The recent mortgage rate cuts by UK lenders are 'good news' for borrowers, but also leave them with a difficult decision to make, says Hannah-Mercedes Skenfield, mortgages channel manager at moneysupermarket.com.
Reacting to the launch of a HSBC mortgage at 1.99 per cent for a discount mortgage, and the string of rate cuts from Santander mortgages, Ms Skenfield says borrowers have a 'gamble' to make on the various competitive deals now available.
"Any cuts in rates and fees is good news for mortgage borrowers, and it's great to see Santander and HSBC leading the charge by announcing changes and additions to their mortgage offerings," she said.
"Santander's cuts are clearly targeted at those who want to shelter from a possible rise in interest rates in the medium term. Those consumers seeking this kind of risk mitigation will find Santander's offering very attractive, but not necessarily the best available, so it is worth shopping around."
The new HSBC mortgage might entice remortgage borrowers who have been sitting on their lender's standard variable rate while they waited for a good enough deal to come their way, but borrowers should consider more factors than just the headline rate, Ms Skenfield warns, such as arrangement fees, which can make them more expensive than other products.
Furthermore, as a discount rate, the HSBC deal is vulnerable to changes in the lender's SVR, and lenders have been increasing their rates despite a static base rate which has remained at 0.5 per cent for a year.
"We are perhaps reaching a fork in the road for the mortgage market, with some lenders keen to capitalise on the low Base Rate for excellent, headline grabbing rates and others looking to lock customers in on fixed deals before rates rise," Ms Skenfield mused.
"Borrowers coming to the end of a deal have a tough choice to make, do they take the risk and plump for a low rate variable deal and hope nothing changes, or do they pay a little more each month for the sake of secure fixed repayments? Ultimately each individual will have to make this decision themselves and there is no right or wrong answer. However, if you do go for a variable rate, do so only if you can afford a potential three or four per cent increase in rates, when they do eventually rise."
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