In May 2021 they took out a £315,000 mortgage on the £395,000 house under a two-year fixed-rate deal at 1.99 per cent. Their plan was to remortgage in 2023 after making improvements to the four-bedroom home and hoping the work would lift the value of the house, thereby giving them access to better mortgage rates.
The promise of a new government with a more orthodox approach to economic policymaking has improved the outlook for mortgage holders. But in hisas prime minister, Rishi Sunak this week warned the UK was in “a profound economic crisis” and the pressures on people’s personal finances remain formidable. FT Money looks at the changing options for borrowers in a world of unenviable mortgage choices.
Seeing rates rising by the day, she decided to act. The best deals she could get via a broker were at 6 or 7 per cent — raising the couple’s monthly costs by £600 — but Halifax was offering a product transfer at 4.37 per cent on a five-year deal. The catch was the couple would have to pay a £2,800 early repayment charge to get out of the previous mortgage.
One way of managing this uncertainty is by taking a variable rate deal — a type of mortgage that has re-emerged as a viable option as rates jumped. There are two chief types: trackers, linked to the Bank of England base rate; and discounted variable rates, which offer a discount for a set period on a lender’s standard variable rate .
In spite of the difference in headline rates, Anderson says it is not always easy to decide between a tracker and a discounted variable rate. But the tracker, which is pegged to the BoE base rate, is marginally more predictable, compared with a lender’s standard variable rate, which may or may not respond to base rate changes.
For those buying with a mortgage, Pryor warns that playing clever with sellers by chipping away at the price — without checking the small print of the mortgage offer — could create unforeseen risks. Richard Donnell, research director at property website Zoopla, says that if mortgage rates were to fall to 4 per cent next year, the market would be relatively unaffected. But 5 per cent fixed rates are “a tipping point”.
Source: Loan Digest (loandigest.net)
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