British borrowers warned the days of cheap mortgages are over
The era of record-low mortgage rates appears to be over, borrowers were warned this week, and the government's independent forecasters predict costs will rise rapidly over the next two years.
Inflation forecasts from the Office for Budget Responsibility (OBR), published alongside Wednesday's Budget, suggest that the cost of servicing a mortgage could rise by 5.6% next year and 13.1% the following year if the Bank of England's prime rate rise is passed on to borrowers more.
According to financial firm AJ Bell, the annual payments from someone who earlier this year could be 250.borrowed GBP 000 on a two-year fixed-rate mortgage at 2.06% if predictions are correct, rising by GBP 600 when he reschedules in 2023. Someone with a borrowing of 450.000 GBP on the same terms would reduce its cost by 1.068 GBP per year increase.
If you're a current Clydesdale borrower, it pays to find out what it has to offer.
You can also arrange to switch to a new lender some time before your current deal expires – with most you can book a deal for three months before you want to start it, and with some you can book and switch up to six months later.
Hollingworth says once you pay your fee, the deal is yours. However, he points out that you check what you sign up for. "If you go for a two-year fixed rate and it ends on a certain date, instead of running for two years from the day you took it out, you don't get the benefit unless you take it out for five or six months," he says.
Some lenders still vying for debt restructuring borrowers with low interest rates and incentives. Harris says TSB's two-year deal is worth a look – it includes a free assessment and a choice of cashback or free legal work. "If you need a higher LTV, Skipton and Platform offer good debt restructuring contracts with similar incentives," he added.
Keep in mind, however, that the fallout from the pandemic could make it harder than you expect to be accepted for a very favorable mortgage.
Lenders are still very picky about self-employed borrowers, especially those who have used government assistance in the last 18 months.
Harris says some lenders limit LTVs or offer smaller loans relative to income.