Homeowners and those wishing to get on the property ladder now have an exceptional opportunity to fix their mortgage at under 4% over 10 years. This comes as banks find themselves warring for good borrowers to sustain capital and rise long-term lending.
Interest War Good for Borrowers
The interest war to attract customers has led to opportunities such a Chelsea Building Society 3.29% five-year fixed rate and the Yorkshire Building Society’s 3.69% rate for those with a 25% deposit. Banks and building societies are slashing fees as well, as Yorkshire BS has a fee of just £95. The cheap deals attract customers and allow banks to have their pick of good, trustworthy borrowers, while also luring people into longer-term contracts.
Five lenders are offering dirt-cheap deals at the exchange for longer, ten-year fixes, including Leeds Building Society and Britannia. Chelsea Building Society has the lowest rate at 3.99%, down from the previous low of 4.89%. It comes for a fee of £1,495 and is only available for those who have a 30% deposit, which means that on a £150,000 mortgage, monthly payments would come to £791.
Beware of Exit Fees
While these deals seem too cheap to pass up, homeowners should be cautious in binding themselves to a long-term fix, as they could face heavy exit fees if they should need to break the deal early. A £150,000 mortgage could mean a £10,500 fee if someone should redeem the mortgage in the first three years. Chelsea Building Society allows homeowners to transfer their mortgage to a new property without exit fees being levied against them, but this is only for borrowers to pass lending checks. This could result in many homeowners being trapped in their home should they miss payments or face an income drop, as lending checkers are becoming increasingly picky about who they choose to take the risk on.
Still, the conditions are good for those wishing to own homes, as mortgages are more affordable now than they have been for 12 years. An average mortgage repayment takes up 28% of a borrower’s take-home pay, compared with 48% in 2007. Since just 4 years ago, average rates have fallen from 5.84% to 3.85%. The issue of affordability for property owners is no longer holding buyers back, though saving up the incredible 25 and 30 percent deposits may be why banks are still fighting for customers.