Mortgages: cut out the middle man for the best rates

One of the most noticeable changes in the mortgage market has been the predominance in the ‘best buy’ tables of loans available only direct from the big high street lenders.  First Direct and HSBC have monopolised the charts with lifetime trackers and offset deals starting at just 2.19% (Bank Base Rate plus 1.69% for the full term of the loan). 

HSBC also now has a market leading five-year fix at 3.95% with a fee of a relatively modest £599.  Loans up to 60% are available with free basic legal work for those looking to remortgage.  But all these loans are only available direct – not through brokers.

Lloyds TSB has just this week come into the market with a new, ‘direct only’ market leading two-year fixed rate mortgage at 2.94% with loans up to 70% of the property’s value on offer. The mortgage is available for house purchase and remortgage, including first time buyers.  The only drawback is the high fee of £1,895.  

Loss of impartial advice

Increasingly, the high street banks are not only by-passing brokers – the only place a potential homebuyer can get truly impartial advice on a home loan – but they are restricting their best offers to existing customers – or those prepared to move their current account. 

Lloyds TSB’s latest offer is no exception.  The market leading 2.94% rate for the two year fix is available to existing customers with a qualifying current account.  Those who don’t have such an account will pay 3.14%.  The rate is also 0.2% higher if you want an interest-only rather than a repayment mortgage.

If you don’t want to move your current account to Lloyds TSB the new two and five year fixes from Skipton Building Society look better bets.  There is a two year fix at 2.99% for 65% loan to value and a 3.19% fixed rate for 70% LTV.  Also available is a five-year fixed rate at 4.78% up to 80% LTV.  The rate is not as good as HSBC’s five year fix at 3.95% - but HSBC requires a 40% deposit compared with Skipton’s 20% deposit.  Coventry Building Society has also launched a new three year fix available only direct from the lender at 3.39% with a maximum loan of 65% and a fee of £999.

Longer fix

Five-year fixes look a better bet than shorter terms because they are long enough to ride out the interest rate cycle and you shouldn’t find yourself looking for another deal just as interest rates peak.  To cater for those who want the certainty of a fixed rate, Leeds Building Society has launched a range of ‘direct only’ products at 4.18% fixed for five years with maximum loan of 60%.  At 80% loan to value the rate rises to 4.83% and at 85% LTV the rate is 5.63% - all with a fee of £999 for loans up to £500,000.

Meanwhile, Barclays Bank is copying Santander, Co-op/Britannia and Halifax in offering reduced mortgage rates to current account clients.  Customers holding any Barclays current account, including the Premier, Additions and Graduate accounts, will be eligible for a ‘loyalty mortgage’ at special rates which are 0.54% below rates offered to non-customers.

Deals include a two-year fixed-rate mortgage at 2.95% for up to 70% loan-to-value – 0.54% below the standard offer.   For mortgages of up to 80% LTV, the Barclays loyalty rate is 4.19% – a discount of 0.19% points.

The bank claims its customers will save £922 in the first two years of their mortgage, based on an average mortgage advance of £135,000. For larger mortgages, for example a £500,000 advance, the savings could top £3,400. To qualify, mortgage applicants need to have an existing Barclay’s current account, with a minimum of £800 credited in each of the last three months, at the time they apply for the loan.

This means, of course, that you must open the account before you know whether you qualify for the loan or not.  But for those with a big mortgage requirement who can save substantial amounts of money by moving to one of these low interest deals, it makes sense to consider moving your current account in order to qualify. 

Beware shoddy service

With some offers you will need to think twice.  For example Santander's loyalty mortgages require that the current account must have been held for six month before applying for a loan and a minimum of £1,000 must be credited to the account each month.  Bearing in mind that Santander was one of the most complained about banks for service in the recent survey by consumer group Which? this doesn’t look such an attractive proposition.