Why you need to fix your mortgage today

In this week’s mortgage round-up we look at why you should fix your mortgage rate today. We also reveal the most popular fixed-rate period and what to do to improve your chances of getting an interest-only mortgage.

May 9, 2019

Experts are predicting that the Bank of England base rate – which determines your mortgage rate – will not rise this year. In fact, the belief is it might only rise once by 2021, reports David Byers this week in The Times.

This means mortgage rates are unlikely to rise over the period. In fact, rates have actually dropped recently. “We have seen more cuts than increases recently,” Ray Boulger of mortgage broker John Charcol, told The Times. “This is down to increased competition between lenders in a crowded market, and the slow housing market.”

So, with rates predicted to stay low, now might seem a good time to forget about your mortgage. Instead, experts are saying this is the ideal time to lock in a low rate.

“Mortgage rates at the moment are at a record low, making it the perfect time to lock into a fixed-rate deal,” says Byers.

Santander has a five-year fixed rate mortgage with a rate of just 1.89%. It is available up to a maximum loan-to-value (LTV) of 75% and has a £999 fee. Alternatively, Yorkshire Building Society has the lowest two-year deal at 1.54%. It has a £995 fee and a max LTV or 65%. 

Thinking about moving to a fixed-rate mortgage deal? Read our guide to remortgaging.

Follow the trend and fix for five years

If you do decide to fix your mortgage rate for half a decade you won’t be alone. Almost half of mortgage customers opt for a fixed rate period of five years or more. Research by Paragon has found that five-year fixed rate mortgages have doubled in popularity over the past six years.

“The five-year fix has found a real sweet spot in the market,” says John Heron, managing director of mortgages at Paragon. “Low interest rates, economic uncertainty around Brexit, a drop in home-mover transactions and more remortgaging means that five-year products have become a viable option for a much larger proportion of customers.”

Find out more about fixed-rate mortgages and the other options available with our guide to all mortgage options.

Get fee-free independent advice from a mortgage broker today

Interest-only options double

It’s a mixed-news week for anyone looking for an interest-only mortgage deal. The number of mortgages offering an interest-only repayment option has doubled since 2013. There are now almost 200 interest-only mortgage options available, according to Moneyfacts.

The bad news is the increase in interest-only mortgages on the market hasn’t improved approval rates. The number of interest-only mortgage applications that are approved has fallen over the past six years.

In the first three months of 2013 26,592 applications for interest-only mortgages were approved, figures from the Financial Conduct Authority and Bank of England show. This had fallen to 24,148 in the last three months of 2018.

This fall comes despite overall mortgage approvals nearly doubling over the same period.

“These figures suggest that although borrowers are still able to locate potential suitable interest-only mortgage products tighter rules and stricter lending criteria following the aftermath of the financial crisis may be leading to a lack of appetite for this sector,” says Darren Cook, finance expert at Moneyfacts.co.uk.

So, it may not be that more people are being rejected for interest-only deals. Simply, that few people are applying for them.

If you are planning to apply for an interest-only mortgage deal Cook advises that a little bit of planning could give you a greater chance of approval.

“It is essential that a borrower looking to apply for an interest-only mortgage first develops a strong and viable repayment action plan before approaching a potential interest-only provider,” says Cook.

“It is likely that the mortgage provider will request and scrutinise this plan early in the application process before proceeding further with the application.”

Get more tips from our guide on how to make a successful mortgage application. You can also improve your chances of approval by using a mortgage broker. They can help match your personal circumstances with the lender most likely to approve your application.

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