Mortgage rates are fractionally lower than this time last year, which means affordability remains stretched. Below, we answer some of the questions you may have about your mortgage.
Question: Should I take a fixed rate now or wait in the hope that rates will come down? Answer:Over the past few weeks, lenders have been slowly reducing rates, with several offering sub-4 per cent for borrowers or homeowners with a 40 per cent deposit or similar level of equity in their home.
The temptation may be to wait a bit longer in case rates come down further but there is no guarantee they will. If you need the certainty of a fix to help with budgeting or peace of mind, it is always better to secure a rate while you can.
Rates can be reserved up to several months in advance. So, if you need to remortgage later this year, it may be worth reserving a rate now; when the time comes to actually take the product out, if rates have fallen by then, your AWS broker should be able to move you onto a cheaper option.
Question: Should I fix for two or five years?
Answer: Ultimately, this depends on your situation. Generally speaking, when five-year fixes are relatively expensive comparing with their shorter equivalents, borrowers may plump for a two-year fix – they still get certainty and can budget but if rates fall over that period, when they come to remortgage they should be able to remortgage onto a lower rate. Even once the cost of remortgaging is factored in, this may be cheaper than fixing for five years now at a much more expensive rate. However, you will only know with hindsight whether it was the best decision.
Best buy remortgage rates
Rate Type Loan-to-value
4.12% two-year fix 60%
4.09% three-year fix 60%
3.98% five-year fix 60%
4.04% five-year fix 75%
4.29% variable 75%
Source: Moneyfacts
Question: Should I discount variable rates?
Answer: Not necessarily, again it depends on your circumstances. If you don’t need the certainty of a fix – that is, you could afford your mortgage if rates were to rise – then the flexibility of a base-rate tracker with no early repayment charges (so it can be overpaid or paid off at any time, or you can switch to a fix should rates come down further), may make sense.
Question: Why are mortgage rates edging downwards when interest rates aren’t?
Answer: When it comes to mortgage pricing, several factors come into play, including Swap rates. These influence what lenders charge for their mortgages, along with how much business they want to attract and what their service levels are looking like. The trajectory of interest rates has an impact on Swap rates, but when it comes to the pricing of mortgage rates, they can go down even if base rate is held because they are part of a bigger picture.
SONIA swaps
As of 26 March
25 Mar 2025 26 Feb 2025 26 Mar 2024 1 Year 4.216% 4.146% 4.807% 2 Year 4.104% 3.997% 4.359% 3 Year 4.065% 3.937% 4.090% 5 Year 4.052% 3.887% 3.802% 7 Year 4.085% 3.890% 3.681% 10 Year 4.183% 3.958% 3.656% 15 Year 4.345% 4.096% 3.706% 30 Year 4.428% 4.160% 3.675%
Source: Chatham Financial
Question: I’ve got a lot of outgoings on my bank statements; will lenders penalise me?
Answer: As the client who features in our case study this month discovered, lenders will take outgoings into account when working out how much you can borrow. This is because those outgoings could impact how much you can afford to pay on your mortgage each month. This may mean you can only get a smaller mortgage than you want or need.
However, as our case study also found, a broker may be able to work with the lender to disregard non-guaranteed commitments from affordability, such as gym memberships, mobile phone bills, etc. We are finding that first-time buyers in particular are increasingly worried about these kinds of payments affecting their affordability after a few inaccurate reports in the media, so it’s worth seeking advice to find out whether your subscriptions are actually an issue.
Question: Where can I find out more?
Answer: AWS Private Finance can advise as to the best mortgage for you and your circumstances. Get in touch for more information.
