There is no question that fixed rates are currently all the rage.
According to the latest CML data, in January this year 87% of all new mortgages were fixed, with 10% being trackers, 2% SVRs and 1% discounts.
And it’s easy to understand why borrowers want to lock-in to the historically low rates currently on offer. Why wouldn’t you?
One answer is that fixed rates may leave some borrowers in a, well, er…fix!
Take first-time buyers for example. OK, fixed rate deals are attractive, but we hear plenty of reports of first-time buyers who simply don’t hit the credit score cut-off point. Not because of any problems or adverse credit, but simply because they haven’t got enough of a credit history to amass the required number of points.
What they need more than a fix is an underwriter who will assess their application on its own merits, rather than having it condemned out of hand by a machine.
And even amongst those who do pass credit-score, there are some who don’t want to be constrained by a fixed rate. They may, for example, anticipate the possibility of remortgaging in the near future, or may value flexibility because of potential career opportunities and therefore home moves.
For them, a 95% LTV discount deal with no application fees or early repayment charges may be a more suitable option than a fixed rate.
“Hang on’ you may say ‘there’s a big price to be paid for sacrificing a fixed rate!’.
Well, perhaps not. At the time of writing I referred to a price comparison site and 2 year FTB fixes (for 95% deals) typically range from 3.98% (Post Office) to, 4.39% (HSBC), 4.49% (Nat West) and 4.68% (Virgin Money). Most have early repayment charges and some charge application fees.
At Saffron, we’re currently offering a 2-year discount at 4.49% – so the rate stands up to comparison.
What’s more, our discount deal comes with a £500 cashback (I couldn’t see that being offered by other lenders), no arrangement fees and no early repayment charges. And its portable.
For a first-time buyer wanting a competitive, low cost and flexible deal, that’s a pretty compelling offer as far as I’m concerned.
Fixed rates will undoubtedly be right for some, but that doesn’t mean they’re the perfect answer for all. Sometimes it’s worth considering what other options may be available on the table.