowest for two-year mortgage deals is 3.87%, also unchanged. Barclays has launched a mortgage proposition to help new and existing customers access larger loans when purchasing a home. The initiative, known as Mortgage Boost, enables family members or friends to effectively "boost" the amount that can be borrowed toward a property without needing to lend or gift money directly or provide a larger deposit. Under the scheme, a borrower's eligibility for a mortgage can increase significantly by including a family member or friend on the application. For example, an individual with a £37,500 annual income and a £30,000 deposit might traditionally be able to borrow up to £168,375, enabling them to purchase a home priced at around £198,375. However, with Mortgage Boost, the total borrowing potential can rise substantially if a second person, such as a parent, joins the application. In this case, if the second applicant also earns £37,500 a year, the combined income could push the borrowing limit to £270,000, enabling the buyer to afford a home worth up to £300,000. Nationwide's (NBS.L) lowest mortgage rate for first-time buyers is 4.19% for a five-year fix, higher than last week's 4.09%. First-time buyers are currently looking at 3.99% for a two-year fix, again higher than the previous 3.94%. Read more: UK sellers offer £16,000 discount on average to secure house sale The lender has announced adjusting its mortgage affordability calculation by reducing stress rates by 0.75 and 1.25 percentage points, helping applicants borrow more, whether buying a first home, moving, or remortgaging. Applicants can borrow, on average, £28,000 more; however, in some remortgage cases, customers could borrow up to £42,600 more. Nationwide is reducing its standard stress rate and the rate applied to eligible first-time buyers and home movers fixing their deal for at least five years. Halifax, the UK's biggest mortgage lender, offers a five-year rate of 4.03% (also 60% LTV), higher than last week's 3.93%. The lender, owned by Lloyds (LLOY.L), offers a two-year fixed rate deal at 3.97%, with a £999 fee for first-time buyers, more than the previous 3.87%. It also offers a 10-year deal with a mortgage rate of 4.78%. Read more: How to choose where to live as you get older Halifax has enhanced its five-year fixed mortgage products by increasing borrowing capacity. This improvement allows borrowers to access up to £38,000 more, enabling them to secure larger mortgages based on individual incomes. Rachel Springall, finance expert at Moneyfacts, said: "The flourishing choice of low-deposit mortgages will no doubt be welcomed by borrowers looking to remortgage or are a first-time buyer. "The government has been clear that it wants lenders to do more to boost UK growth, and so a rise in product availability for aspiring homeowners is a healthy step in the right direction." As providers start hiking rates, prospective homeowners are quickly running out of good options. Barclays' (BARC.L) 3.89% is currently the cheapest deal for five-year fixes, while HSBC (HSBA.L) offers the most affordable deal for two-year fixes at 3.86%, though access requires a hefty 40% deposit. The average UK house price is £297,781, so a 40% deposit equals about £120,000. A growing number of homeowners in the UK are opting for 35-year or longer mortgage terms, with a significant rise in older borrowers stretching their repayment periods well into their 70s. Read more: Odds of more Bank of England interest rate cuts fall as food inflation rises Lender April Mortgages offers buyers the chance to borrow up to six times their income on loans fixed for five to 15 years, from a deposit of 5%. Both those buying alone and those buying with others can apply for the mortgage. As part of the independent Dutch asset manager DMFCO, the company offers interest rates starting at 5.20% and an application fee of £195. Skipton Building Society has also said it would allow first-time buyers to borrow up to 5.5 times their income to help more borrowers get on the housing ladder. Leeds Building Society is increasing the maximum amount that first-time buyers can potentially borrow as a multiple of their earnings with the launch of a new mortgage range. Aspiring homeowners with a minimum household income of £40,000 may now be able to borrow up to 5.5 times their earnings. Mortgage holders and borrowers have faced record-high repayments in recent years, as the Bank of England's base rate has been passed on by banks and building societies. According to UK Finance, 1.3 million fixed mortgage deals are set to end in 2025. Many homeowners will hope the Bank of England acts quickly to cut rates more aggressively. At the same time, savers will likely root for rates to remain at or near their current levels. Read more: 9 coastal homes a stone's throw from the beach How to get your children to move out Home renovation mistakes and how to avoid themSign in to access your portfolio
Yahoo
09-05-2025
- Business
- Yahoo
Tracker mortgage holders could save nearly £350 a year following rate cut
