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Mortgage price war: How to secure an ultra-low rate

Mortgage price war: How to secure an ultra-low rate
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Interest rates have been at rock bottom for a while now. And it seems that mortgage rates are now following suit. While lenders were cautious at the start of the pandemic, economic growth and the recent housing market boom has led to new competitive mortgage deals coming onto the market.

Let’s take a look at what offers are around and how you could secure yourself an ultra-low rate.

Mortgage price war

You can now secure yourself a deal with an interest rate of just 0.94%. Both HSBC and TSB have joined other lenders in offering sub-1% deals for borrowers. The only catch is that you will need a large deposit.

HSBC’s mortgage requires a 40% deposit and carries a £999 fee. But at 0.94% fixed for two years and available to both homebuyers and remortgagers, it’s one of the most competitive deals around.

Meanwhile, TSB’s two-year fixed-rate mortgage (also at 0.94%) is available to remortgagers only. But as with the offer from HSBC, you need a 40% deposit and there is a £995 fee.

Yet, don’t worry if you don’t have such a large deposit. There are also good deals to be had around the 75% loan to value (LTV) mark. HSBC has a five-year fixed rate at 1.29%, while remortagers at TSB can fix for two years at 1.09%.

Securing an ultra-low rate

If you have a large deposit or are remortgaging with a chunk of equity in your home, then you open the door to some really competitive deals.

However, it’s not just a large deposit that you need in order to secure an ultra-low interest rate. There are other factors to consider too.

Credit score

Your credit score and credit report show a mortgage lender what type of borrower you are. If you have a poor credit score, then a lender may think there is a greater chance you could default on your repayments. The lowest interest rates are usually only awarded to borrowers with a good/excellent credit score.

Provider

You may be tempted to stick with your current lender or to go with the same bank as your current account. But you can often get a better deal elsewhere. You can either use comparison sites or ask an independent mortgage broker.

If you opt to go with a broker, make sure you use one that compares deals across the whole market, rather than a selected list of lenders. If you don’t already have one, then unbiased.co.uk can match you with a broker in your local area.

Mortgage type

The type of mortgage you go for will also dictate your rate. Right now, with the base rate so low, there are short-term fixes available with ultra-low interest rates. But you may want to fix for a longer term, which could mean paying a slightly higher rate. Or you may want to opt for a variable rate, thinking that following the base rate is your best bet at the moment.

Whichever mortgage type you go for, it needs to suit your personal circumstances. So try to consider the future impact of any changes in the base rate on your monthly repayments. You can use a mortgage calculator to work out how much you can afford to borrow and what you would be required to pay each month. 

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