Martin Lewis offers advice on how to decrease mortgage interest
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March 2021 has arrived, and this marks the one-year anniversary since the Bank of England Base Rate cuts and the first UK lockdown. Both savers and borrowers will have seen notable changes during this time.
It’s something which latest analysis from money comparison website Moneyfacts.co.uk has put a spotlight on.
Savings rates, for instance, have plummeted to record lows as providers have cut and pulled offers over the past year, Moneyfacts pointed out.
Meanwhile, mortgage product availability fell dramatically in 2019.
It led to a limiting of choice for first-time buyers or those looking to remortgage with a small deposit.
While product volumes are slowly returning, five percent deposit deals are still few and far between.
According to the mortgage market analysis, the average mortgage rate for Standard Variable Rates (SVR) stood at 4.89 percent in March 2019, and 4.90 percent in the following year.
Fast forward six months, the average SVR had dropped to 4.44 percent, and now it stands at 4.41 percent.
Rachel Springall, Finance Expert at Moneyfacts.co.uk, has commented on the new analysis, explaining a number of borrowers could potentially save themselves a substantial amount of money.
However, there are challenges which some may encounter.
She said: “Borrowers sitting on a standard variable rate mortgage (SVR) may have seen their repayments fall in light of the two base rate cuts seen in March 2020, but they could stand to save much more by switching to a fixed rate deal.
“However, the impact of the coronavirus may have made it difficult for some consumers to move their mortgage, some may even be mortgage prisoners if their circumstances have changed drastically due to the pandemic.
“Mortgage availability was hit hard during 2020 and there was more caution adopted by providers with regards to their lending criteria, however the sector to see the biggest shake-up was for borrowers with a small deposit.
“Lenders pulled mortgages aimed at borrowers with a five percent deposit and even now this area of the market only caters for specific types of consumers.
“Lenders’ reservations to offer low deposit deals trickled into the 10 percent deposit market, but thankfully over the past few months we have started to see lenders return, giving first-time buyers and borrowers with limited equity some hope.
“Consumers who may be in the process of getting a new deal or hope to buy a property will no doubt be cautious of any fundamental changes to taxation rules and mortgage availability in the months to come.
“The mortgage market remains fluid and so it is always wise to seek out independent advice to keep abreast of any movements, even if consumers don’t plan to make any decisions quite yet.”
On the topic of savings, Ms Springall said: “Savers searching for the best possible return for their cash will be disappointed to see interest rates have fallen to record lows over the past year.
“Consumers may well have put away more cash during lockdown, but before then the impact of the coronavirus had initiated two base rate cuts in March 2020, which combined with a subsequent drop in competition, decimated the savings landscape.
“One of the most popular savings vehicles are easy access accounts and it would not be surprising to see savers continue to favour deals where they can get instant access to their cash.
“However, as the average rate on easy access accounts has dropped to 0.17 percent, some savers looking for a better return may need to review their options, such as with a fixed bond, but keep in mind that these vehicles have also seen large rate cuts.
“It is hoped that competition will return to the saving market, but it will no doubt be a steady process and not an overnight sensation.
“Savers would be wise to take advantage of any tax-free savings vehicles or Government initiatives such as the Help to Save scheme in the meantime and of course any plans for a new Government-backed NS&I savings deal to help combat the deficit.”
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