Best mortgage rates – May 2021

Mortgage approvals are at an all time high with more products coming to the market, thanks to the 95% mortgage guarantee scheme. Yet the number of properties listed for sale is at its lowest in years as potential sellers have been reluctant to put their house up for sale. What impact will this have on you and your mortgage? See what the experts are saying, compare rates and find the best deal for you.

Finding the best mortgage rate in a sea of mortgage deals is hard work. So every month we’ll be showcasing the mortgage best deals of 2021 for you, with input from the mortgage experts at L&C.

Finding the best mortgage rate is critical as it will determine how much you can afford to borrow and how much your monthly repayments are.

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What’s happening with mortgages May 2021 

The big news this month is that new figures from the Bank of England have revealed mortgage borrowing in the UK hit £11.8 billion in March. This is the strongest month since records began in 1993. The demand was driven in part by buyers rushing to purchase properties before the stamp duty holiday ended. The deadline was originally set at 31st March. However, it was subsequently extended.

Low interest rates were also a factor, along with pent-up demand due to the lockdown.

The number of new mortgage approvals in March stood at 82,700. This is lower than the recent peak of 103,100 in November 2020. However, it was higher than in February 2020 when this figure was 73,000. We’ll watch with interest to see how this plays out in future months as supply in the housing market is limited.

‘No respite in sight for mortgage prisoners’ 

Mortgage prisoners hoping for an end to high interest rates have been left frustrated as MPs voted down a proposed law change that could have slashed their mortgage payments.

The plan to limit standard variable rates by inactive lenders was an amendment to the Financial Services Bill added in the House of Lords to help a group of about 250,000 mortgage prisoners.

Many originally took out mortgages with lenders such as Northern Rock, which had to be rescued during the 2008 financial crisis. And their mortgages have since been sold on to other providers. These providers typically don’t offer any new, cheaper deals that people can switch to. As a result, many borrowers are paying SVRs that are often in excess of 5%.

The amendment would have introduced a cap on the SVR set at 2 percentage points above the base rate. This would currently set it at 2.1%. However, MPs voted it down saying it would be unfair to other borrowers.

But it was announced the Government will work with the financial regulator to review existing data on mortgage prisoners to see if there are any other ‘practical and proportionate’ solutions. Also, the FCA will review the effect of its new and less stringent affordability rules which came into force for some mortgage prisoners last year.

These mortgage prisoners have been paying over the odds for years, with some unable to move. Why does government seem happy to bail out the banks but not their customers who find themselves in this awful situation through no fault of their own.

‘More choices of green mortgages’

This year has seen a boost in lenders offering special mortgage deals for those who buy an environmentally sustainable home, said Defaqto. It found that there are now 26 green mortgages available to borrowers, compared to only a few a year ago.

While green mortgages are different depending on the lender and product, most offer better terms to those who either buy an environmentally-friendly home. Or improve their home to boost its energy efficiency.

According to Defaqto’s research, the lowest rate on a green mortgage was a 1.13% two-year fixed rate at 60% LTV. This compared to the cheapest non-green 2 year fixed-rate mortgage deal at the same LTV deal, which was 1.24%.

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‘One in 7 mortgage holders have never switched mortgages’

New research by Boon Brokers has found some 15% of mortgage holders have never switched mortgages.

And that after the youngest category of homeowners, who are likely to be relatively new to the housing market, those aged over 65 were least likely to have ever switched. Some 18% of this age group admitted this is the case.

For those who had previously switched deals, many hadn’t done so for a significant period of time. Some 9% said it had been over 10 years since they last switched. While 13% said it had been more than five years. This is despite only 24% believing they are tied into their current mortgage deal.

Could you save on your mortgage payments by switching? Find out more in our guide on remortgaging.

‘Help! The house I’m buying has been down-valued by my mortgage lender’

We’ve heard of a few cases recently of prospective homebuyers finding their plans in jeopardy after their lender’s valuation of the property they want to buy was lower than the agreed purchase price. This is known as a down valuation. And it means the lender will only offer the mortgage based on the lower valuation amount.

And these are not isolated incidents. A survey by Bankrate UK last November, found 46% of prospective buyers had seen properties down-valued since March 2020. The majority of homes were down-valued by between £5,000 and £100,00.

If this happens to you, the bad news is it’s generally difficult to appeal these decisions. ‘To stand a chance there’ll need to be several very recent sales of very similar property close by,’ says David Hollingworth, L&C Mortgages. The other options are to try to renegotiate with the vendor, use savings, or even try a different lender.

Help finding the best mortgage rates

Whether you’re looking for a first mortgage, a buy to let mortgage or want to see if you can get a better deal by remortgaging, use the charts below to browse mortgage rates online. Scroll down for mortgage best buys from L&C, calculators & more…

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Take a look at today’s best rates from lenders and get an overview of mortgage options now.

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Your home or property may be repossessed if you do not keep up the repayments on your mortgage.

Representative example A mortgage of £204,302 payable over 23 years, initially on a fixed rate until 31/12/24 at 1.56% and then on a variable rate of 5.05% for the remaining 18 years would require 62 payments of £881.42 and 214 payments of £1,168.08. The total amount payable would be £305,690 made up of the loan amount plus interest (£100,315) and fees (£1,073). The overall cost for comparison is 3.6% APRC representative.

What are mortgage rates?

Mortgage rates are the rate of interest charged by a mortgage lender (bank or building society). The interest is charged by the lender as compensation for the money they have lent them in order to purchase a property.

Interest rates are determined by the lender in most cases, and can be either fixed (ie remain the same for the term of the mortgage) or variable (where they fluctuate with a benchmark interest rate). Before you compare mortgages, you need to understand the different types. For more information see what type of mortgage should I get?

Help finding the best mortgage deal

The best mortgage deal isn’t just about interest rates. You need to consider whether the mortgage term is right for you, arrangement fees and more.

To get a better idea of the best mortgage for you, use our online mortgage service provided by the fee-free mortgage broker L&C.

L&C can compare the latest mortgage deals for you over the phone, or you can do it yourself in real-time online. Whichever you choose they can help search the market to find you the best mortgage deal, see if you qualify and even help you apply online, doing all the legwork to get you your mortgage offer.

Handy tools and calculators

Here’s a selection of practical gadgets and tools to help keep things simple.