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It’s possible to apply for a mortgage “Agreement in Principle”, which states what a lender is likely to lend you based on some information online or over the phone in a couple of hours. It involves you providing some basic information about your finances and a credit check, but it’s not a 100% guarantee you’ll get the full mortgage until all the paperwork has been done at a later stage. Indeed, it’s worth remembering that the lender’s rates could change over the two to three months for which it’s valid.

It does however show vendors that you’re serious and ready to go.

In terms of securing a mortgage offer, there’s no hard and fast rule over the time it takes, but most of us can expect to wait around a month (between 18-40 days) from application to mortgage offer – provided the process goes smoothly and your application is relatively straight forward.

With a fixed rate mortgage, the interest rate stays the same for a set period of time. This means that for every month during this set period, your mortgage repayments will remain the same, even if there are changes with changes to the Bank of England base rate, or your lenders’ standard variable rate (SVR). The term of a fixed rate mortgage usually lasts between two to five years, but can be much longer. When this period comes to an end, your lender will typically transfer you automatically onto its SVR.
A tracker mortgage is a type of variable rate mortgage. The interest rate usually tracks the Bank of England base rate at a set margin (for example, 1%) above or below it. Tracker mortgage deals can last for as little as one year, or as long as the total life of the loan. Once your tracker deal comes to an end, you’re likely to be automatically transferred on your lender’s standard variable rate (SVR). Typically, this will have a higher rate of interest.
A ‘lifetime tracker mortgage’ is a mortgage where the rate you pay back the loan at ‘tracks’ the bank of England base rate for the entire span of the mortgage, for example the base rate +1%. This is different to a typical tracker mortgage where the rate tracks the base rate for a set time period i.e. two years and then reverts back to the lender’s standard variable rate.
A discount mortgage is a type of variable rate mortgage. The term ‘discount’ is used because the interest rate is set at a certain ‘discount’ below the lender’s standard variable rate (SVR) for a set period of time. For example, if a lender has an SVR of 5% and the discount is 1%, the rate you’ll pay will be 4%. And if the SVR is raised to 6%, your discount rate will also rise – in this case to 5%. Discount mortgage deals typically last between two and five years. When your discount mortgage deal comes to an end, your lender will typically transfer you automatically onto its SVR.

A standard variable rate mortgage (also known as an SVR or reversion rate mortgage) is a type of variable rate mortgage. The SVR is a lender’s ‘default’ rate – without any limited-term deals or discounts attached.

When a fixed, tracker or discount mortgage deal comes to an end, you will usually be transferred automatically onto your lender’s SVR.

It can be risky to stay on your lender’s standard variable rate mortgage. A lender can raise or lower its SVR at any time – and as a borrower you have no control over what happens to it. Standard variable rates tend to be influenced by changes in the level of the Bank of England’s base rate. However, a lender may also decide to change its SVR while the base rate remains unchanged.

If you are on a tight budget and relying on your SVR to remain low, you’re in a very vulnerable position. In this case, it is very important you try to remortgage onto a fixed rate deal (which offers rate stability) before it’s too late.

It’s impossible to predict with any certainty when interest rates will rise again – there are no hard or fast rules about when exactly it will happen.

The most important thing for borrowers is to be sure that if you’re on a tracker, discount or other variable rate mortgage – you could still afford your repayments if rates went up by 2%. Although it’s unlikely that rates would rise by 2% in a short period, it’s not impossible.

On Black Wednesday back in 1992, the Chancellor raised interest rates by 2% in one day, and a further 3% shortly thereafter. Although this was an extreme event, it goes to show that movements in interest rates can be unpredictable.

Refer to our interest rate calculator which will help indicate what interest rate a new mortgage would need to save you money.

Each person’s let to buy arrangement will work slightly differently but broadly it works like this:

Stage 1: Remortgage your current property onto a new mortgage deal. You could do this with your existing lender or a new lender. If you own enough equity in the property remortgaging will allow you to release some money.

Stage 2: The new mortgage will either need to be a buy to let mortgage or you will need to agree consent to let with the lender, which allows you to rent your property out but not to remortgage. Be aware that some lenders will increase their interest rate or charge an admin fee in order to grant consent. You would then let out your existing property to cover your mortgage repayments.

Stage 3: Use the equity you have released or existing savings as a deposit to take out a new mortgage and move into a new home.

Stage 4: Keep letting your existing property until you would like to sell it.

Old school advisers set mortgages up over 25 years and never changed them, whereas nowadays the right term really depends on your budget. If you have £800 a month set aside for mortgages and relevant insurance, and the mortgage is £900 over 25 years, if the lender allows it might be an idea to increase the term to 30 years to drop the outgoings to a more affordable level. Similarly, if your budget is £800 a month and its £400 over 25 years, then it might be an idea to reduce the term to 15 years to pay it off quicker and reduce the overall interest you pay. Re-mortgage advice should always factor in your budget and repayment strategy to ensure the mortgage is paid off as quickly as you can, ideally before retirement and if not, to ensure you can afford the mortgage throughout the term.
The type of mortgage you take is important because you’ll be able to fit it around your situation and plan going forward. Need to minimise upfront costs? Then a fee free product would be ideal. Planning to move or refinance in 2 years? Then a 2 year tie in might be best to avoid any penalty, and tying yourself into a 5 year deal would be a bad idea. Coming into some money early on in the term? Then a mortgage with flexible overpayment facility might be best. Getting this right can potentially save you hundreds or even thousands in interest and fees.
This question is age old, and many customers aren’t really sure which is right for them. A fixed rate will lock your rate for the initial period, a tracker rate can increase but is often cheaper. It’s a gamble either way because fixing at a slightly higher rate will cost more if rates don’t change over the term, a tracker rate might be cheaper initially but cost more if rates go up. The truth is – no one really knows what will happen to interest rates, so advising on this is near impossible, but the general thought is that they can’t really get much lower at the moment! It is usually recommended that you fix if you like to know where you are for budgeting purposes, and take a tracker if you feel rates will stay low and are comfortable paying more if they don’t.
Don’t always just look for the best rate – look for the best deal. If you want a 2 year fixed rate, then look at the total cost over 24 months, taking into account the interest AND all fees it costs to set the mortgage up. Often on mortgages for £100k and less, fee free products work out better. The only exception to this is when you are looking for the cheapest monthly payment and are happy to pay more over the term.
Nowadays its becoming increasingly difficult to borrow on an interest only basis. Some major lenders have pulled out of the interest only market altogether and now only lend on repayment products. They are still out there for those who meet the strict requirements and have suitable repayment vehicles such as endowments or other investment portfolios. Buy to let mortgages are the exception, as these are almost always arranged on interest only as standard, viewed by lenders as investments rather than necessarily repaying capital over the term. Generally, repayment is the way, but if you have lump sum investments to clear off the mortgage before the end of the term and you want to minimise monthly outgoings, then interest only might be worth considering. Because of the criteria however, you may limit the number of lenders that approve you, and thus the range of products to choose from which could mean you don’t get the best rates.