Mortgages: your options if you want to switch deals or are a first-time buyer

Abstract

Rates on new mortgages are continuing to climb, leaving millions of people in the UK - from those looking to switch to a new deal to would-be first-time buyers - wondering about their options. After last week's 0.5 percentage point interest rate increase, many mortgage borrowers worried about rising costs are unsurprisingly seeking the shelter of a fixed rate - but the deals on sale now are significantly pricier than those on offer only a few months ago. The bad news for those whose deal is ending soon and who will be wanting to take out a new fixed rate is that the price of these has shot up. At the time of writing, the very cheapest five-year fixes were at about 3.1%. It's a similar story with two-year fixes, with the current average at 3.95% and the cheapest at about 2.8%.So should you get every last drop out of your current deal, on the basis that it is going to be cheaper than a new fixed deal that you would move on to? Or is there an argument for some people to quit and move to a new deal now, before prices go up even more, or get one lined up for a few months' time?When it comes to bailing out of a deal early, most fixed-rate products have early repayment charges during the initial fixed period. "The alternative is to stick with your current low rate and line something up in good time for when your deal comes to an end," says David Hollingworth at the broker L&C Mortgages. The good news is that remortgage offers are typically valid for up to six months, so if your deal is ending in, say, five or six months' time, you can reserve a deal now. Some borrowers may actually elect to take out a tracker deal now because in some cases the rate will be lower than you can get on a fix, Hollingworth says.