How to secure a competitive interest rate to cut your mortgage costs

With interest rates at their highest level since the 2008 financial crisis, finding a mortgage deal that’s right for you could save you thousands of pounds over the long term.

Following the 2008 financial crisis, the BoE slashed its base interest rate, and it remained below 1% for more than a decade. During the Covid-19 pandemic, it cut the rate to just 0.1%. This means the cost of borrowing was low and aimed to encourage households and businesses to spend more.

However, once inflation started to rise at the end of 2021, the BoE began to increase the base rate to curb spending. As of December 2023, the BoE base rate is 5.25%. For many mortgage holders, this has led to repayments rising.

The table below shows how the interest rate you pay could affect your monthly repayments and the total cost of borrowing if you took out a £200,000 repayment mortgage with a 25-year term.

Source: MoneySavingExpert

It’s important to note that the interest rate you pay will usually change during the term of your mortgage. Typically, the rate you pay will fall as you build up more equity in your property and present less of a risk to lenders. However, the above example demonstrates the effect interest rates have on both your short- and long-term finances.

So, if you’re mortgage deal is expiring, what could you do to improve your chances of securing a competitive interest rate?

Step 1: Put yourself in a good position to approach lenders

Before you start applying for a new mortgage, reviewing your finances and credit report could be useful.

Lenders will assess your application to weigh up how much risk there is of you defaulting on your repayments. So, taking steps to put yourself in a good position before applying could be valuable.

Reviewing your credit report is often a good place to start, as lenders will use this when assessing your application – is the information in your report correct? Are there any potential red flags that could put lenders off? There might be small steps you could take that may improve how you appear to lenders, such as closing down old accounts.

You might also want to get your home revalued. If the value of your home has increased, the equity you hold could be higher than you expect. When making an offer, a lender will consider your loan-to-value (LTV) ratio, which compares how much you’d borrow against the value of the property.

Usually, the lower the LTV, the more competitive the interest rate you’ll be offered as you’ll be viewed as less of a risk.

Step 2: Search the mortgage market for a deal that’s right for you

There are lots of mortgage lenders to choose from, and some of them don’t have a high street presence. Interest rates offered by different lenders can vary significantly, so taking the time to search the market could help you find a deal that’s right for you.

Yet, searching the mortgage market can be a challenge.

As each lender will set their own criteria, it can be difficult to understand which lenders are most likely to accept your application. A rejected application could lead to delays, potentially cost you money, and may result in a hard credit check on your credit report, which could affect your application when applying to other lenders.

In addition, the mortgage market can change quickly. Indeed, according to Moneyfacts, the average shelf-life of a mortgage deal in November 2023 was just 20 days.

Working with a mortgage broker could be useful. As experts, we can take the time to understand your circumstances and review a wide range of lenders to find a deal that suits you.

The interest rate isn’t the only factor you should review when assessing mortgage deals

When you’re weighing up your mortgage options, the interest rate is likely to be a key factor. However, depending on your circumstances, there might be other areas you want to consider too.

For instance, if you plan to move, could you port your mortgage to a new property? Or, if you’d like to reduce your debt quickly, could you make overpayments without facing a fee?

Thinking about what’s important to you and your long-term plans when you’re searching for a mortgage could help you secure a mortgage that’s right for you.

Contact us to discuss your mortgage

As a mortgage broker, we can offer guidance throughout the mortgage process and recommend a mortgage that fits your specific circumstances.. Please contact us to arrange a meeting.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Approved by The Openwork Partnership on 08/01/2024.

News

Stay in the loop

Keep up to date with industry insights and company developments by signing up to our free bi-monthly newsletter.

    The internet is not a secure medium and the privacy of your data cannot be guaranteed.
    News

    8 practical tips for setting new year resolutions you’ll stick to

    Read more
    News

    How creating a care fund could provide you with essential protection later in life

    Read more
    News

    Research: The perils of chasing stock market “winners”

    Read more
    News

    How the A Christmas Carol ghosts could help you build an effective financial plan

    Read more
    News

    Financial fears could be holding back millions of retirement dreams

    Read more
    News

    3 simple questions that may help you update your life goals for 2025

    Read more
    News

    10 of the world’s best destinations to travel to during winter in the UK

    Read more
    News

    Investment market update: October 2024

    Read more
    News

    Interest rates are predicted to fall to 3% next year and could slash mortgage repayments

    Read more
    News

    5 smart reasons why retirement planning should start in your 30s and 40s

    Read more
    News

    4 valuable ways lifetime cashflow forecasting could give you financial confidence

    Read more
    News

    10 financial tasks to complete this year to head into 2025 feeling confident

    Read more
    Contact us

    We’re here to help

    Leave us a message and we’ll be right back in touch.

      The internet is not a secure medium and the privacy of your data cannot be guaranteed.

      Get in touch

      01252 979673 admin@johnsonwealthsolutions.com
      11 Kings Rd,
      Fleet,
      Hampshire,
      GU51 3AA