Shopping around for your mortgage can be a daunting process, especially if you are doing it for the first time. There are so many questions: Do I go for a fixed rate or tracker mortgage? How long do I lock in my rate for? Who is offering the best deals?
Before carrying on it is worth addressing the last question for a moment – Who is offering the best current mortgage rate? Many people often fall into the trap of going for the best rate without paying attention to things like the fees involved or whether there are heavy penalties for overpaying your mortgage when applying for their first mortgage. Pay special attention to both of these factors as it could cost you thousands if you ignore them.
A number of mortgages are offered through good national brokers but sometimes lenders save their best rates for those who buy from their branches or through their call centres. However, banks and building societies are still recovering from the fall out of the financial crisis and have tightened criteria significantly since the heady days of 2005-2007 where lenders were fighting among themselves to lend as much as they could. Nowadays lenders are, in the main, looking for borrowers with impeccable credit history and with larger deposits.
However, that is not to say you cannot get a mortgage if you have minor blips on your credit history or you have only got, say, a 10% or 15% deposit. Lenders like Aldermore and Precise Mortgages will lend to those with a less than perfect credit history and a host of other lenders will lend to those with a 10% or even 5% mortgage – albeit the number of these loans has shrunk over the past 5 years.
Regardless of whether you have a large or small deposit, good credit score or not so good, it is always worth consulting a mortgage broker. Brokers will not only be able to find the best current mortgage rate for your circumstances but have an intimate knowledge of lenders’ criteria, thus improving your chances of being approved. This is important as multiple applications for credit can have a negative impact on your credit score, which can further damage your chances of getting a mortgage.
Over the past few months, lenders have had an increased appetite to lend, mainly down to Government help in the form of the Funding for Lending scheme, which offer lenders cheap funding as long as they promise to lend money to borrowers.
In the past week, HSBC has launched a 1.98% two-year fixed rate – the lowest ever two-year fix – for borrowers with a 40% deposit. It has a large fee – £1,999, or £1,499 for borrowers with a current account with HSBC – and it is not available through brokers, meaning you will have to negotiate HSBC’s criteria yourself.
For those who want the comfort of having independent advice from a qualified broker, there have also been some good deals launched in the past week or so. Halifax is offering a 90% loan-to-value deal through brokers for 5.99%, following cuts of up to 0.5% across its range. NatWest introduced to a two-year fixed rate at 4.09%, with a £995 fee, for those with a 20% deposit, or at 4.39% with no fee.
There have also been a few products launched with just a 5% deposit, including a five-year fixed-rate mortgage at 5.59% from Vernon Building Society, but this is only available to borrowers and through brokers based within a 25-mile radius of Stockport and Cambridge Building Society has launched a series of 95% LTV products, with rates starting at 5.49% for a three-year fixed rate, with a fee of £799.