5 ways to make the mortgage market work for you

The mortgage market moves pretty fast – particularly at the moment. Housing minister Grant Shapps has just launched the NewBuy Guarantee, which aims to help an estimated 100,000 Britons buy their dream home with deposits of as little as £10,000. On the flipside, mortgage lenders such as Halifax and Clydesdale and Yorkshire Banks will soon hike the Standard Variable Rates (SVRs) paid by borrowers not on fixed or tracker deals. Here are some pointers to help you make the most of the support available and ensure you get the best possible mortgage deal.

By Clare Francis

Maximise your deposit to pay less interest

While the amount you can borrow will generally depend on your household income, the interest rate you will pay is also influenced by the size of the deposit you can raise in relation to the price of the house or flat.

You could, for example, get a two-year fixed-rate deal from HSBC with a rate of 2.54% and a £1,999 fee, but only if you have a deposit of at least 40%.

For borrowers with a deposit of just 10%, however, First Direct’s two-year fix at 4.19% with a £999 fee is hard to beat.

If there is any chance of scraping together a larger deposit, it may therefore help you to make big savings over the next few years.

Every week, Clare Francis, financial journalist and editor of comparison site moneysupermarket.com will offer tips and advice on all things money-related to help iVillagers make the most of their hard-earned cash. From energy bills to car insurance; credit cards to children’s savings accounts; mortgages to discount vouchers Clare will show you how to make sure you’re getting the best deal.
Take advantage of government schemes

For many cash-strapped buyers, of course, saving up even 10% of a property’s value can be hard - especially for those living in expensive areas. That’s why the government has launched the NewBuy scheme to help people to borrow up to 95% of the value of a new home.

The scheme is available to first time buyers on flats and houses in England up to a maximum value of £500,000, and is supported by mortgage lenders including Nationwide and Barclays.

Other government schemes include the right-to-buy discount - now worth up to £75,000 - for social housing tenants.

Photo: David Cameron gives a talk about NewBuy at a Barratt Homes Development in Lewisham where residents plan to take advantage of the scheme.
Don’t stand for rising SVRs

Despite the Bank of England base rate languishing at 0.5% for the past three years, and showing no sign of an upwards move in the near term, several of Britain’s biggest mortgage lenders have nevertheless announced plans to increase their SVRs.

The SVR is the rate you usually pay once your fixed or introductory discounted or tracker rate ends. However it is set by the lender and isn’t directly linked to the base rate. As a result any changes to the SVR are at the lender’s discretion.

Lenders that have announced rate hikes include Halifax, which is increasing its SVR to 3.99% on May 1, and Clydesdale and Yorkshire Bank, which is pushing its SVR up to 4.95%.

RBS/NatWest has also lifted its SVR for 200,000 offset borrowers to 4.00%, while Bank of Ireland’s SVR will jump from 2.99% to 4.49% in two stages between June and September.

Anyone paying their lender’s SVR - and there are around 5.6million households which are - should consider remortgaging.

Photo: Halifax is amongst the lenders who have announced SVR increases.
Shop around for the best deals

While it is clearly worrying that lenders are hiking their SVRs despite the base rate remaining at 0.5%, there are still some great mortgage deals out there.

First Direct, for example, is currently offering a two-year tracker with a current pay rate of 2.29% and a fee of just £999 - although you will need a 35% deposit to qualify for this deal.

And if you’d prefer to protect yourself from future interest rate rises, you can fix your mortgage rate for five years at under 4.00% which is incredible.

Yorkshire Building Society, for example, has a five year fix at 3.39% that is available for those with a deposit of 25% or more. The arrangement fee on this deal is £995.
Don’t forget about stamp duty

The two-year first-time buyer stamp duty concession announced by the government in 2010 is coming to an end on March 24.

From that point, only those buying properties costing up to £125,000 (rather than £250,000) will escape the charge.

Above that amount, the charge is at least 1%, rising to 3% at £250,001, 4% at £500,001 and 5% for homes worth more than £1 million.

You can find all of the leading mortgage deals on MoneySupermarket.com.

Every week, Clare Francis, financial journalist and editor of comparison site moneysupermarket.com will offer tips and advice on all things money-related to help iVillagers make the most of their hard-earned cash. From energy bills to car insurance; credit cards to children’s savings accounts; mortgages to discount vouchers Clare will show you how to make sure you’re getting the best deal.
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