Best deals for home movers

When moving house, you’ll hopefully have a decent equity stake in the property you’re selling so you’ll be in a strong position to secure a cheaper mortgage. We’ve looked at the bank and building society market to find some of the best deals when buying your next home.

Assumptions

We’ll be considering a £300,000 property purchase, borrowing at 60% loan-to-value as the buyer has £120,000 from the sale of their previous home. They’ve chosen a 25-year mortgage term. 

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Two-year fixes

It’s crucial to consider the overall cost of a mortgage, and not just focus on the headline rate. There are dozens of ultra-low fee deals, though in many cases buyers will end up paying more because of hefty product fees.

Norwich and Peterborough Building Society offers a two-year fix at 1.19%, although fees of £676 do apply. This mortgage will cost £715 per month for the first two years, representing an annual cost of £8,850. The standard variable rate (SVR) is 4.74%, so repayments will jump after two years.

For a fee-free option, consider the West Bromwich Building Society's fixed rate deal. This offers a rate of 1.59%, meaning monthly payments equal £728 and the annual cost is £8,870. The product is fixed until 28 February 2019 and the rate reverts to the SVR at this point, currently 3.99%.

Fix for longer

It’s possible to lock in a mortgage rate until 2027, which can ensure you know exactly what your repayments will be. These long-term deals are cheaper than ever before, but the security of knowing what you’ll pay for a decade doesn’t come cheap – rates are much higher than with two-year deals.

The cheapest ten-year fixed rate comes from TSB at 2.49% although there is a product fee of £995. That’ll cost £807 per month, or £20,363 over two years. When the fixed-rate period ends in February 2027 monthly repayments will increase to £879 (the SVR is 3.74%), assuming rates don’t change and our buyer hasn’t switched to a better deal.

Alternatively, Woolwich from Barclays has a 2.19% rate with a £999 product fee fixed until April 2024. That will cost £780 per month, or £19,719 over two years. The SVR is 3.74%, implying repayments will increase to £885 in 2024.

In the five-year fix market, Virgin Money leads the way. It is currently offering a rate of 1.89%, fixed until 1 April 2022. Fees are £970 which results in an average monthly cost of £753. Virgin's SVR is currently 4.54%, meaning payments will leap when the fixed period expires.

Variable rates

Coventry Building Society currently has the cheapest variable rate at 1.49%. Monthly repayments are £719 with initial fees of £999. 

Alternatively, the Melton Building Society charges 1.50% (discounted from 4.99%) for three years, with £290 fees. The cost over two years is £17,570, if monthly repayments don’t increase from £720. When the SVR takes effect, borrowers will need to repay £1,025 per month, if rates don’t change. 

Interest-only deals

If you’re looking for interest-only options, remember the rules are now a lot stricter and you’ll need to show a well-thought out plan for repaying the capital at the end of the mortgage. Monthly repayments are much lower than with capital repayment, but you'll pay more interest on an interest-only mortgage in the long run.  

Not every provider will lend on an interest only basis, so if you’re looking for one it’s best to speak to a mortgage broker. Our mortgage tool can help you get a feel for the rates on offer.  

 

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