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  • Big mortgage dilemma: Home in quick on falling rates or hold back?

    Mark Harris, of mortgage broker SPF Private Clients, said: “There are some great fixed rates available. But make sure you don't fix for longer than you are absolutely sure about or you will have to pay a hefty redemption penalty to get out of the

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Big mortgage dilemma: Home in quick on falling rates or hold back? - Mirror.co.uk

Mortgage rates have been falling, but should you lock into a fixed-rate deal now... or wait and see in case rates drop even further?

The Government’s ­Funding For ­Lending scheme, which has ­provided banks with cheap funds to pass on, has been ­responsible for the plummeting rates.

As a result, the number of people considering a step on to the property ladder has reached a three-year high, according to the Royal Institution Of Chartered Surveyors.

And the Council Of ­Mortgage Lenders last week reported a 20 per cent increase in the number of first-time ­buyers in March compared with February.

Several lenders have now slashed their mortgages again, with many cutting fixed-rate deals, especially for those with smaller ­deposits.

According to Moneyfacts.co.uk, the average two-year fixed rate for a buyer with a 10 per cent ­deposit was 5.44 per cent a year ago and 5.30 per cent six months ago. Today the average rate is 4.5 per cent.

Similarly, a year ago the average two-year fixed rate for someone with a five per cent ­deposit was 5.79 per cent, but this has fallen to 5.49 per cent.

Mark Harris, of mortgage broker SPF Private Clients, said: “There are some great fixed rates available. But make sure you don’t fix for longer than you are absolutely sure about or you will have to pay a hefty redemption penalty to get out of the mortgage.”

The Nationwide Building Society last week cut its three-year fixed rate mortgage to 4.34 per cent on a 10 per cent deposit, with a £400 fee for first-time buyers. And the Clydesdale and Yorkshire banks lowered their three-year fixed-rates with a five per cent deposit to 5.49 per cent, or 4.49 per cent with a 10 per cent deposit, both with no ­arrangement fee.

One of the cheapest two-year fixed-rate mortgages available with a 10 per cent deposit is 4.04 per cent from Norwich & Peterborough Building Society, with an arrangement fee of £295.

First Direct has a three-year fixed rate of 3.89 per cent with a 10 per cent ­deposit, but with a £999 fee. It also offers 4.19 per cent for three years with no arrangement fee.

The bigger the deposit you have, the better rates you get. If you have a 40 per cent deposit, or the ­equivalent amount of equity in your home and want to lock it in for the long term, Santander on Friday launched its lowest ever 10-year fix, at 3.94 per cent with a £995 fee.

If you don’t want to lock in for so long, and have a 35 per cent deposit or the same in ­equity, First Direct has slashed its cheapest fixed rate from 2.64 per cent to 2.49 per cent, but with a hefty £1,999 fee. It also offers a 2.69 per cent five-year deal with a £499 arrangement fee.

David Hollingworth, of London & Country mortgage brokers says: “There is now a host of five-year fixed rates below three per cent.

"But be aware that the very lowest rates often carry big fees which can have a devastating impact on any savings from choosing a lower rate.

"The dilemma is whether to hold off ­fixing in the hope of even cheaper mortgages coming to market.

“However, for many the chance of trimming another 0.10 per cent from a rate will be far outweighed by slashing their mortgage rate as soon as possible, rather than pay another month at a high standard rate... and no one wants to miss out on the property they want while waiting for rates to drop further.”

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