Best fixed rate mortgage deals for first-time buyers

VIVA Team | 2nd April 2019

A fixed rate mortgage is designed to restrict monthly repayments of mortgage for a period of two, three or even five years.  The maximum tenure ranges to 10 years. After this period ends, it is advisable to switch the mortgages to other lenders offering standard variable rate which is definitely going to be a competitive one.

 

How are fixed rate mortgage interest rates determined? Here we outline:

 

The prevailing rate of interest

The rate which will be offered is decided depending on the ongoing interest rates which are available at the time of signing the papers.

Borrower’s financial status

Borrower’s credit score, down payment amount, and mortgage size will be combined together to decide the interest rate.

Who will pay Closing Costs

Fluctuation in the interest rate can be seen if the borrower chooses to roll out specific costs into the interest rate. The borrower may accept a higher interest rate if the bank is taking the responsibility to cover-up the closing costs.

Private Mortgage Insurance

Another way in which a higher rate can be of great advantage for the borrower is if he/she decides to go with lender-paid mortgage insurance in place of private mortgage insurance (PMI).

 

How maximum loan value is calculated for first-time mortgage buyers?

Let’s take an example here:

 

Maximum loan-to-value or LTV – Will be the amount which the lender agrees to pay the borrower. LTV may vary from one borrower to other

  • The property value: £200,000
  • Offered mortgage value: £170,000
  • LTV: Here the LTV will be 85%
  • Down-payment: Here the borrower needs to pay a deposit of £30,000, which will be 15% of the value of the property

 

List of some best deals for first-time buyers opting for Fixed-rate mortgage:

 

  1. Yorkshire Building society- 2 years fixed stepped Cashback mortgage
  • Initial rate: 1.84% till 30th June 2021
  • Subsequent rate: 4.99% variable. It will be 4.25 till 30th June 2024( A discount of 0.74% given)
  • £500 Cashback
  1. HSBC UK-2 year fixed
  • Initial rate: 1.89% till 30th June 2021
  • Subsequent rate: 4.19% variable.
  1. NATWEST-2 year fixed Cash-back mortgage
  • Initial rate: 1.91% till 30th June 2021
  • Subsequent rate: 4.24% variable.
  • £250 cashback
  1. Virgin Money-2 year fixed Cash-back mortgage
  • Initial rate: 2.09% till 1st July 2021
  • Subsequent rate: 4.99% variable.
  • £300 Cash-back
  1. HSBC-3 year fixed
  • Initial rate: 2.14% till 31st July 2022
  • Subsequent rate: 4.19% variable.
  1. Clydesdale Bank- 3 Year Fixed
  • Initial rate: 2.19% till 30th June 2022
  • Subsequent rate: 5.2% variable.
  1. HSBC-5 year fixed
  • Initial rate: 2.29% till 31st July 2024
  • Subsequent rate: 4.19% variable.
  1. Virgin Money-5 year fixed Cash-back mortgage
  • Initial rate: 2.31% till 1st July 2024
  • Subsequent rate: 4.99% variable.
  • £300 Cashback
  1. Yorkshire Building society- 5 years fixed Cashback mortgage for the first time
  • Initial rate: 2.49% till 30th June 2024
  • Subsequent rate: 4.99% variable.
  • £500 Cashback
  1. Chelsea Building society- 5 years fixed Cashback mortgage
  • Initial rate: 2.69% till Aug 2024
  • Subsequent rate: 4.99% variable.
  • £250 Cashback.

It is advisable for borrowers to read the mortgage agreement in detail taken from a couple of lenders. It will provide ideas on borrowing power and will present the borrowers as serious buyers to estate agents.