homeowners, who remortgage now, could save £1000s, says Ideal Home magazine
Homeowners urged - take advantage of record-low interest rates
Following two emergency cuts in the Bank of England’s base rates, homeowners, who remortgage now, could save £1000s, says Ideal Home magazine.
The 0.1% base rate is being passed on by lenders, with average interest rates for two and five-year fixed-rate mortgages at a record low.
According to the Moneyfacts website, interest rates are at their lowest for 13 years, having fallen to an average of 2.09% for a two-year deal and 2.35% for a five-year one.
Anyone whose current mortgage deal has come to an end, leaving them on their lender’s standard variable rate (typically 4.5%), is advised to switch now. Someone with a £200,000 mortgage could save more than £3,000 a year by switching to a two-year fixed rate deal.
This is also a good time for people with a two-year deal, to consider fixing their rate for longer. Currently, the difference in cost between a two and five-year fixed rate is small, meaning homeowners could now pay a lower premium to secure their rate for five years.
On the downside, the covid-19 crisis has made it harder to find a mortgage in the first place. The impact of the pandemic on the UK economy has led lenders to cut their range of products - halving the number of mortgages available from 5,222 products in March to 2,566 at the beginning of May.
People with a small deposit are being particularly squeezed. The number of mortgages for homeowners with 5% to put down has dropped from 279 to just 22, while the number of loans available to people with a 10% deposit fell from 563 to 50.
This could impact on first-time buyers according to Eleanor Williams, financial expert at Moneyfacts: “First-time buyers are likely to feel the effect of the current circumstances even more keenly than most. These borrowers are more likely to be looking for a low-deposit mortgage product, which, as a sector of the market, has contracted significantly.”
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