How to find the best mortgage rates

Unless you can afford to buy a property outright, you will need to apply for a mortgage from a bank or building society. The size of your mortgage will depend on how much the property is worth, how much you’ve saved for a deposit and what mortgage rate you’re charged.

There are various types of mortgages available, depending on your circumstances. For example, first-time buyers often have smaller cash deposits so will need to carefully consider things like fixed and tracker rates, while those who already have a mortgage but want a better interest rate and better terms might want to consider remortgaging with a different lender. Then, there are buy-to-let mortgages for people who buy property as an investment rather than a home for themselves.

For most people, a mortgage is their biggest financial commitment, so it’s important to shop around for the best mortgage deals. But with around a hundred UK mortgage lenders in the UK, finding the best rate can be overwhelming.

In most cases, lenders set their own mortgage rates. This means they can vary greatly across the market. To help you make the right decision when it comes to choosing a mortgage, we’ve written this article, which gives tips on how to find the best mortgage rates.

How do I find the best mortgage rates?

If you want a good deal on your mortgage, you need to understand the different types of mortgage rates, make any improvements to your credit score and do some research into the rates that are currently being offered by lenders.

You can also try going through a mortgage broker, as they have access to all the best deals, and before you finalise your decision, you should remember to take other mortgage fees into account too.

Read on for our top five tips for getting a great deal on your mortgage.

Five tips for getting the best mortgage rate

1. Understand the different types of mortgage rates

Before you start looking into mortgage rates, it’s important to understand what the different types are. This will help you make the right decision, based on your circumstances.

Here are the different mortgage rates, with an explanation of how they work:

  • Fixed-rate — A fixed-rate mortgage has a fixed interest rate for a set term. This is usually between two and ten years, although you can get a fixed term of more than ten years. The good thing about fixed-rate mortgages is that repayments stay the same and aren’t affected by the Bank of England’s fluctuating base rate, so you know exactly what you’re paying each month. The downside is that if you need to pay the mortgage off before the term ends, you will normally be charged a repayment fee.
  • Tracker — Tracker mortgages follow the Bank of England base rate, which means that when interest rates rise and fall, your monthly mortgage repayments will too. Different lenders charge different premiums on their tracker rate, which is usually a couple of percentage points above the Bank of England rate.
  • Standard variable rate — This is an interest rate set by your mortgage lender, which is usually a few percentage points above the Bank of England rate. If you have this type of mortgage, you could be paying more than you need to and should consider switching to a fixed or tracker mortgage. It’s worth noting that if you have one of the other mortgage rates, when it expires, you’ll go onto your lender’s standard variable rate unless you switch to another provider. So, before you take out a mortgage, make sure you could afford this rate in case a change in circumstances means you wouldn’t qualify for a better rate.
  • Discounted variable rate — Like the previous two mortgages, the rate you pay on discounted mortgages fluctuates. However, instead of paying a premium above the Bank of England’s base rate, you get a discount off your mortgage lender’s standard variable rate. Your lender can change this rate at their discretion, regardless of what rate the Bank of England sets.
  • Interest-only — With an interest-only mortgage, you only pay the interest each month and don’t have to repay the amount you’ve borrowed until the end of the term. The benefit of this is that your repayments are less than they are on a repayment mortgage, but you must be in a position to repay the original loan further down the line.
  • Offset — An offset mortgage could be a good option if you pay more in mortgage interest than you earn in a savings account. This is because it enables you to use your savings against the amount you owe, so you only pay interest on the remaining balance.

2. Improve your credit score

Your credit rating can have a huge impact on the mortgage rates and deals you’re offered. 

You may be able to improve your credit score by doing the following:

  • Close any inactive accounts
  • Don’t go into your overdraft
  • Fix any errors on your credit report
  • Manage your available credit carefully
  • Pay bills on time
  • Register on the electoral roll
  • Remove links to ex-partners and flatmates with low credit scores

If you have a low credit score, a provider that specialises in bad credit mortgages may be able to help you. The downsides to this are that you may have to put down a bigger cash deposit, you’re likely to pay more interest than someone with good credit and you might also have to pay higher upfront fees. We go into what some of the other mortgage fees are below.

