There are some new kinds of home loans that are just coming out and being advertised right now. Several mortgage companies offer them in different ways, and they are being sold as "lifetime" loans. So this could be the end of short-term mortgages. Not necessarily. It looks like people who are willing to look around can still find deals.
Most of the time, mortgage brokers recommend short-term mortgages with discounts and tell their clients to keep shopping around after the two-year discount is over to get an even better deal. The insurance companies call these customers "rate tarts." But who can blame them for getting the best deal possible, especially since the broker does all the work and makes the whole process easy and painless?
First of all, if you need to borrow more than GBP150,000, the advice above is still, without a doubt, the best. It's also important, in our opinion, to ask your broker to shop around for discounted rates.
Some of the new mortgages on the market sound appealing at first to people who want to borrow less than £150,000. They are called "lifetime" loans with low interest rates. Abbey and Woolwich are two of the building societies that, among other things, offer low-cost, fixed-rate home loans.
The lifetime tracker mortgage rate at The Woolwich is always 0.19 percentage points above the base rate. At the moment, the base rate at the Bank of England is 4.50%, so the rate is 4.690%.
On the other hand, the Portman Building Society's two-year fixed rate plan has a rate of 4.19 percent, which is still less than the "lifetime" rate at Woolwich. You do have to think about the costs of shopping around, which we've listed below:
On average, lawyers charge GBP350.
The fee to apply is GBP499.
On average, the valuation fee is 300 GBP.
Deeds release fee GBP199.
This is based on a loan of 150,000 GBP. All of these numbers add up to just under GBP 1,350, and the interest savings over the Woolwich amount to GBP 1,500. This means that the Portman deal at two years only saves a very small amount. You would have to find another good deal and be ready to switch to it at the end of this time period, or you would have to pay a rate of 6.5%.
Abbey's Flexible Plus tracker has a slightly higher rate than the Woolwich, at 5.09 percent, but, as the name suggests, it is very flexible. You can reduce the amount of money you need to borrow by offsetting your mortgage, and you can also take money out of the mortgage. One good thing about a mortgage is that you can use it like a savings account. When you take out money, you are charged the mortgage rate.
In conclusion, these new loans seem to be competitive, but the mortgage market is always changing. If you're looking for the best deals, check with your online broker to see what's out there. They will look at the whole market and find the best deal for you. This is why they are there!
