Smart move

By JUSTIN HARPER FOR MAILONLINE
Updated:

 

MORTGAGE rates might be at their lowest level since the Sixties - but that doesn't mean that you should stick with your existing lender.

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Despite the swift action by most lenders, who echoed the Bank of England's quarter-point cut, most borrowers still aren't getting the best deals. Although there are low-cost, straightforward mortgages readily available, you might have to move lenders or demand your lender shifts you on to its better deal.

For example, while Halifax's base rate mortgage is now 6.25%, its lowest standard rate since January 1965, most of its customers pay a different, higher mortgage rate - its standard variable rate - which has been cut to 7%. But all borrowers stuck on the standard variable rate need to do is ask the Halifax to switch them over to the lower base rate.

Someone with a 20-year £60,000 repayment mortgage at Halifax's standard variable rate of 7% will pay £471.96 a month. But if they switch to the Halifax's base mortgage rate of 6.25%, the monthly payment will be £438.55 a month. So if you haven't already, ask to switch over.

Nationwide says its new base mortgage rate of 6.24% will fall to 5.99% and its standard variable rate of 6.74% will drop to 6.49% for new and existing borrowers from 1 June. It says its base mortgage rate is the lowest since May 1960.

However, there are lenders who have more straightforward mortgages which still offer low rates - and there's no confusion of switching around rates. HSBC, Standard Life Bank and Intelligent Finance have one low rate which all existing and new borrowers can gain access to. The benefit of this is that borrowers are not confused about what rate they are on or being tied in to a specific deal.

These are genuinely low, no-frills, standard variable rates with no bells and whistles or catches. HSBC has just one variable rate - which will fall to 6% from June 4 for both new and existing customers.

Intelligent Finance (IF), the phone and internet arm of the Halifax, reduced its rate from 6.25% to 6.0%. The new rate will come into effect for new and existing borrowers on 5 June. Customers get an automatic 1.5% discount for the first six months. Standard Life Bank's basic rate is 6.25% - and, again, there's a discount for the first six months.

Ray Boulger, at mortgage broker Charcol, says: 'It is usually fairly easy to move to a lender's base mortgage rate. 'Most lenders will freeze the fees if you move to their variable rate. But first check what redemption penalties you might have to pay before making that move.'

If you are on a good discount or capped deal, wait until the end of this period before transferring on to the base rate mortgage.

Richard Scrase from Surrey will benefit from a base mortgage rate with Standard Life Bank of 6.25%, which comes into effect on 1 June. The couple moved their £100,000 mortgage over to Standard Life Bank and are currently paying 4.74% for the first six months, costing £777.32 a month, before the mortgage reverts to the base mortgage rate, which will then cost them £854.64 a month.

Mr Scrase, a 40-year-old marketing manager, says: 'The beauty of having these really low rates is that we don't always have to search around for the best short-term deals as we're on a pretty low deal anyway. And if we decide not to reduce our monthly repayments we will be over-paying our mortgage, which will cut the total amount of interest we have to pay even further.'

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