Get A Good Mortgage Interest Rate | Hack

Podcast: Let’s Talk Money and Mortgages

Host: Gemma

Guest: Ifthi – Trained Accountant, Mortgage Advisor, and Founding Director at WIS

Topic: Current mortgage interest rates and the possibility of rates below 2%

Q1: What is currently happening with mortgage interest rates?

Answer:

Interest rates are highly volatile at the moment.

Rates can change multiple times a day; a rate offered in the morning may not be available by afternoon.

Over the past three months, rates below 2% were possible, but today, they are very rare, especially for fixed-rate mortgages.

Many clients returning after a few months are often shocked by the significant increase in rates.

Q2: Is it possible to get a mortgage with an interest rate below 2%?

Answer:

Fixed-term mortgages (2-year or 5-year fixes): Very unlikely to be below 3% currently, even with a large deposit.

Variable mortgages: Some discounted variable mortgages and tracker mortgages are available below 2%.

Note: Interest rate alone isn’t the only consideration; product fees and other associated costs also affect the total cost of the mortgage.

Q3: What is a discounted rate mortgage?

Answer:

A discounted mortgage is a variable-rate mortgage.

It is discounted from the bank’s Standard Variable Rate (SVR) rather than the Bank of England base rate.

Example: If a bank’s SVR is 5% and they offer a 3% discount, the mortgage rate is 2%.

Changes to SVR are determined by the bank, often influenced by the Bank of England rate, but not guaranteed.

Advantage: Typically cheaper initially than fixed rates.

Disadvantage: Interest can increase if the bank raises its SVR.

Q4: What is a tracker mortgage?

Answer:

A tracker mortgage is a variable-rate mortgage linked to the Bank of England base rate.

Example: Bank of England base rate = 1.25%. Mortgage = 1% above base rate → interest = 2.25%.

If the base rate rises by 0.25%, the mortgage rate rises accordingly (to 2.5%).

Trackers move in line with the base rate, unlike discounted mortgages which follow the bank’s SVR.

Q5: How often can discounted mortgage rates change?

Answer:

It depends on the bank.

Most banks adjust SVR in line with the Bank of England base rate, but not always.

There is no fixed schedule, so rates can rise or fall based on the bank’s discretion.

Q6: What are the advantages of discounted rate mortgages?

Answer:

Initial interest rates are lower than fixed-rate alternatives, saving money in the short term.

Useful for clients who want immediate savings and are willing to take the risk of future rate increases.

Provides time for borrowers to adjust financially before potential interest hikes.

Q7: What are the disadvantages of discounted rate mortgages?

Answer:

Borrowers have no control over future interest rate increases.

Early repayment may incur early repayment charges.

Budgeting is less predictable compared to a fixed-rate mortgage.

Some borrowers feel uncertain because rates can change overnight based on bank decisions.

Key Takeaways:

Fixed-rate mortgages below 3% are unlikely at present.

Discounted and tracker variable mortgages can be below 2%, but come with risks.

Always consider interest rate, fees, and associated costs before choosing a mortgage.

Use professional advice to ensure the mortgage is suitable for your circumstances.

Contact WIS:

Phone: 0203 01968

Website:https://wismortgages.co.uk/

Reminder: Your mortgage is secured against your home or property. Failure to keep up with repayments may result in repossession.