Average Fixed Mortgage Rates Hover Below 6%: What It Means for Borrowers

Mortgage rates: what mixed lender pricing means for you

Mortgage market averages can give you a useful overview, but they don’t tell you which deal you could get. Your available rate will depend on your deposit or equity, income, credit history, property and the mortgage you choose.

When some lenders cut selected rates while others increase theirs, it can be difficult to know what to make of the headlines. The practical step is to compare the options available for your circumstances, including their fees and overall cost.

Why lenders move in different directions

Lenders price mortgages according to several factors, including funding costs, competition and how much new business they want to take on.

This means a lender may reduce rates on some products while increasing others. A reduction for borrowers with larger deposits won’t necessarily translate into a better deal for someone buying with a smaller deposit.

Market averages cover a wide range of products and borrowers. They are a guide to the wider market, rather than a quote for your own mortgage.

What your deposit means for your options

Loan-to-value, or LTV, describes the mortgage as a percentage of the property’s value. A 90% LTV mortgage generally requires a 10% deposit, while a 95% LTV mortgage generally requires 5%.

A larger deposit or more equity will usually give you access to lower rates. For example, a mortgage at 60% LTV requires a 40% deposit or equivalent equity.

Mortgages for buyers with smaller deposits can offer a route into homeownership, but availability depends on the lender’s criteria, affordability checks and the property. Some products also have restrictions on property type or location.

Compare the whole deal

The lowest advertised rate won’t always give you the lowest overall cost. When comparing mortgages, consider:

• Product fees: An arrangement or booking fee can outweigh the saving from a lower interest rate, particularly on a smaller mortgage.
• Monthly payments: Check that repayments fit comfortably within your budget alongside other commitments.
• Deal length: Think about how long you want payment certainty and whether you may move or need to change your mortgage.
• Early repayment charges: Leaving a deal early or exceeding its overpayment allowance may trigger a charge.
• What happens afterwards: Check when the initial deal ends and which rate applies if you don’t arrange a new one.

Compare the total cost over the same period, taking account of fees, incentives and the interest you would pay. Adding a fee to the mortgage also means paying interest on it.

Budget for buying and owning your home

Your deposit and mortgage payment are only part of the cost. Leave room for upfront expenses such as legal and conveyancing fees, searches, surveys, any valuation charge and any mortgage advice fee.

You’ll also need to budget for ongoing costs:

• Maintenance and repairs: Allow for regular upkeep and unexpected problems with heating, plumbing or the building itself.
• Insurance: Lenders generally require buildings insurance. Contents insurance provides separate protection for your belongings.
• Council Tax or domestic rates: Council Tax applies in England, Scotland and Wales. Northern Ireland uses domestic rates based on the property’s capital value.
• Property management costs: Depending on the property and ownership arrangements, service charges, reserve fund contributions, factoring fees or ground rent may apply.
• Household bills: Include energy, water where charged separately, broadband and other regular expenses.

Property transaction taxes also differ: Stamp Duty Land Tax applies in England and Northern Ireland, Land and Buildings Transaction Tax in Scotland, and Land Transaction Tax in Wales. Whether you pay, and how much, depends on your circumstances and the purchase.

The buying process differs too. In Scotland, most marketed homes require a Home Report, and the purchase becomes legally binding when missives are concluded. In England, Wales and Northern Ireland, it generally becomes binding at exchange of contracts.

Understand how your payments could change

A fixed-rate mortgage keeps your interest rate unchanged during the agreed fixed period, providing certainty over scheduled repayments.

Tracker mortgages usually follow the Bank of England base rate at an agreed margin. Standard variable rates are set by individual lenders and do not have to change by the same amount, or at the same time, as the base rate.

Before choosing a deal, consider whether your budget could cope with higher payments when a fixed period ends or a variable rate rises.

Your home may be repossessed if you do not keep up repayments on your mortgage.

How we can help

At Anderson Reed Financial Services, we provide mortgage advice tailored to your circumstances, with access to a wide range of lenders through the Connect network. We compare rates, fees and product features to help you find a mortgage that suits your budget and plans.

Speak to a Mortgage Specialist at Anderson Reed Financial Services to discuss your next step.