THOUSANDS of homebuyers are at risk of losing cheap mortgage deals as rates continue to climb.
Mortgage rates have been edging up in recent weeks following the escalation of the conflict in the Middle East.
Thousands of homebuyers are at risk of losing cheap mortgage rates Credit: Getty
This has fuelled concerns about rising inflation and dashed hopes of an interest rate cut, leading lenders to increase their rates.
The current average two-year fixed residential mortgage rate today is 5.62%, according to Moneyfactscompare.co.uk.
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This is up from 5.6% the previous working day.
Meanwhile, the average five-year fixed residential mortgage rate today is 5.64%.
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This is up from 5.61% the previous working day.
David Hollingworth, associate director at L&C Mortgages, said: “The resumption of hostility in the Middle East has put paid to that, once again highlighting how quickly market volatility can change the outlook for borrowers.
“Fixed rates have consequently been rising since the beginning of July.
“The average of the best remortgage rates from the top ten lenders shows a rapid increase in both two- and five-year rates since the beginning of July, meaning deals will cost hundreds more per annum.”
Not only is this bad news for those looking for a new mortgage deal, but also for those who have locked one in and are waiting to exchange.
This is because mortgage lenders typically give a window of between six and eight months of mortgage offers for the transaction to go through.
However, many home purchases end up being delayed for months at a time due to legal issues, chains falling through or other factors.
Home movers and those looking to remortgage will be feeling extra anxious to get their purchases over the line before rates climb even further.
If your deal is heading towards it’s expiry, it is possible for you – or your broker on your behalf – to apply for an extension to the offer.
It’s best not to dilly dally and get this applied for as soon as possible.
This is because it is more likely to be accepted if it is done several weeks before the existing offer expires.
A lender may ask for recent payslips, bank statements, a new credit check and confirmation that employment and income have not changed.
This is because changes such as lower income, new borrowing or a deterioration in credit history could lead to refusal.
If you are granted an extension, this should be confirmed in writing and communicated to the buyer’s solicitor or conveyancer.
An extension may only provide a limited amount of additional time, though, and is unlikely to be for several months.
In cases where the extension is denied, borrowers have to start a new mortgage application from scratch.
But don’t be disheartened, there are lenders that will happily grant an extension to mortgage offers to help save a sale.
So if you have a mortgage offer, and it is due to expire, don’t dilly dally, get in touch with your mortgage broker so they can get it extended in good time.
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.
