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Mortgage Price War: 0.99% Mortgages Are Back

MORTGAGES | 26.04.2021

The 95% mortgage guarantee scheme came into effect on Monday, prompting other lenders to compete and bring their own deals to the market. To attract borrowers, a UK building society has announced a two year discount variable mortgage at 0.99%, a rate that hasn’t been seen on the market since the beginning of the pandemic.

Alongside the reintroduction of 0.99% mortgages, one lender is increasing the amount first-time buyers can borrow to 5.5% times their salary up to 90% loan-to-value (LTV), while another is relaxing their criteria for the self-employed.  With plenty of new offerings like these continuously hitting the market, it can be difficult to work out which is best for you. Here’s everything you need to know. 

What is a 0.99% mortgage?

The new 0.99% mortgage is what’s known as a discount mortgage. A discount mortgage is based on the lender’s standard variable rate (SVR), with the interest on your mortgage being discounted for the duration of the fixed term (2 years in this case). So if the SVR is 3.59% and your discount is 1%, you would be paying 2.59% interest on your mortgage for the length of the deal. However, the SVR is subject to change as the lender sees fit, so the amount you pay could increase.  This particular 0.99% mortgage in question launches on the 23rd April, is available to remortgage borrowers only, and comes with a £999 fee. As well as being subject to a maximum loan-to-value (LTV) of 60%, borrowers must keep in mind that:
  • The minimum loan is £150,000
  • The applicant must have no credit issues
  • The mortgage must be on a capital repayment basis

What is a 95% mortgage? 

A 95% mortgage allows you to borrow 95% of the value of the house you’re buying, with the remaining 5% coming from your deposit. This type of mortgage is also referred to as a 95% LTV ‘loan-to-value’ mortgage.  Announced as part of the 2021 Budget, the 5% deposit mortgages government scheme applies to buyers purchasing homes under £600,000. 

Which mortgage is right for me?

If you’re a first-time buyer, the 95% mortgage could be the right option for you, especially if you’re currently renting. Saving for a smaller deposit makes getting on the property ladder much easier, and there are now 110 deals that offer 95% mortgages (including 38 under the government guarantee scheme), giving you plenty of options to choose from.  On the other hand, a 0.99% mortgage is more suitable for borrowers looking to make their next move. Only available to those wishing to remortgage, you’ll need to have a deposit of at least 40% to qualify.  Whether you’re a first-time buyer or looking to remortgage, we can help. Our expert advisors are available to chat through your options, guiding you through everything you need to know about the new mortgage schemes currently on the market. Get in touch with us on 0345 305 2540 or fill in a contact form and we’ll be happy to help. 
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