HOMEOWNERS with expiring mortgages have been urged to lock in new deals ahead of the Budget after major lenders slashed rates.
Santander, NatWest, Barclays and HSBC have all cut their rates in the past week, sparking a mortgage price war.
On Monday, Santander cut its fixed rates for homebuyers and people remortgaging by up to 0.36%.
NatWest cut its deals by 0.21% this week, while HSBC and Barclays have also cut rates.
Most of the deals that have been cut are two-year fixes, with Barclays cutting its lowest two-year fixed rate from 3.92% to 3.86%.
HSBC also cut its lowest two-year fix for someone remortgaging from 3.99% to 3.92%.
NatWest is currently offering the cheapest two-year fix at 3.77% – down from 3.94%.
It’s available at up to 60 per cent loan-to-value (LTV), with a £1,495 fee.
Mortgage brokers have hailed the news “welcome relief” for borrowers, but urged them to lock down deals ahead of Rachel Reeves’ Budget next month.
Jack Tutton, Director at Fareham-based SJ Mortgages, said borrowers should act now ahead of the Budget on November 26.
“Lenders are ramping up the rate war ahead of the budget to gain market share before the Chancellor makes her announcements,” he told The Sun.
“All of which is great news for homeowners whose mortgage deal is coming to an end in the next six months.
“As it’s been for a while, it’s still best to secure a new deal at your earliest opportunity providing the lender will consider changing your product should the market improve.
“This gives you a worst case scenario for your mortgage moving forward, plus it protects you should the budget have a negative impact to our financial markets.”
Justin Moy, EHF Mortgages managing director, said the fall in rates mean existing homeowners with expiring mortgage deals should “jump in now and grab a new decent rate”.
Ben Perks, Orchard Financial Advisers managing director, added: “Lenders are starting to fight for business ahead of the Budget announcement.
“It’s widely thought that the Chancellor could bring in changes that stifle the property market, so lenders are reducing to try and increase lending ahead of this.
“Hopefully more lenders join this scrap for business and borrowers will see a selection of slightly improved rates.”
One of the changes the Chancellor is reportedly considering that could slow down the housing market is a “mansion tax”.
Under the proposals, owners of properties over £2million would face a charge of 1% on anything over that amount.
It’s one of several taxes that could be implemented as Reeves battles to find around £30billion to fill the financial black hole in the public finances.
The fresh price war comes after inflation remained at 3.8% in September, the Office for National Statistics said last week – lower than the 4% predicted by economists.
This has boosted hopes for lenders that the Bank of England will cut the base rate – which is currently 4% – more quickly than previously thought.
It has, in turn, led to a fall in swap rates, which heavily influence mortgage rates and reflect what markets expect will happen to interest rates in the near future.
How to get the best deal on your mortgage
IF you’re looking for a traditional type of mortgage, getting the best rates depends entirely on what’s available at any given time.
There are several ways to land the best deal.
Usually the larger the deposit you have the lower the rate you can get.
If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.
Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.
A change to your credit score or a better salary could also help you access better rates.
And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.
You can lock in current deals sometimes up to six months before your current deal ends.
Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.
But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.
To find the best deal use a mortgage comparison tool to see what’s available.
You can also go to a mortgage broker who can compare a much larger range of deals for you.
Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.
You’ll also need to factor in fees for the mortgage, though some have no fees at all.
You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.
You can use a mortgage calculator to see how much you could borrow.
Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.
You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.