CHECK CURRENT DEAL
Unless you are on your lender’s standard variable rate, leaving your current deal before it expires can lead to early repayment charges. These may add up to thousands of pounds. But it can be worth setting the switching wheels in motion even with six months left to run in order to secure an attractive deal.
DECIDE TYPE OF HOME LOAN
The usual choice is between a fixed and a variable rate. Fixing provides security against rising costs but locks you in to a specific rate. Most borrowers are fixing because they fear rate rises ahead.
PICK THE BEST OVERALL DEAL
The rate is important but there are other factors to consider. Some of the lowest rates carry big arrangement fees which eat into potential savings. Other pricier deals provide free valuations and free basic legal work to reduce switching costs.
Sometimes a higher rate can work out cheaper in the long run. Research by online broker Trussle suggests that of the home loan deals offered by the country’s six biggest lenders, the best value offerings – once fees and other incentives had been factored in – had higher headline interest rates.
CHOICE: Broker David Hollingworth
For example, it found a typical borrower choosing Barclays’ 1.39 per cent, two-year fixed rate deal would pay £13,709 in interest and charges over the period of the fix. This is £649 more than if they opted for the bank’s 1.63 per cent deal with lower fees.
London & Country’s David Hollingworth says: ‘Borrowers with smaller mortgages, perhaps £100,000 or less, are likely to find that a deal with lower set-up costs will serve them better.’
GET EXPERT HELP
Compare home loan rates using websites such as Moneyfacts and MoneySupermarket. But it is easier to track down the most suitable loan using an expert mortgage broker.
Some brokers such as Trussle offer a free monitoring service that tracks a borrower’s mortgage and flags up better deals.