A MORTGAGE lender is offering what’s been described as “unprecedented” rates as low as 3.35%.
Skipton Building Society has launched a range of low-rate mortgages that are around half that of the current average fix.
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The current average two-year fixed rate is 6.41%, though they have been edging down gradually in recent weeks.
There’s a catch though, as the latest deals are only for those who already have a mortgage with Skipton.
Plus there could be a hefty fee for some homeowners with a 5% fee.
The building society has launched the rates for customers who are at risk of payment difficulties.
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Those who want to take advantage of the low rates must also be owner-occupiers and be facing a struggle with repayments, either now or when they reach the end of their current deal.
The low-rate mortgage will bridge their payments by maintaining a lower interest rate for two years.
The “member only” two-year fixed-rate deals include a 3.35% rate for borrowers with a 40% deposit and a 3.59% rate for those with a 10% deposit.
The deals carry a fee of 5% of the existing loan amount.
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This means that the cost depends on the outstanding mortgage.
For example, on a loan of £100,000, you’d pay £5,000, and on £250,000 it would be £12,500.
Some mortgages do come with a flat fee, but typically this is around £1,000.
But this amount can be added to the mortgage balance, avoiding any upfront costs.
This would mean that borrowers pay more overall, however, as they will pay more interest overall.
The society said the products present members with “another option” and will not be right for everyone.
A 3.39% rate for borrowers with a 25% deposit and a 3.49% rate for those with a 15% deposit are also included in the product range.
The society said the move extends the support that it already offers through the mortgage charter, which many lenders have signed up to in order to help borrowers who may be struggling after mortgage rates soared.
The Bank of England paused hiking interest rates last month, following 15 consecutive increases since December 2021 when they were at a historic low.
It brought relief for millions of homeowners as the base rate stayed at 5.25%. It’s used by lenders to set the rates for customers on loans and mortgages.
Under the charter, lenders will offer adjustments to borrowers’ repayments, for example, they may want to temporarily make interest-only payments or extend the term of the mortgage to make monthly payments more manageable.
Skipton said the two-year low-rate products are intended for members who need this level of added support to help them during the current difficult times.
Skipton’s boss of home finance Charlotte Harrison said that signing up to the mortgage charter was “just one step” in providing support to borrowers, and that it felt it “can do more”.
She said: “For those who are financially stretched, this is a good time to consider if they can make that equity work for them.
“We will always work directly with our borrowers to understand their personal situations and work with them on a solution that is most suited to them and their circumstances.
“This range of mortgages presents another option for our members – it’s not to say, that they will be right for everyone.”
But Nicholas Mendes, mortgage technical manager at John Charcol, described the Skipton deal a “too good to be true”.
He said: “While the headline line rate of 3.35% in the current market might seem great, the 5% arrangement fee will likely out way any benefits when choosing this deal over a competitor.”
While Nicholas said that the arrangement fee is high her did acknowledge that this could also be beneficial to those that are struggling with mortgage payments at a higher rate.
However, Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “It’s not your only option. Lenders are also making it easier to stretch loans over a longer period, or switch to interest-only for the short-term, both of which will make monthly payments more affordable.
“This extra solution could help those who are already borrowing up to retirement, or for whom a switch to interest-only still wouldn’t be enough to bring payments back within their means.”
What mortgage help is available?
As soon as you think you will have a problem with your monthly mortgage repayment – whether you can’t pay anything, can’t pay all of your monthly payment or can’t pay it on time – get in touch with your lender straight away.
They have certain schemes in place to help you if you’re struggling and most lenders have now signed up to a Mortgage Charter.
The charter means customers coming to the end of a fixed-rate deal now have the chance to lock in a new one up to six months ahead of time.
Plenty of lenders already let you do this, but the charter means households have more certainty.
The new charter also means homeowners can now approach their lender for advice on repayments without impacting their credit score.
Plus, they can change their mortgage to interest only and extend the terms of their loan.
Again, this has no impact on the homeowner’s credit score and homeowners can then go back to their original plan within six months.
But if you’re looking for extra support on top of this, there are a number of other options available to you.
Cost of living cash
A range of cost-of-living support is available. People can visit the helpforhouseholds.campaign.gov.uk for more information.
Millions are also in line to receive cost of living payments worth up to £1,350.
The first instalment of the £900 payment has been paid to millions on certain benefits, including Universal Credit and Pension Credit.
Welfare Assistance schemes
Many local councils have Welfare Assistance schemes to help struggling families.
Help available varies, but you could get free cash, food vouchers, and help for bills like rent and energy.
Check with your council to see whether you are eligible and what you can claim.
Household Support Fund
This is another scheme you can access through your local council.
It’s designed to help those in most need with payments towards the rising cost of food, energy, and water bills.
Check with your council directly to see what’s on offer as some share money with charities which can then give you cash or food vouchers.
Some councils restrict how often you can apply for money through this scheme to once a year, so double-check.
Check your benefits entitlement
Even though the government is stopping much of the cost of living help currently on offer, some people will still be able to get financial support.
If you claim pension credit, income support or universal credit you may be entitled to further cost of living payments.
Depending on other tax credits or benefits you already get, you could get either three or five further payments.
You can find free-to-use online benefits calculators to work out what you’re entitled to.
Entitledto’s free calculator works out whether you qualify for various benefits, tax credits and Universal Credit.
Debt charity StepChange also has a benefits checker which is free to use and won’t record your results.
Make sure you have key financial information to hand, such as bank and savings statements, and information on pensions and existing benefits.
If you live with a partner or family, get their basic financial information together too as this could affect your claim.
Support for mortgage interest
Support for mortgage interest or SMI helps those on Universal Credit – and other benefits – by giving them a low-interest loan.
The help goes towards mortgage payments or towards loans taken out to help repair any damage to the home.
SMI is a loan that you will need to repay with interest when you sell your home.
You’ll get help paying the interest on up to £200,000 of your loan or mortgage.
But you’ll only get up to £100,000 if you’re getting Pension Credit.
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The interest added to the loan can go up or down, but the rate will not change more than twice a year – the current rate is 3.03%.
Contact the office that pays your benefit to find out if you could get an SMI loan.
