The month of January is closely associated with post-Christmas sales, as shops attempt to rid themselves of their stock from the previous year and make way for fresh trends and items for the new year. However, it appears that in 2019, some mortgage lenders are joining the January sale mindset and shaving a little from some of their mortgage products.
While not all lenders are offering some reduced mortgage interest rates, the view is that among those who are – HSBC, Coventry Building Society, NatWest, Santander and Barclays – they are doing so to become more attractive to the likely lower number of home buyers, as Brexit-related uncertainty deepens.
It’s also worth being aware that while shop sales can discount at around 70%, that’s absolutely not the case with these lower mortgage rates. Figures from Which? show that the largest reductions are up to 0.36% of some Halifax trackers and fixed rate products, a 0.25% cut to selected Santander products and a 0.14% reduction on some Barclays fixed rate mortgages.
Fixed-rate differentials shrink
Separate data, this time from MoneyFacts, shows that this mortgage rate cut activity has worked to reduce the differential between 2-year fixed rate and 5-year fixed rate mortgages to an average of just 0.41%. That’s the lowest difference between the two, fixed-rate mortgage options since 2013, when there was an average difference of just 0.27%.
“The mortgage rate war may have dulled in comparison to the golden years of cheap funding schemes, but so far this year some of the biggest lenders in the market have taken aim at their pricing to entice new borrowers,” said Rachel Springall, finance expert at Moneyfacts.co.uk.
However, while there are some great low mortgage rates available right now, it’s important to be careful when selecting the right deal for you. Some of the reductions are only available on loan-to-value ratios of 50% or less.
Having said that, lenders are also beginning to offer more choice for home-owners who own only a small proportion of their property after making the initial purchase on a Government scheme. This allows them to gain a mainstream mortgage at market rates, despite having just 5% of equity in it once the Government loan is repaid.
Not all lenders are reducing mortgage rates
While there are a number of mortgage lenders who have reduced their rates, likely in order to stimulate more business as the number of home sale is expected to stall during 2019, not all have followed that path.
Lender TSB has raised some of its fixed-rate mortgage products by 0.01%. And, while the Yorkshire Building Society and First Direct have reduced the rates on some mortgage products, they’ve also raised the rates on others.
As always, selecting the best mortgage remains a job that requires plenty of research to ensure the product you choose is one that’s suitable for your specific situation. And, that any penalties for future changes aren’t too big to negate the benefit right now, should things change dramatically. That’s particularly true for any 10-year fixed rate mortgage products.
If you need a mortgage as a first-time buyer, or are looking to secure a new mortgage as your current fixed rate term is coming to an end, take your time to view and understand all the deals you’re interested in, or seek professional advice.
Buying a home is a major financial commitment and getting all the details surrounding that purchase right, is important for your financial health going forward.