Your mortgage at risk – four ways to fight rising costs
According to Moneyfacts, an analyst, 33 five-year mortgage agreements are offered with no exit fees beyond a minimal administration fee. Coventry Building Society offers a five-year contract at 1.89 percent for people who remortgage with 25 percent equity, and early termination of the mortgage only incurs a fee of Â£ 125.
Several lenders are offering 10-year fixes with an early departure option after five years, said David Hollingworth of broker L&C, who said that fixing longer was “a given for now.” The cheapest solution over 10 years is 2.24 pc with TSB for those who remortgage with 40 pc of equity; prepayment charges only apply for the first five years.
Offset your savings
âOffsetâ mortgages allow borrowers to tie their savings accounts (which must be held with the lender) to their home loan and only pay interest on the difference.
Rates tend to be a bit higher than on conventional mortgages, but for those with large deposits, they can be attractive and allow easy access to cash in an emergency. As the spread between savings rates and mortgage rates widens, their attractiveness increases. Coventry Building Society has a two-year solution at 1.49pc, plus a fee of Â£ 999, for a 25pc deposit.
Get a mortgage offer, even if you don’t use it
Mortgage offers last for six months, offering protection against rising rates by May. You don’t have to accept an offer, and you can act quickly if prices go up. Lender turnaround times are longer than usual as they are still grappling with the pandemic real estate boom, which has seen a record number of transactions in the past 12 months, so it is best to apply as soon as possible .
Add value to your home
As a general rule, the more equity you have in a property, the lower the rate you will be offered. Converting a loft or doing other value-added renovations should secure a better mortgage, offsetting the cost of the work itself.