Your Money: Now may be time to strike a deal as rates creep upwards

IT’S crunch time for borrowers considering taking out a new fixed-rate mortgage deal.

Lenders have been tweaking the rates they are offering upwards in recent weeks, leading to some of the lowest of the low deals disappearing. So, if you’ve been considering taking out a new deal for a while but haven’t got round to it, now might be the time to have a closer look.

Swap rates, which lenders use to price their loans, have been heading upwards amid speculation about a possible base rate rise. And some ultra-low fixed rates have been pulled off the market altogether.

David Hollingworth, from broker London and Country Mortgages, said: “This acts as a reminder that rates won’t stay low for ever and actually they’re already on the move.”

The rate increases have been made across large chunks of lenders’ ranges, he says, so many people could be affected, whether they have bigger or smaller deposits.

Hollingworth adds: “Right the way through the loan-to-value range now, from the lowest of the low all the way up, you’re seeing increases in fixed rates.”

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Compared to previous years, the rates on offer are still low, so there are still many good deals out there. But Hollingworth said: “The very lowest rates are rapidly disappearing.

“This is something that will trigger people to take action if they haven’t already, because they are going to miss out on the very lowest rates, potentially.

“But there’s still a lot of competitive rates out there, so it’s not too late if they are able to get their skates on.”

If you’re wondering how long to fix your mortgage rate for, it depends on your individual circumstances and how far into the future you feel comfortable being locked in.

A longer-term fixed deal means you have certainty over your payments, but a shorter term may have a lower rate, and will also free the borrower up more quickly if circumstances change – so the pros and cons need to be weighed up.

Longer-term deals could last up to 10 years, so you must carefully decide whether you’re happy being locked in for such a lengthy term.

But Hollingworth suggests more people will be quite willing to commit to long-term, fixed-rate deals to insulate themselves from potential interest rate rises.

He says: “The question will be whether they go for the very cheapest rates, which are the shorter-term fixes, or consider longer-term.”

For borrowers wanting longer-term certainty, Hollingworth suggested a possible compromise could be a seven-year fix, with Coventry Building Society having brought out these deals.

When choosing the right mortgage, Hollingworth said it’s important to factor in any fees and incentives, such as cashback or free legal packages, as well as the rate.

People nearing the end of their current mortgage deal should also bear in mind that some lenders announce offers which are valid for up to half a year, and it could be worth their time locking into a deal months in advance.