Money Insider: Borrowers can cry mortgage freedom

One in six homeowners are considering remortgaging this year

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The Independent Online

I wasn’t surprised to read the research from Nottingham building society this week revealing that one in six homeowners are considering remortgaging before the end of this year.

With the price war between mortgage lenders sending five-year fixed-rate deals below 2 per cent, there are some sizeable monthly savings available for those coming off fixes arranged two or five years ago. Even for people with modest mortgage balances, the financial benefits make the ordeal of changing lender worth while.

However, there was a word of warning from Ian Gibbons of Nottingham Mortgage Services: “To secure the best remortgage deal, it is important to look at more than the interest rate. Search the whole market and to be aware of the product fees – a great rate won’t save you much if you have to pay a high fee.”

The level of innovation and activity in the UK mortgage market means there are excellent opportunities not only if you’re switching lender, but also if you are looking to move home or even to switch your  interest-only borrowing.

On Monday Yorkshire building society stormed the best-buy tables with a new range of fee-free three and five-year fixed-rate mortgages that also give borrowers £1,000 cashback.

This range is available for home purchases only and includes five-year rates of  2.54 per cent up to 60 per cent loan-to-value and 3.94 per cent up to 90 per cent LTV.

For those with a smaller deposit, the no-fee option is a real plus as there is plenty of strain on your budget when buying your first home as it is, without a lender relieving you of a four-figure sum.

Jemma Anderson, mortgage product manager at the Yorkshire, said: “Our research has shown that across the UK people are keen to move but upfront costs can be a big barrier. “Our new, fee-free mortgage is designed to help those who are struggling to stump up the cash for those expenses.

There was even some good news for interest-only “mortgage prisoners” this week when Leeds building society loosened its interest-only criteria. It will now lend up to 75 per cent LTV on a “part and part” basis.

Previously, the society offered interest-only mortgages up to a maximum LTV of 50 per cent. Now, however, it will lend up to 75 per cent LTV, with a maximum of  50 per cent LTV on an interest-only basis and the remainder on capital repayment.

 The innovative move will enable some borrowers to benefit at last from lower rates than they have been stuck with  due to the lack of competition in this area of the market. It  is a forward-thinking and welcome move that gives borrowers who are currently on full interest only an opportunity to remortgage and benefit from the flexibility of starting to pay down their loan in a manageable way.

There are many borrowers who took out interest-only loans at the peak of their popularity around a decade ago, some of whom may have an endowment shortfall or have yet to reduce the original amount of their loan.

The new “part interest, part repayment” mortgages will give them the opportunity to start reducing the capital they owe, without the payment shock of having to revert to a full repayment mortgage.

The new part-and-part mortgages include a two-year fixed-rate deal at 2.39 per cent and a five-year fix at 2.99 per cent, and come with a free valuation, free legal services and a £999 fee.

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