Learning how to find the best mortgage rates has never been more important. The mortgage landscape has changed considerably since the coronavirus pandemic began in March. Amid tightening criteria for mortgage approval across the board, it's important to understand what you need to do to secure the best possible mortgage deal, whether you're buying your first home or remortgaging.
Although both mortgages for first-time buyers and remortgaging have been affected recently with a lack of access, it is still possible to get a mortgage, and a good mortgage rate, if you know how and where to look. Small deposit? It is true that getting a mortgage will be tough right now – but it's not impossible, which is why it's so important to understand how to find and compare the best mortgage deals.
To get started, use the online mortgage calculator form below to compare mortgages from a variety of lenders. Online mortgage expert Habito will engage in an online chat with you, advising you on the next stages, helping you assess affordability and give you impartial advice to ensure you get the best deal for you.
Then, read more of our advice to develop an in-depth understanding of mortgage rates.
Please note: Habito is an online mortgage broker and whole of market lender so they will assess the best deals available and work out which works for you. We have an affiliate relation with Habito and take a small percentage of commission for referring you to them.
Mortgage rates with low deposit: what are the current options?
If you're a first-time buyer with a five or 10-per-cent deposit, you've probably heard about lenders pulling most of the higher LTV (loan-to-value) mortgages from their portfolios. We wish we could say this isn't true, but the situation for first-time buyers with low deposits is serious. In fact, the latest data suggests that even 15 per cent isn't enough for some lenders, making it very difficult to secure a mortgage at all, let alone at the lowest mortgage rate.
What should you do if you really, really need to secure a mortgage this summer? If you've found your dream home and really cannot wait, the tough truth is: find a way to put together a larger deposit, even if it means asking family members. If this is not an option, we strongly suggest waiting until late August/September to see if lender confidence returns. Late summer will show the full scale of financial harm done by Covid-19, which is when lenders will understand better how they want to proceed.
Mortgages and furlough: is it true that I can't get a mortgage if I've been furloughed?
Not necessarily. It all depends on whether you and your employer have worked when you'll be going back to work. While many banks announced towards the end of July that they'll be tightening criteria for furloughed workers, no one has banned furloughed workers from applying for a mortgage.
You will need to speak to a broker or your chosen lender to find out the exact criteria that will apply to you: some lenders are asking for a letter from employer confirming the date of your return to work and salary, while others will simply need to know that you are returning to work within the next three months.
Also be aware that you're likely to find it much easier to get approved if you're applying jointly with someone else – but again, be careful: some lenders now won't count furloughed workers' salaries as part of joint mortgage applications.
Mortgage and coronavirus: has getting a mortgage become more difficult?
Yes, especially if you're self-employed, have been furloughed, or have had your options slashed because you now need a bigger deposit. And even if you are in full-time employment, expect the lender to ask you more probing questions about your financial outlook than you expected. They will be interested in your past spending (especially the last six months), but also in your future. Some of these questions may seem intrusive, so be prepared.
The same now goes for remortgaging: any change in circumstance is likely to be of interest to your lender, although the equity you already own in your home will at least give you more leeway in terms of the rates you can secure.
Whatever your current circumstance, now is not the time to think that you'll settle for anything you can get. You should still find out as much as possible about the best mortgage deals available to you, so that you know what you're going after.
Mortgages and coronavirus: what is the impact?
The truth is that it's still unclear what the longer-term implications of coronavirus on mortgage rates will be, although it's unlikely that anything dramatic will happen over a short period of time. There is a likelihood that house prices will come down at the end of 2020, although there is unlikely to be a dramatic crash – more of a slowing down.
Our advice is always: do what you need to do in light of your individual circumstances and what you know about your immediate future. If you've kept your job, have a decent deposit saved up, and want to own your own home, now is as good a time as ever to apply for a mortgage.
What is the best time of year to get a good mortgage rate?
Ordinarily, we would say that the very best time to get a mortgage is the end of a season, just before the next year's spring rush of home buying begins. So, the months of November and December are a pretty good time to secure a mortgage, because they also tend to be a good time to buy a house at a great price.
Late winter (January and February) also present a good opportunity to finalise your purchase and get a mortgage, because the market is still a bit sluggish, but there are more properties on the market than before Christmas.
The summer months tend to be much, much busier, with family homes in particularly high demand, and this summer has proved to be no exception, with the release of pent-up demand following the loosening of lockdown restrictions resulting in a very lively market. Do your local research carefully, as you might face some tough competition in popular destinations that don't have many properties going.
Finding the best mortgage rates: the importance of the deposit
If there is just one useful thing to know when looking for the best mortgage deal, it is this: the bigger your deposit, the better the deal you'll get. This is true always, with any lender. The very best mortgage rates are only available to buyers with deposits of over 25 to 30 per cent (and 40 will get you the cream of the crop of mortgage deals).
