Loan Rates Favour The Homebuyer In The Mortgage Market

Mortgage deals are looking attractive following a quiet period at the end of last year. But advisers are warning borrowers to watch out for hefty fees, which may make the deals less competitive.

Borrowers who switch out an expensive variable rate mortgage, typically 6.75 per cent, will almost always be quids in by picking up one of the bargain fixed-rate or discounted offers flooding the market, so long as they are not tied in to their lender’s loan by a hefty early redemption penalty.

Simon Tyler of London broker Chase de Vere Mortgage Management says: ‘The expected price war has started in earnest and both fixed and discounted deals have been cut by many lenders. This time last year the base rate was 0.75 percentage points lower at 4 per cent, yet fixed-rate mortgages were priced at about the same level as they are today, which shows what good value they are relative to the base rate and how hungry lenders are for business.’

Ray Boulger of London broker Charcol says discounted variable and tracker rates are unlikely to get any better than they are now in terms of the margin between the interest rate and base rates, but he predicts fixed rates will get even cheaper. He says: ‘If you are thinking about a tracker or a discounted variable rate, there is no point waiting.’