Place your bets

By JUSTIN HARPER FOR MAILONLINE
Updated:

 

WHILE economists ponder what will happen to interest rates this year, homebuyers can take comfort in the fact that low mortgage rates are still on offer.

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At the end of last year, many lenders were pulling their best mortgage deals or increasing the interest rates of their existing deals.

But some lenders who put rates up are now bringing them down again. These include Halifax, NatWest, Cheltenham and Gloucester and Nationwide Building Society.

Halifax spokesman Mark Hemingway says: 'We put our rates up last month based on what the money markets were doing. But there has been a change in sentiment since then and there's now talk of rates coming down.'

Money market rates have fallen over two to three years, because there is increased talk of a fall in base rates from the current level of 4%.

The result is that deals on relatively short-term fixed rate mortgages have fallen, offering homebuyers some bargain rates. Britannia Building Society has one of the best two-year deals, offering a rate of 3.84%. There is a £295 arrangement fee.

Coventry Building Society last week launched a two-year fixed rate of 4.1%. There is an arrangement fee of £295, but free valuation and legal work for anyone remortgaging. On a £100,000 25-year repayment mortgage, this would mean monthly repayments of £539.

Rob Clifford, at broker Mortgageforce, says: 'Fixed rates should come down even further in the coming weeks, but the important thing is to get off your lender's standard variable rate as soon as possible.'

For a more long-term view, broker London & Country has a five-year fixed rate of 4.74%. It refunds the valuation fee and offers free legal work for remortgaging.

Bristol & West has a 4.49% five-year fixed rate deal which has a £299 fee but no freebies. On a £100,000 25-year repayment mortgage, you'll pay £561 per month.

Trackers are also proving popular, according to Ray Boulger at mortgage broker Charcol. He recommends Abbey National's tracker, which is 0.21% below the Bank of England base rate for two years - giving a current interest rate of 3.79%. It carries a £299 fee. Abbey also has a good five-year tracker at 0.05% above the 4% base rate.

Discount rates are also becoming more competitive. Mercantile Building Society, based in Wallsend, Northumbria, has the cheapest two-year deal with an interest rate of 3.59%. (This is a 2.25% discount off its standard mortgage rate of 5.84%.)

Emma Davis has just bought her first home and has fixed her mortgage payments for five years.

Emma, 22, took out a £41,000 mortgage with Bristol & West on an interest rate of 4.75%. Not knowing much about mortgages as a first-time buyer, she approached broker TheMarketPlace at Bradford & Bingley, which found the deal for her. Her mortgage will cost £238 a month.

Emma, who lives in Shrewsbury and works as a paralegal for a law firm, says: 'I needed some peace of mind, so fixed my mortgage for five years at a really low rate. 'At the end of the term, my salary should have increased and I'll be able to reassess my situation.'

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