Competition in the mortgage market is hotting up, with market-beating new deals from Nationwide and Northern Rock. So should you take advantage?
Those looking for a new mortgage have several good variable-rate deals to choose from. These pass on the benefit of the current low base rate, but with the risk that your mortgage rate could rise if inflation takes off and the base rate rises. Woolwich’s one-year tracker at 1.98%, with a £999 arrangement fee available up to 60% loan-to-value, is tempting. Or you might prefer Northern Rock’s two-year tracker at 2.69%, with its more wallet-friendly £595 fee. If you prefer the predictability of a fixed-rate mortgage, look into Northern Rock’s two-year deal. Its 3.69% rate with a £595 fee makes it a current best buy.
Anyone thinking of switching mortgages faces rising mortgage arrangement fees. Five years ago these averaged £300, says Julian Knight in The Independent on Sunday. But now many lenders charge closer to £1,000. That’s a painful punch in the wallet and “it stops people shopping around”, says Knight. That, of course, is the idea. Lenders “no longer feel they can benefit from consumers ‘churning’ between providers. Instead, they want them to stay for the long haul and slapping on exorbitant arrangement fees is a good way of doing this.”
Sadly, arrangement fees are largely unavoidable. Just make sure when shopping around that you consider these fees as well as the quoted mortgage interest rate. You may then find, for example, that staying on your current lender’s standard variable rate is cheaper than switching.
For first-time buyers, finding any mortgage has been tough over the past couple of years. But Nationwide may have just ridden to the rescue. The building society has launched a range of new mortgages that only require a 10% deposit, with fixed rates starting at 5.98% for two years, plus a £495 fee. To get this deal you have to have a Nationwide Flexaccount that receives a monthly deposit of at least £750. This practice is becoming more widespread since the government announced that lenders must have better knowledge of their customers’ finances. Indeed, what better way to acquire such information than by being your customer’s main banker?
In any case, first-timers don’t need to rush. House prices have risen in recent months, but a house is still repossessed every 11 minutes in Britain, according to Credit Action. Meanwhile, 2,553 people are losing their jobs every day. Overall, the economy is still in the doldrums and that’s bad news for property. Prices are likely to fall again next year.