This week's best mortgage rates
Whether you're buying your first home, moving up the ladder or looking to invest, check out our round up of the best mortgage deals around.
If you are looking to buy your first home the maximum loan-to-value on the mortgage will probably be your biggest concern.
If you are a first-time buyer with only a 5% deposit to put down then Chelsea Building Society is offering a two-year fixed-rate deal at 3.69%. However it does come with a pretty heft fee of £1,825.
Those people with a 10% deposit looking for a fixed deal should look to Norwich & Peterborough Building Society which is offering a 4.04% two-year fixed deal with a £295 fee.
Lloyds TSB is offering a 95% Lend a Hand mortgage with a great rate of 4.34% with no fee. The catch is that a family member must deposit 20% of the value of the property into a linked savings account. The Lend a Hand Savings Account pays 2.7% AER for three and a half years, after which it will be 0.5% above the Bank of England Base Rate.
If you want a tracker rate (which moves in line with the Bank of England base rate) HSBC offers a lifetime tracker at base rate + 3.89%, so the current rate is 4.39%. The maximum LTV is 90% and there is a £599 fee – unless you are an existing HSBC current account holder when it is fee free.
There are some good deals around at the moment for anyone looking to remortgage. If you are prepared to risk a raise in the base rate and could still afford your repayments if it did then there are some excellent tracker deals on the market at the moment.
HSBC is top of the pops with a two-year fixed-rate mortgage with a rate of just 1.79%. You'll need 40% equity to take advantage but it's a great rate. There is a £1,999 fee.
Those homeowners who would prefer a tracker should turn to Nationwide, which has a two-year tracker at 1.84% above the base rate – so the current rate is 2.34% – with a £999 fee, but you do need a 60% LTV.
With so many would-be first-time buyers struggling to get on the property ladder the rental market is booming. If you are fortunate enough to be able to buy a second property and rent it out then there are some good buy-to-let mortgages on the market.
Mansfield Building Society offer a two-year buy-to-let fixed mortgage that has a rate of 3.43% with a 2% arrangement fee and a £199 booking fee. The maximum LTV is 70%.
Anyone with some savings to set aside should consider an offset mortgage. With this type of mortgage your savings are put in a connected account to your mortgage and the balance of your savings account is used to offset the interest on your mortgage.
So, for example, if you had a £200,000 mortgage and £50,000 sat in your connecting savings account you would only pay interest on £150,000 of your mortgage. Given how low interest rates are this can be a far wiser choice than a separate savings account and mortgage.
Chelsea Building Society offers the best deal with a two-year fix at 2.09% with an arrangement fee of £1,695 and a maximum LTV of 60%.
The next best comes from Yorkshire Building Society, which is offering a rate of 2.14% for two years with a £1,495 fee. The maximum LTV on this one is also 60%.
The best tracker offset mortgage is also offered by First Direct with a rate set at 2.09% above the base rate for two years (so currently 2.59%). There is a £1,499 fee and you’ll need a minimum deposit or equity of 35%.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.
A way of combining a mortgage and savings so the savings “offset” and reduce the mortgage. Rather than earning interest on savings, the savings reduce the mortgage and the interest paid on the borrowing, so savings are effectively earning interest at a higher rate than most mainstream savings accounts will pay. They are also tax-efficient, as savers avoid paying tax on interest that their deposits would otherwise have earned. Offset mortgages offer the disciplined borrower a great deal of flexibility, as overpayments can be made to reduce the term or monthly mortgage repayments, which can save thousands of pounds in interest payments over the mortgage term.
The catch-all term applied to investors who buy properties with the sole intention of letting them to tenants rather than living in them themselves, with the proceeds from the let usually used for the repayment of the mortgage. Buy-to-let investors have to take out specialised mortgages that carry higher interest rates and require a much bigger deposit than a standard mortgage. Other expenditure can include legal fees, income tax (on the rental profits you make), capital gains tax (if you sell the property) and “void” periods when the property is unlet.
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.
A charge some brokers (and, increasingly, lenders) make for arranging your loan or mortgage, either as a flat fee or a percentage of the amount you wish to borrow. In order to look ultra-competitive in the best-buy tables, some mortgage lenders will offer mortgages with an attractive low rate and recoup any losses with a hefty arrangement fee.
Where APR is the rate charged for money borrowed, Annual equivalent rate is how interest is calculated on money saved. The AER takes into account the frequency the product pays interest and how that interest compounds. So, if two savings products pay the same rate of interest but one pays interest more frequently, that account compounds the interest more frequently and will have a higher AER.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.