MARTIN Lewis has issued an urgent warning for anyone waiting for cheap mortgage rates to return.
The consumer champion said on the latest episode of the Martin Lewis Money Show that people shouldn’t delay taking out a new mortgage deal.
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The founder of MoneySavingExpert said: “I’ve been quite concerned over recent months of many people who have got in touch with me in recent months who said I’ll stick on the standard variable until rates go back to the cheap rates that we had.”
“I need to be very plain. If you’re under 35 you might not realise that the rates we had from 2008 until last year, they were low.
“They were limbo-ing well below the prior 300-year historic lows for interest rates.
“We have lived through an anomaly time so there is absolutely no rule that says things must go back to how they were. I’m not saying they won’t, but there is no rule that it must.”
The average two-year fixed-rate in December 2021 was 2.34%, but by December 2022 it reached 5.84%.
But Martin’s advice comes after mortgage rates fell below 4% for the first time in five months this week.
HSBC announced that it is offering those remortgaging a five-year fixed deal at 3.99% to 60% LTV with a £999 fee.
And Lloyds Bank and Virgin Money slashed their 10-year mortgage deals to 3.99%.
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But keep in mind that the exact mortgage rate you can get depends on your personal financial circumstances.
This is good news for home buyers and mortgage holders looking to refinance.
And Martin warned that those looking to buy or remortgage shouldn’t speculate that rates will fall back to levels seen in 2021.
Lenders have been cutting rates even though the Bank of England hiked its base rate for the tenth time in a row to 4% in January in a bid to tackle inflation.
It now expects it to peak at 4.5% before falling to 3.25% over the next three years.
The base rate is used by lenders to price the rates offered to customers on savings and loans including mortgages.
Usually, a rise in the base rate is passed on to consumers, but banks are dropping interest rates instead.
This is because the Bank of England has lowered its forecasts on how interest rates will peak from 6% to 4.5% since the disastrous mini-Budget which caused mortgage rates to shoot up to a 14-year high.
Borrowers on fixed-rate mortgages have been cushioned from the immediate impact of rising rates so far.
But those coming off a cheap fix will still face a hike to their monthly payments.
Should I fix now?
If you have a fixed rate, you could see higher rates when you come to the end of the current term.
Around 2.2million borrowers are due to come to the end of a deal that they fixed when the base rate was at a historic low of 0.1%.
But if you’re nearing the end of a fixed deal soon, you may be wondering if it’s worth looking for another one now.
David Hollingworth of broker L&C Mortgages previously told The Sun: “Although those coming to the end of a fixed rate taken during the low in rates of recent years, will still be faced with higher payments than they have been used to, it’s a far cry from the prospect of rates at 6% or more.
“Those borrowers that understandably decided to sit on their hands when rates went through the roof last October, should now seriously consider if it’s time to take advantage of these significant improvements.”
How can I get the best mortgage deal?
Getting the best rate on your mortgage can depend on the rates available at the time, but there are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio has changed this could also give you access to better rates than before.
A change to your credit score or a better salary could also help you access better rates.
If you have a fixed rate, you could see higher rates when you come to the end of the current term after the BoE rise., either when shopping for a new fixed deal or reverting to the standard variable rate (SVR).
But if you’re nearing the end of a fixed deal soon it’s worth looking now. You can lock in current deals sometimes up to six months before your current deal ends.
Fixed rates have historically been cheaper than SVRs, but that may not be the case now, so its worth comparing the costs, and how long you want to be locked in for.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also got to a mortgage broker who can compare for you, but you may have to pay for this service.
It could cost a couple of hundred pounds but it might save you thousands on you mortgage overall.
You’ll also need to factor in fees for the mortgage, though some have no fees at all, or you can add it on to the cost of the mortgage, but beware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember, that you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks, and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statement.
