MortgagesAug 4 2015

Rate hikes see 65% LTV better priced than 60% deals

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
Rate hikes see 65% LTV better priced than 60% deals

With recent indications of a base rate rise sooner rather than later, several lenders have started to hike their mortgage rates, Moneysupermarket has reported, however it appears to be cheaper to get a loan with a 65 per cent loan-to-value than a 60 per cent LTV.

Analysis from Moneysupermarket revealed there are still some good mortgage offers available, but 65 per cent loan-to-value deals are now cheaper than 60 per cent LTV mortgages on average.

The current average 60 per cent LTV rate across fixed, variable and discount mortgages is 2.23 per cent, while the average 65 per cent LTV rate is 2.08 per cent, they calculated.

So, for example, someone borrowing £150,000 over 25 years would pay less back over the promotional period on Yorkshire Building Society’s 65 per cent LTV two year fixed rate of 1.07 per cent with a fee of £1,545, than on the Post Office’s 60 per cent LTV two year fix at 1.05 per cent, but with a higher £1,995 fee.

Dan Plant, consumer expert at Moneysupermarket, said it was “bizarre” that you can currently get a cheaper deal with a smaller deposit.

“However, the recent rate rise speculation is starting to make providers cautious, and this is being reflected in their offers. We know choosing a mortgage can be confusing but if people can do it now, they avoid the risk of rates rising over the next few months.

“Many lenders allow mortgage holders to reserve rates available now for up to six months for a small fee, so even those who still have some time left on their current deal can benefit.

“65 per cent LTV mortgages are better than the 60 per cent LTV deals at the moment, consumers should be wary of a rate rise and make sure they can afford the repayments if they suddenly shoot up, should they choose a variable rate mortgage.”

Since Bank of England governor Mark Carney suggested just a few weeks ago that rates could rise by the turn of the year, the price comparison site claimed some of the best mortgage deals have become less favourable.

Moneysupermarket’s analysis came as the Council of Mortgage Lenders stated there were numerous inter-connecting factors affecting mortgage rates.

Sue Anderson, head of member and external relations at the CML, said that a quarter point rise in bank rate does not necessarily mean a precise quarter point rise in other interest rates, including mortgages.

“Although there is a relationship between bank rate and wider interest rates, there are also many other influences on the pricing of a mortgage. Changing the bank rate can set off a whole chain of other reactions that affect the may affect pricing of mortgages both directly, and indirectly.

“These might include the individual lender’s own cost of borrowing funds - from savers, from banks, from wholesale market investors (and by securitising mortgage assets - recent securitisation issues, it is reported, were affected by the turmoil in Greece).”

emma.hughes@ft.com