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Warning over ‘blink and you’ll miss it’ mortgage deals – five ways to still get the cheapest rates
Mortgage rates have been edging upwards in recent weeks - we explain what action to take now
HOMEBUYERS are being warned about "blink and you'll miss it" mortgage deals as rates continue to climb.
Mortgage rates have been edging upwards amid uncertain market conditions.
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Swap rates, which underpin fixed-rate mortgages, have been fluctuating in recent months leading lenders to adjust their rates.
As a result, the shelf life of a mortgage product has plummeted to 15 days in March, from 28 days in February - a six-month low.
But mortgage choice recorded its biggest month-on-month rise in six months and options of for borrowers reaching over 6,000 - the largest count in 16 years.
Deals available on the open market can be pulled from the market and repriced at any point.
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The rates offered when deals are repriced may fall or rise from previous levels - but this all depends on the current financial environment.
Right now, the average two- and five-year fixed rates rose between the start of February and the start of March, to 5.76% and 5.34% respectively.
Halifax, Santander and Co-op all announced that they would be increasing their rates last week.
It comes after lenders including HSBC and Natwest pulled cheaper deals only to come back with higher rates.
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Rachel Springall, finance expert at Moneyfacts, said: "Lenders reacted to the change in swap rates, leading to numerous repricing of fixed rate deals, no doubt making it a challenging situation for borrowers and brokers to keep on top of the changes.
"The rate volatility led to a rise in both the overall average two- and five-year fixed rates, the opposite direction borrowers may well have hoped for after positive rate cuts recorded a month prior."
Nicholas Mendes, from mortgage advisors John Charcoal, said deals are appearing in such a manner that you'll "blink and you'll miss it".
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He added: "As mortgage rates are continuously being repriced even to the extent, that we’ve seen lenders reprice twice in a week, with some lenders providing little to late notice of a rate change."
It comes ahead of The Bank of England's interest rate decision, which will be announced on Thursday.
The central bank is expected to hold interest rates steady at 5.25%.
But The Bank has signalled at recent meetings that cuts are likely to come in future.
How can I secure a cheap rate on my mortgage?
Act Quickly
In a competitive market, good mortgage deals can disappear fast.
Nick said it's best to be prepared to act quickly once you find a suitable mortgage rate.
He said: "Promptly submit your application and provide any requested documentation to avoid delays."
Check your credit score
If you've got a bad credit record, the best thing to do in the first instance is to find out what your score is.
Nick said: "Your credit score plays a significant role in the mortgage approval process.
"Check your credit score in advance and take steps to improve it if necessary.
"A higher credit score can help you qualify for better mortgage rates."
Nick said that this should leave you better placed to go for a mortgage which will suit you.
You can check your credit file for free on websites like ClearScore and Credit Karma.
If you find that you do have bad credit, this isn't to say that providers won't lend you any money.
Get a mortgage in principle
A mortgage in principle is an official estimate from a lender of how much it's willing to lend to you based on what you can afford.
It can be a pretty useful thing for those hunting for a first home because it shows that you're a serious buyer.
Nick said: "Have this before you start house hunting, not only will expedite the process when you find the right property.
"Pre-approval shows sellers that you're a serious buyer and can give you a competitive edge. It will also flag any issue."
To get an agreement in principle, you can either go to a mortgage broker and see what deals are available that you may be eligible for.
It's important to remember that a broker may charge a fee to put together an agreement in principle for you, so make sure to ask about this first.
Alternatively, you can go directly to the lender that's offering a deal that you're interested in.
Going to a lender doesn't mean that you have to borrow from them when it comes to applying for a mortgage, so don't worry about getting tied in.
Gather Necessary Documents
When you apply for a mortgage, you must be truthful and honest to the mortgage adviser and the lender.
Gather all your personal information and make sure you disclose information that could stop a lender from pulling the mortgage at the last moment.
If you have recently gone on maternity leave, for example, and do not disclose this to the lender, it will likely be picked up on payslips and bank statements, which could negatively impact your application.
Working reduced hours would also have to be disclosed for the same reason, for example.
Get mortgage advice
It can be tempting to go directly to a bank or building society for your first mortgage, but doing so could severely limit your options.
Nick said visiting a broker six months in advance can be useful to help you work out what your maximum purchase price will be.
Nick said: "Mortgage brokers can help you navigate the mortgage market and connect you with lenders offering competitive rates.
"They have access to a wide range of loan products and can potentially find deals that you wouldn't discover on your own.
"They will also be aware of any market changes or lender repricing."
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A broker will be able to review a wider range of products and advise you on the right one for your circumstances, as well as assess any hidden costs which can sometimes be difficult to find.
Remember though, they'll take a fee for their services so you'll need to factor that into your costs.
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.