The average homeowner on a tracker mortgage will see their monthly repayments fall by nearly £29, after the quarter-point snip to the Bank of England base rate. UK Finance said homeowners on tracker deals will typically see their monthly repayments reduce by £28.97, based on balances outstanding. This could add up to a saving of nearly £350 over the course of a year. People on a standard variable rate (SVR) mortgage could see their monthly payments fall by £13.87, assuming that their lender passes on the base rate cut in full, which could add up to a saving of nearly £170 over a year. Mortgage holders may end up on an SVR when their initial deal ends and the rate is set by individual lenders. The Bank of England cut the base rate to 4.25 per cent on Thursday, from 4.5 per cent, following a slowdown in inflation in recent months. Many lenders have been chopping rates in recent weeks, including several offering deals at sub-4 per cent levels. Around 85 per cent of outstanding mortgages are fixed rates – and homeowners on these deals will not see their rates change until they move onto a new deal. According to UK Finance's figures, 1.6 million fixed-rate mortgage deals are due to end, or have already ended, at some point in 2025. David Hollingworth, associate director at L&C Mortgages, said: 'The good news for fixed-rate borrowers coming to the end of a deal is that rates have been falling. 'That's because today's cut was so widely expected that it's already allowed lenders the chance to improve their rates. There's still plenty of tweaking of rates in the market but fixed rates are looking to predict what will happen rather than react to base rate movement.' Rachel Springall, a finance expert at said: 'The driving force behind the recent falls (in mortgage rates) has been volatility in swap rates, with lenders rushing to pass on cuts to fixed rates in their range. 'This momentum has led to the average two-year fixed rate dropping to its lowest point since September 2022.' Two-year fixed-rate, 5.18% Five-year fixed-rate, 5.10% Standard variable rate (SVR), 7.58% Ms Springall said this was just before 'the notorious fiscal announcement, or 'mini-budget', that saw markets panic and mortgage rates skyrocket'. She added: 'The mortgage market is undoubtedly calmer now by comparison, despite a rush to reprice fixed deals, but lenders are going to have to work incredibly hard in the coming months to balance new business and keep a close eye on their rate margins.' The average two-year fixed-rate mortgage on the market at the start of May was 5.18 per cent, while the average five-year fix was 5.10 per cent and the average SVR was 7.58 per cent, according to figures from Ms Springall said: 'Those borrowers coming off a cheap fixed rate would be wise to refinance or risk seeing their monthly repayments soar by falling onto a higher 'revert rate'. 'Despite consecutive falls to the average standard variable rate (SVR), the incentive to switch remains.' Ms Springall added: 'There is an expectation that the Bank of England base rate will be cut several times before the year is over, due to wider economic uncertainty and concerns over inflation. 'Those borrowers concerned about their homeownership aspirations will need support and innovation from lenders. 'First-time buyers are the lifeblood of the mortgage market, and they are essential to keep the market moving.' The rate cut could help to inject more buyer interest into the housing market, following the recent ending of a stamp duty holiday. The Royal Institution of Chartered Surveyors (Rics) said on Thursday that home buyer inquiries and sales fell in April. But figures released by Halifax on Thursday indicated that house prices are continuing an upwards march. It recorded a 0.3 per cent month-on-month price rise in April, following a 0.5 per cent monthly fall in March. The annual house price growth rate ticked up to 3.2 per cent in April, from 2.9 per cent in March. The average property price in April was £297,781, up from £296,899 in March, according to Halifax. Richard Donnell, executive director at Zoopla, said: 'Today's base rate cut is welcome news for people looking to sell and buy homes in 2025. 'It will provide a boost to market sentiment and filter slowly into lower mortgage rates as the cost of fixed-rate mortgages already reflects future cuts in the base rate. 'This, alongside reforms to mortgage regulations announced recently, will help boost buying power. 'This is important at a time when there is a large number of homes for sale across the UK – the average agent has 34 homes for sale. 'Improved buyer confidence will support sales and help more people realise their moving ambitions in the year ahead.' Matt Smith, a mortgage expert at Rightmove, said: 'A fresh round of mortgage rate reductions could be a boost for buyer demand as this year's spring selling season approaches its end.' Mark Manning, managing director of Northern Estate Agencies Group, said: 'Today's decision to reduce interest rates is fantastic news for the housing market and will help to strengthen buyer confidence and stimulate market activity.' Meanwhile, some savers need to get their skates on before savings rates tumble further. Ms Springall said that a year ago, the average easy access savings rate was 3.11 per cent, but by the start of May this year it had fallen to 2.79 per cent. The average easy access Isa rate at the start of May 2025 was 3.03 per cent, down from 3.33 per cent in May 2024. Ms Springall added: 'There are several challenger banks and building societies offering decent inflation-busting returns on some of the most flexible easy access accounts, but savers just need to carefully check the terms of these accounts before they invest, such as those with withdrawal restrictions.' Jenny Ross, editor of Which? Money, said: 'Unfortunately for savers, banks are now likely to cut their rate of return. 'Competitive rates are still available though – particularly away from the high street – so be proactive and shop around for a better deal. When it comes to your savings, loyalty rarely pays.'
