The mortgage market is shifting dramatically, bringing a sigh of relief to homebuyers and those nearing the end of their current mortgage deals. Major lenders like HSBC, Halifax, and TSB have sparked a competitive mortgage “price war,” significantly reducing the cost of their new fixed-rate deals.
HSBC has recently announced that several of its deal rates have plummeted below 4% for the first time since last April. This is a significant development, especially for those in the market for a new home loan.
What About Existing Borrowers?
However, it’s not all smooth sailing. According to investment platform Bestinvest, about 1.6 million borrowers with expiring low-rate fixed deals this year are still facing a substantial increase in interest payments when they switch to a new product.
Act Now, Save Later
If your mortgage deal is expiring in the next nine to twelve months, you have fewer options. But if your deal is ending sooner, there’s a golden opportunity. Remortgage offers usually last up to six months. If your deal is ending in five months, for instance, you can lock in a deal now and continue to monitor the market. Should rates drop further, you can switch to a more favorable deal without being bound to your initial choice.
Chris Sykes from Private Finance emphasises that borrowers should actively seek out these new, lower-rate deals, as lenders and brokers might not reach out proactively.
Using Savings to Reduce Mortgage Debts
For those with extra savings, it might be wise to use some of it to reduce mortgage debts. This is especially true if you’re dealing with more expensive debts with higher interest rates. Most lenders allow up to 10% of the mortgage balance to be paid as an overpayment each year without penalty, but this varies, so check with your lender.
Credit Card Costs, How to Minimise Them
Credit card debt can be a burden, but transferring your balance to a provider offering a more favorable rate can save you hundreds. Some cards offer interest-free deals lasting over two years, which means your monthly repayments go entirely towards reducing the principal debt.
For instance, Barclaycard offers 0% interest on balance transfers for up to 29 months (with a 3.45% transfer fee), and M&S Bank offers a similar deal for up to 28 months (with a 3.49% fee). Transferring a balance from a high-interest card can lead to substantial savings. M&S Bank’s calculator, for example, shows a potential saving of £616 when transferring a £2,000 balance from a card with 24% APR.
Maximising Credit Card Benefits
Savvy shoppers are now using rewards credit cards for almost all purchases, big and small. Regularly paying off these cards can accumulate significant rewards without incurring debt. Here are three top picks:
- British Airways American Express Card: Earn one Avios point for every £1 spent. Spending £12,000 annually earns a “companion voucher” for two-for-one travel on select airlines.
- Amex Platinum Cashback Everyday Card: Offers 5% cashback on purchases (up to £100) for the first three months, followed by tiered cashback rates based on spending.
- John Lewis Partnership Card: Earn points for vouchers redeemable at John Lewis and Waitrose. Special offer: Get £40 in vouchers by spending £250 at John Lewis and Waitrose within 90 days of getting the card.
Conclusion
The current financial market presents a unique opportunity for homeowners and credit card users. By actively engaging with these new deals and strategically managing debts, significant savings can be achieved. Whether it’s locking in a lower mortgage rate or transferring credit card balances, taking action now can lead to considerable financial benefits in 2024.