Could you be a mortgage price war winner?

Mortgage lenders are cutting their interest rates as they battle for your business

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The mortgages mentioned in this article may only be available for a limited time. Rates correct as at 8 May 2017.

Recent weeks have seen the introduction of some of the lowest mortgage rates ever seen.

That’s good news for borrowers, as it signals that lenders are battling for business. But hefty fees mean these eye-catching deals won’t always be the best value for everyone.

And you’ll need a substantial chunk of money to put down as a deposit, as lenders are only interested in extending a loan equivalent to 60% or 65% of the property’s value at these ultra-competitive rates.

Why are mortgages getting cheaper?

Lenders are paying less to borrow money on the wholesale markets, which means many banks and building societies have reduced their rates or launched record-low deals.In turn, this enables homebuyers and those looking to remortgage to benefit from lower monthly repayments.

However, lots of the best deals are only available to those with big deposits to put down, or a large amount of equity in their homes if remortgaging, and most come with steep arrangement fees, so it’s essential to factor these in before applying.

Here’s our rundown of – and what to watch out for.

Yorkshire Building Society

At just 0.89%, Yorkshire’s two-year discounted variable rate deal is, according to the building society, the lowest mortgage rate it has ever offered.

The mortgage comes with a high £1,495 completion fee, though, which substantially bumps up the cost.Representative example: A mortgage of £180,000 payable over 25 years, initially on a discounted variable rate for 27 months at 0.89% (variable) and then on our current variable rate of 4.74% (variable) for the remaining 273 months would require 27 monthly payments of £669.44 and 273 monthly payments of £991.15. The total amount payable would be £290,563.00 made up of the loan amount plus interest (£108,658.00) and valuation fee (£270), completion fee (£1,495). The overall cost for comparison is 4.2% APRC representative.

The building society does however, offer a lower fee of £995 if you opt for a higher rate of 1.05%.Yorkshire’s 0.89% mortgage is only available to those who are looking to borrow up to 65% of the property value, so anyone with a small deposit to put down (less than 35% of the value), or who doesn’t own a large amount of equity in their property if remortgaging, won’t be eligible.

As well as taking the high fee into account, homebuyers and those looking to remortgage also need to remember that, as this is a variable rate deal, rates could increase at any time.

There is also an early repayment charge based on a percentage of the sum repaid (at the rate of 1%) for each period.If you want peace of mind that your monthly payments won’t change, Yorkshire also offers a 0.99% two-year fixed rate deal for those with a 40% deposit to put down, or the equivalent amount of equity if remortgaging.

This carries a completion fee of £1,495 and early repayment charges of 2% of the sum repaid up to 31 August 2018 and 1% of the sum repaid up to 31 August 2019.

Representative example: A mortgage of £180,000 payable over 25 years, initially on a fixed rate for 27 months at 0.99% and then on our current variable rate of 4.74% (variable) for the remaining 273 months would require 27 monthly payments of £677.56 and 273 monthly payments of £992.18. The total amount payable would be £291,064.00 made up of the loan amount plus interest (£109,159.00) and valuation fee (£270), completion fee (£1,495). The overall cost for comparison is 4.2% APRC representative.

Santander

Santander has just reduced some of its mortgage rates by up to 0.3 of a percentage point, and is currently offering a 1.14% two-year tracker deal (0.89% above Bank of England base rate), with a £999 fee.

Trackers move in line with the base rate, which stands at a historic low of 0.25% - any increase would make the mortgage rate higher.This deal is only available to homebuyers with a 40% deposit or the same amount of equity if remortgaging.

You can make unlimited overpayments on Santander’s tracker rate mortgages without paying an early repayment charge. A minimum payment of £500 applies. 

Representative example: A mortgage of £180,000 payable over 25 years on our tracker rate for the mortgage term of 24 months at 0.89% above the Base Rate and then on our current variable rate of 4.49% (variable) for the remaining 276 months would require 24 monthly payments of £689.84 and 276 monthly payments of £973.77. The total amount payable would be £286,590.00 made up of the loan amount plus interest (£105,316.00) and booking fee (£999). The overall cost for comparison is 3.8% APRC representative.

First Direct

First Direct is also offering some competitive fixed deals, including a 1.14% two-year fixed rate deal, but with a high £1,450 fee.

Again, you’ll only qualify if you’re borrowing up to 60% of the property value, which means having a 40% deposit, or the same amount of equity if you want to remortgage.

This carries a completion fee of £1,495 and early repayment charges of 3% of the sum repaid up to Year 1 and then 2% of the sum repaid up to Year 2.

Representative example: A mortgage of £180,000 payable over 25 years, initially on a fixed rate for 24 months at 1.14% and then on our current variable rate of 3.69% (variable) for the remaining 276 months would require 24 monthly payments of £689.84 and 276 monthly payments of £900.81. The total amount payable would be £266,906.00 made up of the loan amount plus interest (£85,179.00) and valuation fee (£227), booking fee (£1,450). The overall cost for comparison is 3.4% APRC representative.

Chelsea Building Society

The Chelsea Building Society has also joined the mortgage war, cutting rates on some of its two-year fixed and tracker deals.

PLEASE NOTE – THESE PRODUCT ARE AVAILABLE EXCLUSIVELY THROUGH MoneySuperMarket. THEY ARE NOT AVAILABLE VIA ANY OTHER PRICE COMPARISON SITE.

Chelsea is offering 1.14% on its two-year fixed deal, with a £1,695 arrangement fee. You’ll be eligible if you have a 35% deposit to put down, or the same amount of equity if remortgaging.

There are early repayment charges of 2% of the sum repaid up to 31 August 2018 and 1% of the sum repaid up to 31 August 2019.

Representative example: A mortgage of £180,000 payable over 25 years, initially on a fixed rate for 27 months at 1.14% and then on our current variable rate of 4.74% (variable) for the remaining 273 months would require 27 monthly payments of £689.84 and 273 monthly payments of £993.71. The total amount payable would be £292,013.00 made up of the loan amount plus interest (£109,908.00) and valuation fee (£270), completion fee (£1,695). The overall cost for comparison is 4.2% APRC representative.

The building society also has a 1.15% two-year tracker (0.9% above Bank of England base rate) deal available with a fee of £995.

Trackers are for those who are comfortable accepting the fact that your payments could increase in future. This deal is available to those with a 35% deposit, and there is no early repayment charge.

Representative example: A mortgage of £180,000 payable over 25 years on our tracker rate for the mortgage term of 27 months at 0.9% above the Base Rate and then on our current variable rate of 4.74% (variable) for the remaining 273 months would require 27 monthly payments of £690.66 and 273 monthly payments of £993.82. The total amount payable would be £291,365.00 made up of the loan amount plus interest (£109,960.00) and valuation fee (£270), arrangement fee (£995). The overall cost for comparison is 4.2% APRC representative.

Finding the best deal

With so many different mortgages to choose from, it isn’t always easy to know which one is going to the best value for you.That’s where our can help.Whether you’re a first-time buyer, remortgaging, or looking for a buy-to-let mortgage, the calculate can not only tell you how much you’ll be allowed to borrow based on your income, but also how much your mortgage repayments will cost, based on the size of the mortgage, the interest rate and the term of the mortgage.Remember too that you should never pick a mortgage based on the rate alone, as if it carries a hefty fee, it won’t necessarily be the cheapest option.

Your home may be repossessed if you do not keep up repayments on your mortgage

Please note: any rates or deals mentioned in this article were available at the time of writing. Products valid as at 8 May 2017.

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