11 November 2017

Homeowners should think twice before incurring charges in rush to secure cheap fixed rate mortgages as providers hold or even cut rates.

6 min read

 
Helen Morrissey, Personal Finance Specialist

Helen Morrissey

Corporate PR Specialist – Long Term Savings

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Homeowners should think twice before incurring early exit charges in a dash to secure a cheap fixed rate mortgage with analysis from Royal London showing some providers have held or even cut rates following last week’s interest rate hike.

The Bank of England’s (BoE) decision to raise interest rates to 0.5% was widely expected to raise the cost of mortgage borrowing. It was thought borrowers would rush to secure the cheapest long term fixed rate deals before they can be withdrawn from the market. In some cases homeowners could incur early exit charges from their previous mortgage as they rush to secure the best deal.

While not every bank publishes their historic mortgage borrowing costs, Royal London analysed the fixed interest rates offered to new borrowers by HSBC and Nationwide on Friday 13th October 2017. This was compared to the new rates these lenders published three weeks later on Friday 3rd November 2017 following the BoE’s announcement.

The analysis showed that despite updating its borrowing costs on tracker mortgages and standard variable rate, the cost of borrowing at a fixed rate with HSBC for two, three and five years at 60%, 70%, 75%, 80% and 90% loan to value had not changed (see Table 1).

Nationwide’s new range of products offering mortgage borrowing at a fixed rate for ten years had actually fallen by between 0.30% and 0.45%, while for a range of other fixed rate mortgage products the cost of borrowing either stayed the same or fell by up to 0.15% (see Table 2).

Helen Morrissey, personal finance specialist at Royal London said:

It was widely expected that the interest rate hike would increase the cost of mortgage borrowing and while this is certainly the case for tracker mortgages, the analysis shows that some banks have not chosen to hike their fixed rate rates as yet. The Bank of England’s announcement should calm people’s nerves as low interest rates look like they are here to stay for some time yet and so borrowers should think carefully before incurring early exit penalties in a bid to secure a quick deal. Borrowers should take the time to do their research or seek advice where necessary.”

- ENDS –

Notes to editor:

TABLE 1 – BORROWING COSTS AT HSBC
Product AS OF 13/10/17 AS OF 3/11/17 Difference
Standard Range 2 year fix 60% 999 fee 1.34% 1.34% 0.00%
Standard Range 2 year fix 60% 0 fee 1.69% 1.69% 0.00%
Standard Range 3 year fix 60% 999 fee 1.54% 1.54% 0.00%
Standard Range 3 year fix 60% 0 fee 1.84% 1.84% 0.00%

Standard Range 5 year fix 60% 999 fee

1.79% 1.79% 0.00%
Standard Range 5 year fix 60% 0 fee 1.99% 1.99% 0.00%
Standard Range 10 year fix 60% 0 fee 2.59% 2.59% 0.00%
Standard Range 2 year fix 70% 999 fee 1.39% 1.39% 0.00%
Standard Range 2 year fix 70% 0 fee 1.79% 1.79% 0.00%
Standard Range 3 year fix 70% 999 fee 1.64% 1.64% 0.00%
Standard Range 3 year fix 70% 0 fee 1.94% 1.94% 0.00%
Standard Range 5 year fix 70% 999 fee 1.94% 1.94% 0.00%
Standard Range 5 year fix 70% 0 fee 2.14% 2.14% 0.00%
Standard Range 10 year fix 70% 0 fee 2.69% 2.69% 0.00%
TABLE 2 – BORROWING COSTS AT NATIONWIDE BUILDING SOCIETY 
Product AS OF 13/10/17 AS OF 3/11/17 Difference
Existing buyer 10 year 60% LTV 999 fee 2.94% 2.49% -0.45%
Existing buyer 10 year 60% LTV 0 fee 3.04% 2.59% -0.45%
Existing buyer 10 year 75% LTV 999 fee 3.04% 2.69% -0.35%
Existing buyer 10 year 75% LTV 0 fee 3.14% 2.79% -0.35%
Existing buyer 10 year 80% LTV 999 fee 3.24% 2.94% -0.30%
Existing buyer 10 year 80% LTV 0 fee 3.34% 3.04% -0.30%
Existing buyer 5 year 60% LTV 999 fee 1.94% 1.79% -0.15%
Existing buyer 5 year 60% LTV 0 fee 2.14% 1.99% -0.15%
Existing buyer 2 year 60% LTV 0 fee 1.79% 1.69% -0.10%
Existing buyer 2 year 75% LTV 0 fee 1.84% 1.74% -0.10%
Existing buyer 2 year 60% LTV 999 fee 1.39% 1.29% -0.10%
Existing buyer 2 year 75% LTV 999 fee 1.44% 1.34% -0.10%
Existing buyer 2 year 80% LTV 999 fee 1.49% 1.44% -0.05%
Existing buyer 2 year 80% LTV 0 fee 1.89% 1.84% -0.05%
Existing buyer 5 year 75% LTV 999 fee 1.99% 1.94% -0.05%
Existing buyer 5 year 75% LTV 0 fee 2.19% 2.14% -0.05%
Existing buyer 3 year 60% LTV 999 fee 1.59% 1.59% 0.00%
Existing buyer 3 year 60% LTV 0 fee 1.89% 1.89% 0.00%
Existing buyer 3 year 75% LTV 999 fee 1.64% 1.64% 0.00%
Existing buyer 3 year 75% LTV 0 fee 1.94% 1.94% 0.00%
Existing buyer 3 year 80% LTV 999 fee 1.69% 1.69% 0.00%
Existing buyer 3 year 80% LTV 0 fee 1.99% 1.99% 0.00%
Existing buyer 5 year 80% LTV 999 fee 2.04% 2.04% 0.00%
Existing buyer 5 year 80% LTV 0 fee 2.24% 2.24% 0.00%

For further information please contact:

Helen Morrissey, Corporate PR Specialist – Long Term Savings

About Royal London:

Royal London is the largest mutual life, pensions and investment company in the UK, with funds under management of £117 billion, 8.8 million policies in force and 3,745 employees. Figures quoted are as at 30 June 2018.