Right now, we strongly recommend trying to save up for as large a deposit as you can manage, before applying for a mortgage. Remember: the smaller your loan, the better the rate. If you only have a small amount saved up and really want to own a home soon, consider government equity loan schemes such as Help to Buy.
Bear in mind that most large lenders have suspended mortgages with five and 10-per-cent deposits, so if that's all you've got, you'll need a good mortgage broker to find you lenders who will still offer higher LTV mortgages.
How to find the best remortgage deals
The answer is: start looking as far in advance of switching lenders as you can, and keep a lookout. Remortgaging only ever makes sense if it's going to be financially beneficial; for example, if your current lender is going to charge you an exit fee, you'll want to make sure that your new repayment plan is worth that penalty. Conversely, if you see a great fixed-term deal that'll allow to start saving (for example), exit fees notwithstanding, go for it.
Are all good mortgage deals fixed rate?
Fixed rate mortgages are so popular right now that it can almost seem as if a variable rate mortgage will inevitably give you a bad deal. This isn't true: with interest rates remaining at a historic low, you can get good mortgage deals with variable rates. It is true, however, that the fixed-term two-year mortgage has become probably the most competitively priced mortgage product, and if you're planning to stay at the home you're buying fro at least two years (most people will be), then go for a two-year fixed mortgage deal. Five-year or even ten-year fixed deals are now quite common, but these work best for people who are committed to the home they've bought for the longer term.
I've found a mortgage deal: what do I do now?
Habito will engage in an online chat with you, advising you on the next stages, helping you assess affordability and give you impartial advice to ensure you get the best mortgage deal for you. Don't worry: you won't be applying for a mortgage without receiving proper advice, and you will get to speak to a person.
Bear in mind that once Habito have helped you identify the best mortgage deal for you and looked over your application, you will be submitting it yourself to the lender. If you don't want to do this, there is the Habito Plus service that takes care of the entire process, including evaluations, for you.
There's also the Habito Go service which essentially give you your own buying agent who will negotiate the house purchase on your behalf, as well as find you a mortgage deal and doing all the paperwork.
Finding the best holiday let mortgage
With the staycation trend booming, you might be thinking about taking out a holiday let mortgage. Finding the best mortgage rates for this type of mortgage is very important, because these type of mortgage require bigger deposits and usually come with higher interest rates. They can be worth it if your holiday let makes a decent return, but you'll want to make sure you're on the best possible rate to maximise the property's potential.
How to find the best mortgage rate if you're self-employed
Accessing the best mortgage rates if you're self employed will hinge on three things: how much you have saved for a deposit, your earnings, and your record keeping. Needless to say, all three need to be up to scratch, and the more you have on all three fronts, the more likely you are to get the lowest mortgage rates. Mortgage lenders dislike applications they deem to be high risk, and you want to convince them that, even though you are self employed, you're financially stable.
Find out more about self-employed mortgages in our guide.
How to find the best guarantor mortgage
Guarantor mortgages are the new crop of what used to be called 100 per cent mortgages, and they do allow you to get a mortgage without a deposit – if you have family who are able and willing to keep some of their savings in an ISA account for a few years. The differences between the different products available are mainly about the interest rates on the savings and the number of years the money will need to be used as the guarantee on your mortgage. Find our more in our guide to guarantor mortgages.
Average mortgage interest rate: what it can tell you
Average rates won't tell you what the best mortgage rate is for you personally, under your current circumstances. But, they do give you a good idea of the average value for money for different length fixed-term mortgages, compared to variable rate mortgages.
Of course, this method of mortgage comparison only really works if there are no drastic changes to the base interest rate from the Bank of England. However, given that the base interest rate levels have remained relatively stagnant (and very low) for a good number of few years now, comparing average mortgage interest rates may well give you a clue to what type of mortgage you should be going after.
The average mortgage rate chart for the time period between 2014 and 2019 shows a clear downward trajectory, with interest rates steadily falling over the five years.
If a longer-term fixed rate mortgage is what you're after, now is definitely the time to get one: the 10-year fixed mortgage in particular is a much, much more attractive proposition as of September 2019 at an average of 2.65 per cent than it was in September 2014 at 4.06 per cent.
However, if you want the hands-down best mortgage rate, there is some competition between the two-year fixed rate mortgage (average rate of just 1.56 per cent in September 2019) and the two-year standard variable mortgage. It wasn't as good a deal last September as the two-year fixed rate, at 1.61 per cent. But, back in September 2016, a standard variable mortgage came in at 1.54 per cent – cheaper than the two-year fixed average of 1.59 per cent. In fact, it wasn't until the very end of 2016 that the standard two-year variable became more expensive, on average, than a two-year fixed rate.
The main takeaway from this is that, right now, a two-year fixed rate mortgage is your best bet as far as average mortgage rates go, very closely followed by the two-year variable rate that remains low thanks to the lowest ever current base rate.