Martin Lewis this week shared his top tips for locking in the best fixed mortgage deal you can - even if your renewal isn't due for months.
The financial guru took to his Money Show Live spot on ITV to talk all things housing with a number of special guests, while taking questions from viewers on the cost of living and finances.
Just last week, the Bank of England surged its base interest rate for a tenth time consecutively, taking the total up to 4 per cent. It comes as a move which will impact millions of UK residents and homeowners - with those one tracker mortgages will directly follow the base rate.
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The Mirror reports that those set to re-mortgage will also see a significant rise due to how much rates have risen over the last year. The Money Saving Expert founder shared his tips for re-mortgaging after one viewer called Stephen got in touch to ask whether he should dip into savings to pay his mortgage as his current fix ends in a couple of months.
Stephen wrote: “We may have to dip into our £28,000 savings, which is meant to be for our kid's education, to pay for our rise in the mortgage. I am getting really worried now - my five year fix rate is coming to an end in April. I don't know enough about mortgages so could do with some advice - what are my options?”
The Money Saving Expert said the first thing you need to do is gather as much information about your mortgage as you can.
This includes:
- your current rate
- the type of mortgage you have
- when your deal ends
- the term - how much is has it left
- switch penalties - Martin said if there are, then it may just end your chances of moving and you may have to stick with it.
Martin added: “The most important thing everyone needs to get about mortgages is the Loan To Value (LTV), this is the proportion of your home’s current value that you’re borrowing. So let's say the home is worth £100,000, you’ve got a £10,000 deposit as a first-time buyer or £10,000 equity, therefore you’re borrowing £90,000 of £100,000 which is 90 per cent. The lower the Loan To Value the better.
“The problem with current value is that as house prices go down, your Loan To Value goes up. Rates get cheaper at 90%, 80% 75% until 60% - remember, lower Loan To Value is better.”
Circling back to Stephen's question, Martin explained that if some of his savings could be used to help him get over a Loan To Value boundary that may help cut the cost of his mortgage and would 'more than pay itself back'. Martin then told viewers that the first thing you need to do when hunting for a mortgage deal is to find your lender's cheapest deal.
Martin says this is what is known as a 'product transfer' and previously they used to be 'poor' however they have gotten 'much better in recent years'. He added: "Because existing lenders can forego affordability checks, many have lower fees and they’re becoming a lot more competitive towards their existing customers.
“Crucially, many lenders will let existing customers lock in deals three to six months ahead, and I call that an insurance deal. So let’s say you can get a deal now, you lock it in, you may have to pay a few hundred quid to do so, and if rates get worse you’ve locked in a cheap deal and if rates get better, you can lose the few hundred quid and move to a new cheaper deal because you can cancel it.”
Martin confirmed with the mortgage expert on the show that these steps were primarily for existing members only and those who were new would find this tactic a lot tougher.
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