Where to Get the Cheapest Mortgages Before UK Interest Rates Jump

There’s no time to lose when it comes to looking around for a cheap mortgage, because the days of ultra-low rates will be coming to an end very soon.

If you take action today you could still secure a mortgage below 1% before the Bank of England raises interest rates.

Experts and the markets expect the Bank of England to raise rates in November or December, so there is no time to lose. A delay now could cost you thousands of pounds over the next few years.

With UK inflation hotting up, the Bank of England wants to stop things getting out of hand and increasing interest rates is one way of it hopes to do that, although it may not have the desired effect on supply chain bottlenecks and energy prices.

Martin Lewis: act now to grab cheap mortgages before they’re gone

Personal finance expert and media guru Martin Lewis has warned borrowers that they don’t want to end up in a situation of regretting not taking action sooner, only to be left asking themselves “if only I sorted my mortgage in October”.

On The Martin Lewis Money Show he told viewers that there are still cheap mortgage deals out there  today, with some rates below one per cent. But with a rate hike coming soon, homeowners will want to act quickly to secure these deals.

“The market consensus predicts UK interest rates are going to rise, they think that will happen in the meeting in two weeks time.

“It will be the first rise in three years from 0.1 percent to 0.25 percent in February, they’re predicting it goes up to half a per cent, and by the end of next year it will be at three quarters of a per cent.”

To kick the process off, Lewis says mortgage hunters need to read up on their current mortgage details, find out what their current lender’s cheapest deal is and then compare it to the deals on the market to see what savings are available.

“Check now if your deal is improvable so you don’t miss the boat if rates go up,” says Lewis.

Mortgage concerns moving up the household agenda

Nick Morrey of mortgage broker John Charcol explained how the issue of mortgages is rising up the agenda for home-owning households.

“A mortgage is, for many, the highest monthly outgoing,” said Morrey.

He added: “What to do with it, whether to fix and for how long seems the question everyone wants to know the answer to. You want to ensure you fix for the right period. A two-year will allow you to review your options more regularly, but if you are looking for stability and have no plans to move, a five-year may be suitable.”

How to get your hands on the best mortgage deals

Make sure you understand all the basics of what a mortgage is, such as the difference between the various types of mortgages and how repayments work, what loan-to-value (LTV) is, the ins and outs of remortgaging and credit scores.

Decide what sort of mortgage you want : fixed, variable or interest-only or offset.

As things stand you will likely want to opt for a fixed deal at as low a rate as possible for a minimum of two years.

The Mortgage Advice Bureau provides free mortgage advice to moneyfacts.co.uk users, so worth checking out.

Use a mortgage comparison tool

Use a mortgage calculator. These are available on comparison sites and also provided by mortgage  lenders.

Citizens Advice provides a fully featured mortgage calculator.

Initially, jump on a mortgage comparison tool – make sure to use a number of different services so that you cover the whole of the UK mortgage market. Some comparison tools will exclude those that are only available direct from the lender.

• Moneyfacts.co.uk – this data provider is a good starting point
• Habito – comparison tool for whole of market
• The UK top comparison sites are moneysupermaket.com and comparethemarket.com.

Get a mortgage broker

Now you have an idea of what is out that that fits your needs you can use a broker to matching you up with a lender that best fits your requirements and resources. Using a broker also has the benefit of access to specials deals that can sometime be exclusive to the broker.

Given your circumstances there will be certain lenders that will be most suited to your profile and the broker will have the knowledge and expertise to get you a lender that will accept your business.

There’s nothing worse than go through a convoluted application process only to be rejected at the end of it, so brokers are recommended.

Here’s some three of the leading mortgage brokers:

Habito – Online-only but this broker does a comprehensive check for most deals in the market and also includes direct-only deals. No fee.

London & Country –  Phone and online service, but search not as comprehensive as Habito but has been in the business a lot longer and as such has built a good reputation. No fee.

John Charcol – A well-known independent broker in the UK. Searches all deals available to brokers but does charge a fee for its in-depth service provision.

There are good mortgage brokers available that serve various localities. Unboased.co.uk is a useful place for finding them.

Cheapest mortgages available right now

Although sub-one per cent fixed rate deals are still available to borrowers with deposits of 40 per cent or more, they are steadily drying up.

According to data provider Moneyfacts the number of two-year fixed rate deals has dropped from 131 to 116 as lenders remove the best deals from the market Over the past fortnight they have fallen from 131 to 116 — mainly two-year fixes — according to data from Moneyfacts with more being withdrawn virtually every day.

Among those, there are still some deals with interest rates under 1% to be had but they are becoming few and far between.

Here’s the 5 best two-year fixed rate mortgages under 1% that we found for a mortgage amount of £218,000 and a property value of £363,400

Source: Moneyfacts. Data correct as at 22 October 2021

NatWest Fixed Rate 0.97%
0.97% Fixed to 29/02/2024, reverting to 3.59%

Max LTV 60%
Product Fees £995.00
Initial Payment £818.62
Total Over 2 Years £20,793.88

Royal Bank of Scotland Fixed Rate 0.97%
Fixed to 29/02/2024, reverting to 3.59%

Max LTV 60%
Product Fees £995.00
Initial Payment £818.62
Total Over 2 Years £20,793.88

NatWest Fixed Rate 0.98%
Fixed to 29/02/2024, reverting to 3.59%

Max LTV 60%
Product Fees £995.00
Initial Payment £819.61
Total Over 2 Years £20,817.64

Royal Bank of Scotland Fixed Rate 0.98%
Fixed to 29/02/2024, reverting to 3.59%

Max LTV 60%
Product Fees £995.00
Initial Payment £819.61
Total Over 2 Years £20,817.64

First Direct Fixed Rate 0.99%
Fixed for 2 years, reverting to 3.54%

Max LTV 60%
Product Fees £490.00
Initial Payment £820.60
Total Over 2 Years £20,234.40