Halifax cuts its mortgage charges – however are residence loans about to spike once more?
A major mortgage lender has cut its rates today, but brokers are warning that they could be about to rise again.
Halifax has lowered its fixed remortgage rates by up to 0.25 percentage points today, as well as reducing some home buyer mortgages by up to 0.05 percentage points.
It follows rate cuts from HSBC and First Direct last week.
However, financial advisers and mortgage brokers are warning that continued tension in the Middle East is feeding through to higher swap rates, which could feed through to higher costs for home buyers.
Fixed rate mortgage pricing is largely based on Sonia swap rates – the inter-bank lending rate, which is based on future interest rate expectations.
When Sonia swaps rise it often results in fixed mortgage rates going up, and vice versa when they fall.
Lock in now? Households are being warned that mortgage rates may be about to rise unless the conflict in the Middle East resolves
Two-year Sonia swaps – which show where mortgage rates could be in two years’ time, were up 13.2basis points yesterday at 4.34 per cent, while the five-year rate was up 13.6bps, at 4.31 per cent.
Ken James, director at London-based mortgage broker Contractor Mortgage Services, said the recent cuts were ‘good news on the surface’ but added:
‘The market underneath is flashing warning lights, because while Halifax is cutting, the cost of funding mortgages is rising fast.’
He added: ‘If swaps stay elevated, these rates won’t stick around but for those who can benefit from these cuts, the message is clear – act and don’t dilly-dally.’
Riz Malik, an independent financial adviser at Southend-on-Sea-based R3 Wealth, also fears the instability in the Gulf could mean ‘recent rate cuts may be short-lived.’
Meanwhile, Rohit Kohli, director at Romsey-based The Mortgage Stop, described the current market as a rollercoaster and said some lenders are pulling rates with hardly any notice.
‘Swap rates have moved up sharply today, and when funding costs rise, lenders that price heavily off swaps often respond quickly,’ said Kohli.
‘We have already seen other lenders pull products at short notice today, including one with less than two hours’ warning.
‘My advice to borrowers is simple: if the rate works for you today, do not delay. Get your documents ready, speak to a broker and secure the deal while it is available.
‘You can always review later if pricing improves, but you cannot lock in a rate after it has been withdrawn.’
In general, homeowners can secure a new mortgage deal up to six months before their current one ends. If a better one turns up later, they can still switch their choice until just before the new one begins.
What are the best mortgage deals today?
HSBC is currently topping the charts when it comes to the lowest fixed rate deals.
For someone buying with a 40 per cent deposit, it is offering a 4.45 per cent two-year fix or a 4.61 per cent five-year fix, both with a £999 fee.
Someone locking in a 4.45 per cent rate on a £200,000 mortgage being repaid over 25 years could expect to pay £1,106 a month.
They are also offering some of the best deals for those moving home with smaller deposits.
Someone with a 25 per cent deposit could get a 4.59 per cent two-year fix or a 4.66 per cent five-year fix with the bank, both with a £999 fee.
Those buying with just a 10 per cent deposit can get a 4.99 per cent two-year fix or 4.89 per cent five-year fix.
As for those looking to remortgage, Bank of Ireland is offering a 4.69 per cent two-year fix with a £1,495 fee while HSBC is offering a 4.73 per cent deal with £1,008 fees.
HSBC’s five-year fix is slightly cheaper at 4.69 per cent, while First Direct is charging 4.7 per cent with a £490 fee.
The cheapest deals on the market continue to be tracker rates which follow the Bank of England base rate, plus a certain percentage on top.
For example, someone might be given a tracker mortgage at base rate, currently 3.75 per cent, plus 0.25 per cent.
This would set the rate they pay at 4 per cent. If the base rate rose to 4 per cent, though, their mortgage rate would immediately rise to 4.25 per cent – so borrowers need to be comfortable with the fact their payments could go up.
Broker L&C Mortgages says it has seen a base rate tracker surge in April, with take-up more than three times that of the previous month.
Trackers tend to come without early repayment charges. This means that, unlike fixed deals, they can often be paid off, overpaid or switched away from without penalty.
At present the lowest two-year tracker rate on the market for someone buying or remortgaging is offered by Halifax. Its 3.96 per cent rate comes with a £1,599 fee.
