Homeowners are being urged to act now if they want to lock into a competitive mortgage rate, as some lenders are starting to raise rates again.

Mortgage rates are substantially lower than they were last summer, and in recent weeks, lenders have released a raft of new deals, with Nationwide last week dropping rates to as low as 3.84% on its five-year fixed rate mortgage. Barclays Mortgages also cut a selection of fixed rates in its range, with its two-year fixed rate mortgage now priced at 4.51% for borrowers looking to borrow up to 60% of the property value. This deal does not charge an arrangement fee and it also comes with a free valuation, free legal fees and £150 cashback.

However, some lenders are starting to raise rates again after recent falls. For example, Santander has raised its rate by up to 0.20% on some fixed rate deals and following the unexpected increase in inflation in December, and there are fears that other lenders may follow suit.

The reason behind recent movements in fixed rates, despite no change to the Bank of England base rate, is that rather than being pegged to the base rate, fixed rates are instead predominantly based on ‘swap’ rates. These are the rates that lenders agree to pay the financial institutions that lend them money to fund their mortgages. Swap rates change daily, and are calculated based on how the base rate is expected to perform in the future, which is why mortgage fixed rate movements can sometimes appear volatile. Find out more in our guide What are swap rates and how do they affect my mortgage?

Act now as rates start to climb

Those who delay remortgaging risk ending up on a potentially higher rate than they would have if they were to secure their next mortgage now.

The average overall five-year fixed rate mortgage has been consistently falling since August, reaching 5.55% this month. The average two-year fixed rate has also been steadily dropping since reaching its 2023 peak of 6.86%, and now stands at 5.93%.

The average standard variable rate – the rate you usually roll onto when your mortgage deal ends – hit a peak in 2023 of 8.19%, the highest rate since moneyfactscompare.co.uk records began in 2007. This has fallen slightly this month, dropping by 0.01% to 8.18%.

Teddy Cenaj, mortgages expert at Rest Less Mortgages, said: “Rates may be pulled with little to no notice at all and replaced with more expensive deals. That means if you get a mortgage recommendation you like, don’t delay. Get your documents together and get the deal submitted – this means you’ll have secured that rate, most of the time with no actual cost to do so.

“If you decide just to sit on a deal that you like, you are putting yourself at risk of the rate going up and simply paying more.money for the same thing. It really isn’t worth waiting in this market.”

You can find out more about the sort of information you’ll need to provide to support your mortgage application in our guide How to apply for a mortgage – everything you need to know.

Get expert mortgage advice*

Looking to discuss your mortgage options? Speak to an expert independent mortgage broker with Unbiased. Every advisor you find through Unbiased will be FCA-regulated, qualified and unconnected to product providers – so they can offer you truly unbiased advice. Your first consultation is free.

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Switch and save

The potential savings that can be made by remortgaging should not be underestimated. Around 370,000 households could save money by switching to a cheaper mortgage, according to financial regulator the Financial Conduct Authority (FCA).

It estimates that around 110,000 households would save £500 or less a year over two years i they remortgaged to a better deal, 110,000 would save between £500-£1,000 a year for two years and 150,000 would save over £1,000 a year for two years.

If you haven’t reviewed your mortgage for a while, there’s a good chance that you could be paying more than you need to. Given the current cost of living crisis, reducing your mortgage costs could help free up some extra cash to help cover rising bills elsewhere. Unfortunately, however, the over-50s tend to be worse than other age groups at making sure they’re on the best possible mortgage deal.

Our own Rest Less research found that 26% of over 50s said their mortgage deal had expired and they were on their lender’s SVR, compared to 18% of those aged under 50. Of the over 50s who have remortgaged, nearly one in 10 (9%) said they didn’t remortgage after coming to the end of their mortgage deal, compared with 3% of under 50s. More than one in four over 50s said they didn’t know or didn’t recall what they did when it came to their last remortgage, compared to just 17% of homeowners aged under 50.

Many people over 50 are put off remortgaging because they don’t think they’ll be eligible for a new deal due to their age. However, there is a growing range of options available to homeowners in this age bracket, which you can read more about in our articles Mortgages for over 50s: What you need to know and Mortgages for over 60s: what you need to know.

Secure your next deal now

Remember that you don’t have to wait until your current mortgage deal ends to secure your next deal. Most lenders will allow you to tie into your next mortgage three to six months before your current deal finishes. The benefit of advance planning is twofold – not only can you secure a competitive rate before it disappears, but you can also arrange your next mortgage deal to begin as soon as your old one finishes, which means you avoid rolling onto your lender’s standard variable rate.

Teddy Cenaj said: “I tell all my clients that they should be looking to start their remortgage at least six months before their current fixed rate runs out. This allows them to secure a rate now (most have no upfront cost), and to then keep an eye on the market. If rates do drop, which is unlikely, we can then go with the better rate, but if rates rise, which is much more likely, then they have already secured the best rate for themselves.”

Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage. If you’re looking for expert mortgage advice, you can speak to an independent mortgage broker with Unbiased. Every advisor you find through Unbiased will be FCA-regulated, qualified and unconnected to product providers – so they can offer you truly unbiased advice.

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