Martin Lewis urges homeowners to check if they can save thousands on their mortgage
MARTIN Lewis has urged homeowners to check their mortgage deals ahead of possible rate rises and potentially save thousands of pounds.
The consumer guru said that Brits should see if they can lock in a better deal elsewhere in the latest MoneySavingExpert weekly newsletter.
His warnings come as concerns have been raised that mortgage rates could soar towards the end of the year.
This is because the Bank of England warned it could raise interest rates before Christmas due to soaring energy bills, as well as the cost of food and other goods.
The central bank can increase what's known as the base rate, which is currently at a record low of 0.1%.
The base rate is used by high street banks to set their own rates for loans, mortgages and savings rates.
By increasing the base rate, the Bank of England (BoE) hopes it can keep a handle on the rising costs of goods – known as inflation.
If banks and building societies pass the rate rise on to consumers, it could be bad news for borrowers, including homeowners, who may see interest rates on loans rise.
To beat the hikes, Martin urged homeowners to check their mortgage deal and lock in another as rates remain low.
He said that there more than 50 deals where you can lock in an interest rate of 1% or below, and gave eight tips to bagging yourself the best deal.
These tips are:
- Understand what your current mortgage deal is
- Find the cheapest deal your existing lender is offering
- Compare this offer to the cheapest deals that other lenders are offering
- Use online tools such as MoneySavingExpert's mortgage comparison checkers and mortgage calculators to compare deals
- Check your credit score and if you can afford a new mortgage deal
- Consider using a mortgage broker
- Check if the lender charges a fee for locking in the best rate – this can be £100-£250, Martin says
- Use your savings to borrow less on your mortgage and pay less per month
Martin said: "EVERYONE with a mortgage should check now if your existing deal is as good as it can get – and that applies double if you're languishing on your lender's standard variable rate."
Who is offering the cheapest mortgage rates?
Who is offering the cheapest mortgage rate depends on a number of factors including how much you're borrowing and what your term is.
You can use a mortgage comparison tool, like MoneySavingExpert's, to compare the best deals on your mortgage.
For example, if you were looking to secure a 25-year mortgage of £120,000 on a property valued at £200,000, the cheapest rates are being offered by TSB and Santander.
Both lenders are offering a two-year fixed rate of 0.84% – working out at a monthly payment of £444.
Royal Bank of Scotland and NatWest are offering a two year fixed rate of 0.87%.
To see which is the best deal for you, make sure to do your own research.
What do I need to know about remortgaging?
Be aware that there are other costs to consider when making the switch – such as additional fees to take out the deal.
Fees are usually higher for the mortgages with the lowest rates.
Also bear in mind that if you’re currently locked into a mortgage deal you may have to make an early exit payment before you can change.
You might not get the cheapest deal on the market too – it depends on whether the lender is willing to strike a deal with you.
Lenders will look at two key criteria before they allow you to remortgage.
Firstly, they will check your credit history. If it's poor they may block your application or lock you out of the cheapest deals.
You can check your creditworthiness online – and there are ways to improve your score.
Mortgage providers will also check whether you will be able to keep up with your repayments – at current rates and also if they skyrocket.
They will check your income, bills and expenses for evidence that you will keep up with your payments.
Your loan to value (LTV) is the biggest factor that will impact the mortgage rates you pay.
LTV means the ratio of your mortgage compared to the value of your property.
For example, if you have a deposit of £10,000 and you have your eye on a £100,000 home, you’ll need a 90% LTV mortgage.
Mortgages start at 95% LTV – but you can get better deals at lower LTVs.
How else can I save on my mortgage?
If remortgaging isn't for you, then there are other ways to save on your mortgage.
You might want to consider overpaying your mortgage to drive down the amount of interest you'll be paying back on it.
If you overpay on your mortgage, it means you pay more than the minimum amount, either regularly every month or as a lump sum.
The Sun revealed last week that you could save over £1,400 in interest if you overpaid by just a tenner a month.
Upping your overpayments to £100 a month could put over £11,800 back into your pocket.
However, you might want to prioritise putting your savings elsewhere, like paying off other debts.
You could also consider switching to an offset mortgage.
The loan keeps your mortgage debt and savings in separate pots with the same bank or building society.
The cash savings are then used to reduce – or offset – the amount of mortgage interest you’re charged.
This helps to reduce the interest paid on your mortgage – while still maintaining access to a savings pot.
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