Martin Lewis issues mortgage warning to every single homeowner

Martin Lewis has issued a warning to all homeowners amid record low mortgages – and tens of thousands of bill payers could see their monthly costs fall as a result.

The consumer expert said households should check they are on the best possible deal as interest rates fall below 1%.

This particularly applies to those who are on a variable rate – which could mean they are paying an eye-watering rate for their loan each month.

Those that are approaching the end of their fixed term should start comparing rates six months early due to Covid delays and pressure on banks and brokers right now.

“Rates have dropped below 1% – check urgently if you can switch & save £1,000s. Acceptance isn’t always easy, but don’t just accept the status quo,” the consumer expert told this week’s MoneySavingExpert readers.

He said a combination of “ultra-low UK interest rates”, the stamp duty holiday and people saving more during the pandemic, means there’s huge competition that customers could take advantage of.

That includes both buyers and those remortgaging who may be able to cut their costs overnight.

Explaining how homeowners can secure the cheapest mortgage, he urged buyers to act now to avoid any standard variable rates – often the default rates you pay when your initial term ends.

He says the sweet spot is to apply for a cheaper deal three to six months before your fixed term ends.

When getting started, check the deal your currently lender is offering then try a mortgage comparison tool to find out if you could get a cheaper rate elsewhere.

The first questions to ask yourself when you find a deal are:

1. What is the interest rate and what does that amount to in monthly payments?
2. What type of mortgage deal is it? Most people will opt for fixed or tracker deals.
3. How long does the introduction period last and what are the upfront fees of the deal?
4. Will you be penalised to switch? Are there early repayment/exit penalties during your fix or tracker deal?
5. What’s the loan to value (LTV) – how much of your home’s value do you need to borrow?

Most rates fluctuate because of the loan to value (LTV) on the mortgage.

Mortgages start at 95% LTV, but are usually far cheaper at 90% or less than the home’s value.

Also factor in your savings, if you’ve been lucky enough to put money away during the pandemic, putting it towards your mortgage could save you tens of thousands of pounds in the long run by reducing your loan to value ratio.

For example, if you had a £150,000 mortgage, and used an extra £1,000 of savings to get you to 75% LTV, the top two year fixed deal drops to 1.18%. That means you would pay £580 a month, as opposed to 1.79%, which was £625 a month, Lewis explains.

You can use MoneySavingExpert’s handy mortgage calculator to find out what your repayments would be.