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Halifax and First Direct have joined major lenders in announcing mortgage rate cuts.
What Bank Has Lowest Mortgage Rates
Halifax said it reduced five-year fixed rate mortgages by 0.71 percentage points, and two-year fixed rate loans would fall to 0.27 percentage points.
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Raising money to buy a home can be a challenge at times and we want to help
Halifax is part of Lloyds Banking Group, which was the UK’s largest mortgage lender last year, lending £52.7 billion by 2022, according to figures from trade group UK Finance.
First Direct said it has reduced rates on more than 20 of its two, five and 10-year mortgages by up to 0.20 percentage points, with immediate effect.
CEO Chris Pitt said: “Raising the money to buy a home can be a challenge at times and we want to help.”
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Several major mortgage lenders are cutting rates this week, amid signs that stubborn inflation is easing.
The Bank of England uses the base rate, which affects the cost of borrowing, as a tool to beat inflation.
Among the rate cuts, HSBC UK has cut some homebuyer, first-time buyer and buy-to-let rates by 0.35 percentage points, as well as adding a £500 cash incentive to certain businesses.
The National Building Society has already announced cuts of up to 0.55 percentage points on fixed deposit products from Thursday.
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And, earlier this week, TSB announced reductions of up to 0.40 percentage points in fixed five-year home mortgages, with rates starting from 5.44%.
The cuts in deposit rates announced today by major lenders represent a much-needed boost and reassurance to the market that the Bank of England’s base rate is approaching its peak.
The UK Consumer Price Index (CPI) was 7.9% in June, down from 8.7% in May, according to the Office for National Statistics (ONS). This has led to higher expectations that the base rate may not need to go higher.
Last week, the Bank of England raised the base rate from 5.00% to 5.25% – the 14th increase in a row.
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The five-year fixed mortgage rate was 6.33%, down from an average of 6.34% on Wednesday.
Emily Williams, director of research at estate agent Savills, said: “The cuts in mortgage rates announced today by the major lenders represent a much-needed boost and reassurance to the market that the Bank of England’s base rate is approaching its peak.
“This will ease some of the affordability challenges that buyers face and bring more confidence to the market, but we expect downward pressure on prices and performance to continue for the rest of the year.”
Those (lenders) who have made reductions in rates should be congratulated for doing so and hopefully those who have not will soon follow suit.
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He added: “Demand in the first half of the year was stronger than many expected. Financial buyers are very active, increasing their share of transactions to 46% in April, from 34% at the end of 2022.
“First-time buyers are still keen to get on the housing ladder due to pressures in the rental market. But to control the increased cost of debt, they extended the loan terms – the average length of time for a first-time buyer in (the first quarter of) 2023 is 31 years.”
Mark Harris, chief executive of industry broker SPF Private Clients, said: “The relative stability of swap rates, which support the value of fixed rate mortgages, has given a growing number of lenders confidence in where they can price their products.
“Those who have made rate cuts should be commended for doing so and hopefully those who haven’t will soon follow suit.”
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For example, if a bank wants to lend you 80% of the value of a property, known as loan-to-value (LTV), you will need to deposit the remaining 20%.
A fixed rate plan provides the same interest rate for a contract period such as two, five or even 10 years.
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Your monthly payments are the same for the entire term of the contract, which provides comfort and security as you can predict what your monthly payments will be for a set number of years.
In contrast, atracker mortgage sets its rates a percentage above or below the external benchmark. This is usually the Bank of England base rate or the bank may have its own figure.
If the premium rate goes up, your mortgage will be more expensive, but if it goes down, your monthly payments will be lower.
This can mean your payments are unpredictable, but it can be beneficial if you think rates will go down and you don’t want to be locked into a high rate.
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There are also discount rate mortgages that set repayments based on a lender’s interest rate, known as standard variable rate (SVR) or fixed rate mortgages, which are linked to the SVR but will not go above a certain level.
The more savings you have, the less interest you’ll pay on your mortgage, which should lower your monthly payments and help pay off debt sooner.
You may not get the best interest rate, but it may be worth it to lower your mortgage payments.
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Lenders offer low-interest mortgage deals aimed at first-time buyers and some may have specialist products aimed at self-employed and older borrowers with difficult to prove incomes.
This can be difficult if you are a first time buyer unless you have large savings or support from family.
Property owners may be able to use some of their current property value as a down payment when they move toward a new home loan, known as a repurchase.
Help to Buy Loan: The Government will lend you up to 20% of the value of a new home – or 40% in London – after you put down a 5% deposit.
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The loan is based on a standard mortgage, but can be used to buy new property in England and is subject to local housing costs.
Life Isa: This is another government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 on their first home. You can save up to £4,000 a year and the Government will add 25% on top.
Shared ownership: Joining a housing association means you can buy part of the property and pay rent on the remaining amount.
Lenders will advertise mortgages based on the amount they will borrow – the LTV – and the interest earned on the loan, known as the mortgage rate.
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But the actual price is affected by the Bank of England base rate and how much it costs lenders to borrow the money on the wholesale market.
It also depends on how much competition there is in the market and how eager the lender is to attract new customers and build market share.
A lower mortgage rate can often come with a higher fee, so it can sometimes be worth paying a slightly higher rate in return for paying less upfront.
The rate is a cost associated with the deposit, so adding in everything else can be more useful.
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APRC helps determine how much you will need to pay for a home loan in total.
Conversely, other businesses may have a high rate, but a low fee that makes the offer cheaper overall.
APRC can be an effective way to compare different products because it takes into account both the price and any price.
You may have to pay valuation fees for the value of your property, or to cover legal conveyancing work.
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The broker may also pay for tips if you use one to make an application.
Check for any exit fees or early repayment fees (ERCs) if you want to switch your mortgage before the end of the contract period.
These can be quite high, especially in the first years of the loan when it can be as much as 5% of the balance.
There is now no stamp duty for any buyer on the first £500,000 of a property purchase until the end of June 2021.
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First-time buyers will benefit from an exemption on the first £300,000 of a purchase up to a maximum property value of £500,000.
Mortgage rates can change all the time as lenders bring out new products and withdraw old ones in response to the economic environment.
The sooner you start preparing for a mortgage, the better position you will be in when buying or re-buying a property.
It may take four to six weeks
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