Finding the right mortgage deal isn’t always easy – and new research from the City regulator suggests many borrowers are getting it wrong. With a mortgage being the most costly regular outgoing for many people, this can be an expensive mistake to make.
Three in ten customers fail to find the cheapest mortgage for them, according to the Financial Conduct Authority, which is looking at ways to make it easier for mortgage borrowers to shop around.
In the meantime, here are some factors to consider when navigating the mortgage maze.
Weigh up whether you want a fixed or variable rate
Fixed rates give borrowers certainty over what their payments will be for a certain period – but if you’re taking out a longer-term fixed deal, you’ll also need to be sure that you’re able to lock yourself in for that length of time.
Bear in mind mortgage rates have been edging up
While the Bank of England base rate remained at 0.5 per cent in May, mortgage rates have been edging up recently. According to Moneyfacts, 27 providers increased their rates in April – some doing so more than twice. Charlotte Nelson, a Moneyfacts finance expert, says: “It is important for borrowers to note that there does not need to be a base rate rise for mortgage rates to increase.”
Utilise online tools
There are tools which can help you see what’s available quickly – for example, MoneySavingExpert.com has a Mortgage Best Buys tool (moneysavingexpert.com/mortgages/best-buys/).
Look at more than a low rate
Always consider the whole package when weighing up a mortgage deal to work out the overall cost. Some mortgages will come with fees, while some may have perks such as cashback which may be worth considering. There has recently been a surge in the number of cashback deals on offer. Moneyfacts.co.uk says by mid-May, there were 1,315 mortgage deals on the market offering cashback – representing 28 per cent of the mortgage market.
Consider brokers carefully
Mortgage brokers have their fingers on the pulse when it comes to scouring the market for a good deal, and they understand key details about lenders’ criteria. But choosing the right broker for you could be vital. One question to ask could be whether they look at the whole of the market or make a selection from a panel of lenders. You may also want to consider recommendations from friends if they have used someone who was helpful.
Find out what re-mortgage deals are available
If your existing mortgage deal is coming to an end soon, make sure you don’t just end up sitting on a higher rate by default. Research from MoneySuperMarket found one in six people on a fixed-rate mortgage claim have no idea what will happen to their repayments once their fixed term period comes to an end.
Don’t forget about what else is important
Buying a house can be stressful, with the mortgage being one important aspect to consider. But insurer LV= has found 27 per cent of home owners didn’t spend any time researching which buildings insurance would be best for them, meaning they might not have had the right cover in place.