Mortgage price war not over yet as Barclays and NatWest release new table-topping deals
- NatWest and Barclays release two new deals at 60 and 70% loan-to-value
- Overall however average rates remained largely the same in September
- 90% and 95% LTV deals have crept up by 0.05 and 0.01 per cent respectively
Mortgage rates remained near historic lows in September as some of the leading lenders offered a flurry of new best buy deals.
NatWest and Barclays both released market-leading deals in the past week, with the former unveiling a table-topping 1.19 per cent two-year fix up to 60 per cent loan-to-value and the latter, a 1.51 per cent two-year fix up to 85 per cent loan-to-value.
On a £200,000 mortgage taken over 25 years, taking NatWest's deal would result in monthly repayments of £771 and total interest charges of £31,321 over the life of the deal, while Barclays' would result in a monthly repayment of £801 and total interest charges of £40,244.
Experts say these new deals are evidence that the price war between lenders, which has seen rates pushed down significantly in recent months, is not quite at an end yet despite rates remaining largely the same on average over the past month.
Barclays and NatWest have both released table-topping rates in the past week
According to finance experts Moneyfacts, the average two-year fixed rate mortgage at maximum 95 per cent loan-to-value has crept up by just 0.05 per cent from 3.23 per cent to 3.28 per cent in the past month.
Similarly, the average two-year fix at 90 per cent loan-to-value has increased by only 0.01 per cent to 2.65 per cent since last month.
Max LTV | 60% | 75% | 80% | 85% | 90% | 95% |
---|---|---|---|---|---|---|
Apr-19 | 1.91% | 2.34% | 2.45% | 2.47% | 2.63% | 3.28% |
Sep-19 | 1.84% | 2.34% | 2.42% | 2.46% | 2.64% | 3.23% |
Oct-19 | 1.80% | 2.32% | 2.39% | 2.45% | 2.65% | 3.28% |
Difference | -0.04% | -0.02% | -0.03% | -0.01% | 0.01% | 0.05% |
Source: Moneyfacts |
In contrast the average two-year fix at maximum 60 per cent loan-to-value has slipped by 0.04 per cent from 1.84 per cent to 1.80 per cent, falling by an overall 0.11 per cent since April last year.
There are still some very competitive deals to be found. Currently, the closest competitor to NatWest's deal is Barclays' 60 per cent loan-to-value two-year fix at 1.21 per cent, while the closest to Barclays' 85 per cent deal is Post Office Money's 1.56 per cent two-year fix.
Monthly payments on the same mortgage as above would be £801 on the Barclays deal and £ 805.50 on the Post Office rate.
Moneyfacts's Darren Cook said: 'Higher loan-to-value fixed mortgage rates may be creeping up, but the affordability of these products may be helped by the fact that of the 107 two-year fixed rate products at maximum 95 per cent loan-to-value available to first-time buyers, 98 are available up to a maximum mortgage term of either 35 or 40 years.
'This enables borrowers to lower their monthly repayments by spreading the cost, which as a result makes them more affordable – helping to pass stringent affordability tests when applying for a mortgage.'
Stretching out a mortgage over a longer term like this drops monthly repayments, reducing outgoings and lets the borrower qualify for a larger loan, but it also adds to the cost a borrower will pay over the life of the loan.
For example, the average two-year fixed rate mortgage at 60 per cent loan-to-value is currently 1.80 per cent.
Taken over 25 years, the monthly repayments on a £200,000 mortgage would be £828, while the monthly repayments if it was taken over 40 years would be just £585, some £243 cheaper each month.
However, over the lifetime of the mortgage the borrower on the latter would pay £32,199 extra in interest.
Some mortgages allow borrowers to make overpayments each month (usually up to 10 per cent of the mortgage balance over a year) and on a longer term mortgage, this can have the same effect as shortening the term - it can help clear your loan more quickly and you'll end up paying much less in interest.
For some, taking a longer-term loan but making regular overpayments could be the most flexible option.
Not all deals allow for this facility and you'll have to check whether or not yours does. Speaking to an independent financial adviser can help you decide what is best for you.
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