Mortgage Best Buy Table: Compare Mortgage Rates & Deals

Understanding how mortgages work

Mortgage best buy tables like the one above are a great way to start the research process. But whether you’re taking out a mortgage for the first time or remortgaging, you’ll come across new terminology that can make the process more overwhelming than it needs to be.

Below, we take a look at some of the key mortgage concepts you’ll need to understand to ensure you’re getting the best mortgage deals out there.

Should you go for a fixed or variable mortgage?

Fixed-rate mortgages are a good option for those looking for certainty and variable mortgages work well for those looking for flexibility.

A fixed-rate mortgage gives you a fixed mortgage rate for a set period, usually between 2 and 5 years. During this period, your mortgage rate won’t change even if mortgage rates go up or down on the whole.

Fixed-rate mortgages come with the reassurance that your repayments will remain the same, but they can be less flexible than variable mortgages. For instance, if you want to switch to a different lender, you will almost certainly need to pay an early repayment charge to change mortgage products. Also, there are usually limits on how much you can overpay each year with additional early repayment charges if you go over that limit.

Fixed-rate mortgages work well if you know you can afford the monthly payments and like the certainty that they provide. However, you won’t benefit from mortgage rates falling until it’s time to remortgage which means you could end up paying more if you fixed when mortgage rates were particularly high.

A variable rate mortgage, on the other hand, comes with a mortgage rate that can go up or down depending on the market. Typically, you will pay less when overall mortgage rates fall and more when overall mortgage rates rise. If you’re on a tracker mortgage, your mortgage rate will change in line with the Bank of England’s base rate which is currently 5.25%. Variable mortgages are typically more flexible, and some don’t have early repayment charges which means you can easily switch deals or overpay.

Variable mortgages work well if you want flexibility and you want to benefit from potential falls in interest rates. However, it’s worth looking at your budget and making sure you can pay more as interest rate rises can result in higher monthly payments.

What is loan to value?

The loan-to-value ratio is worked out by dividing the amount you want to borrow by the value of your home. So, for example, if you’re a first-time buyer with a £20,000 deposit and you want to purchase a £200,000 property, you’ll need to borrow £180,000 to buy the property. Dividing £180,000 by £200,000 gives you a loan-to-value ratio of 0.9 or 90%.

Why is the loan-to-value ratio important?

Lenders look at your loan-to-value ratio when you take out a mortgage to decide whether they want to offer you a mortgage and what interest rate they offer you. Typically, the lower your loan-to-value ratio, the better the interest rate you’re likely to be offered. This is because a lower loan to value ratio means you have more equity in your home and it represents less risk for your lender.

The mortgage rate you’re offered will vary and depends on many different factors. But, all things being equal, people who have an LTV ratio of 60% and under tend to attract the lowest mortgage rates. The general rule of thumb is the higher your LTV, the higher your mortgage rate.

How to work out your current home value

If you want to work out your current home value so you can estimate your loan-to-value ratio, you can take a look at free instant valuation tools available via sites like Zoopla and Rightmove. Bear in mind, however, that these are fairly rudimentary tools that won’t necessarily take into account improvements you may have made on the house. For a more accurate valuation, you could try speaking to local estate agents.

But, bear in mind that your lender will likely have their own methods of valuing your home and could arrive at a different figure to you. As such, whatever figure you arrive at is likely to be an estimate rather than an exact figure, however, this can still be a useful way to get an idea of the types of mortgage rates you can expect to get.

What fees can you expect to pay when taking out a mortgage?

When taking out a mortgage, you may sometimes need to pay a lender’s fee, a valuation fee, and a broker fee, if you’ve used a broker. Here’s what these entail:

• Lender’s fee - The lender’s fee or product fee is sometimes charged by your lender to arrange your mortgage. Some mortgages with lender’s fees come with lower mortgage rates so it could be worth paying the fee.
• Valuation fee - Lenders charge this fee to value your home so they can work out your loan-to-value ratio among other things. Some lenders cover this fee.
• Broker fee - If you use a mortgage broker to find the best deals on the market, you might need to pay to use the service. Online brokers like Habito* don’t charge mortgage fees.

If you’re buying a home rather than remortgaging, there will be other fees associated with the home-buying process too. You can expect to pay conveyancer fees, stamp duty (particularly if you’re not a first-time buyer), estate agent fees if you’re selling your own home, and surveyor’s fees if you want your own survey of the home.

Can I remortgage early?

You can typically remortgage whenever you like, however, if you have a fixed-term mortgage rate, this is likely to come with early repayment charges.

In some cases, remortgaging early could make sense despite the charges. For example, the deal you’re switching to could mean more savings even with the early repayment charges taken into account. If you want to compare the impact of different mortgage rates on your repayments, check out our mortgage repayment calculator.

However, if you’re planning on remortgaging because you’re worried about interest rates being less favourable when it comes to the end of your term, the early repayment charges might not be worth it. Nobody can predict with absolute certainty what mortgage rates are going to look like when your fixed term ends and you could end up paying hefty early repayment charges for no good reason.

If you’re still considering it, check out our article on remortgaging to help you decide whether it’s the right course of action for you right now.

Do I need a mortgage broker?

There are plenty of tools out there that can help you research mortgage products and apply directly if you want to bypass a mortgage broker and the potential fees that come with using one.

But mortgage brokers can help you find the best mortgage deals on the market and are particularly helpful if you have a more complex financial situation. For instance, if you’re self-employed or if you have a smaller deposit,  a broker can help find providers that will work with your circumstances. They will also help with the application process which can be complex and lengthy.

If you want to find a vetted mortgage broker locally, you could use services like VouchedFor*. If you prefer an online broker, you can try Habito* where you can compare more than 90 lenders and get advice.

What are the best mortgage deals at the moment?

Our mortgage best buys tool helps you compare mortgage rates based on your circumstances. But if you’re looking for the best mortgage deals in the UK right now, you should also check out our best mortgage rates tables.

We update these tables every week with the best current mortgage rates across different types of mortgages including tracker mortgage deals and fixed-rate mortgage deals, for example. If you’re in the market for a new mortgage, we recommend you bookmark the best mortgage rates tables and refer to them often.

If a link has an * beside it this means that it is an affiliated link. If you go via the link, Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. The following link can be used if you do not wish to help Money to the Masses or take advantage of any exclusive offers - Habito, Vouchedfor