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Good news for homeowners as mortgage lenders cut rates

By Joel Stanier

27 July2021

A number of major lenders have cut some of their mortgage rates in recent weeks, meaning lower mortgage payments for many new and remortgaging homeowners.

With the Bank of England's base rate still at the historic low of 0.5%, mortgage lenders have the freedom to set their rates much lower than in past years. According to uSwitch.com, the cheapest average rate on a fixed-rate mortgage is now around 3% - and many tracker and variable-rate deals offer even lower rates.

It means that now could be a good time for would-be homeowners to make their move, while many existing mortgage holders could save money by remortgaging to a better deal.

Michael Ossei, personal finance expert at uSwitch.com, said: "With many consumers struggling to pay off other debts and with many having seen little or no pay rises over the past few years, it's hardly surprising there is a great deal of appetite for longer term fixed rate deals. The launch of the lowest ever five year fixed rate deal from HSBC, and Santander's competitive five year fixed deal for those wanting to remortgage, suggests that lenders are starting to wise up to what borrowers are looking for and are finally giving them what they want. It's in this market that the battle for customers is really starting to kick off - with Barclays, Halifax and Nationwide all reducing their fixed rate mortgages in the last few days."

But he added that it's not all good news for homeowners. "As lenders battle it out for the best long-term fixed deals, the number of good value shorter fixed deals, such as two year products with free additional services, has fallen. In 2008, 53% of all two-year fixed deals had free valuations and legal fees - in 2021 this has fallen to 47% - and this downward trend looks set to continue.

"The other worry for borrowers is the larger deposits now required to benefit from the best rates. The better long-term fixed deals now require a 40% deposit on average. Very few are available to buyers with smaller deposits and these tend to come with a trade-off, such as an increase in up-front fees."

If you're thinking about buying your first home - or if you're an existing homeowner thinking about a remortgage - you can compare mortgage deals here.

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Tags: mortgage, mortgage rates, rates, loans, remortgage

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