3. Shop around

The easiest way to get an idea of the mortgage market is to do some research on the internet. The more research you do, the more likely you are to find the best mortgage rates. 

Price comparison sites like Compare the Market, GoCompare and Moneysupermarket are a good place to start your search, as they give you a quick overview of the best mortgage rates on the market.

4. Go through a mortgage broker

Many people use mortgage brokers to help them find the best mortgage rates. 

A mortgage broker will speak to you to find out about your circumstances and then advise you on the best deals. 

Be warned, though, that while they are independent from banks and building societies, some will only recommend mortgages from certain lenders, rather than searching the whole market. This means they might not be getting you the best rates.

Rather than going to see a mortgage broker in person, you may prefer to use an online broker instead. Some of the most popular online mortgage brokers include Habito, Trussle and L&C. They use algorithms to search through thousands of deals, which human advisers will then talk you through.

All you have to do is fill out an online application form at a time that suits you, after which, you’ll receive your recommendations. While the benefits include being able to track your application online and not having to wait for paperwork to be posted, a disadvantage of online mortgage brokers is that with no expert helping you fill out the form, there’s more risk of making a mistake which could lead to delays down the line.

Is it better to go to a mortgage broker or bank?

The good thing about using a mortgage broker is that they generally have access to deals that wouldn’t be offered to you by a bank directly. Also, some lenders don’t have branches, so to benefit from their deals, you have to go through a broker.

On the other hand, some lenders do offer their best rates to customers directly and going through a mortgage broker can be more expensive. While all mortgage brokers receive a payment from their recommended lenders, some will also charge you a fee for their services. More often than not, this will be a flat fee, but in some cases, it can be up to one per cent of your mortgage balance.

5. Consider other fees

When comparing mortgage recommendations, it’s important to remember that the lowest mortgage rate doesn’t necessarily mean the best deal.

Sometimes, there are other fees to take into account too, such as:

  • Arrangement fees — Most lenders charge an arrangement fee of around £1,000, but it could be more than that.
  • Booking fees — These are less common but some lenders do charge them.
  • Exit fees — Also known as an early repayment charge, an exit fee is a penalty that’s charged for leaving before the initial term is over. This is calculated as a percentage of your mortgage balance and, depending on the deal, will range from one per cent to five per cent.
  • Legal fees  — Your lender may make a contribution towards these.
  • Valuation fees — Again, some of this may be covered by the lender.

Can you negotiate mortgage rates?

It’s not possible to haggle down your mortgage rate, but you may be able to switch to a better deal elsewhere.

It’s a good idea to start shopping around for a better deal at least three months before your current deal ends. This is to avoid going onto your lender’s standard variable rate, which can be expensive.

In some cases, though, you may be able to get a better deal with your current lender. Some providers reward existing customers with better rates and, if the new deal is cheaper, they may let you switch to a new rate early, without charging you a fee. If you don’t increase your mortgage balance or change the term, your credit report won’t be rechecked, so your credit score won’t be affected. Bear in mind, though, that this doesn’t necessarily mean you’re getting the best mortgage deal on the market, so it’s wise to look around before committing to anything.

Summary

For most people, a mortgage is their biggest financial commitment, so it’s important to shop around for the best mortgage deals.

In most cases, lenders set their own mortgage rates. This means rates can vary greatly across the market. 

Our top five tips for getting a good deal on your mortgage are:

  1. Understand the different types of mortgage rates:
    • Fixed-rate — Fixed-rate mortgages have a fixed interest rate for a set term
    • Tracker — Tracker mortgages track the Bank of England base rate
    • Standard variable rate — This is an interest rate set by your mortgage lender, which is usually a few percentage points above the Bank of England rate
    • Discounted variable rate — With these types of mortgages, your interest rate varies, but instead of paying a premium above the Bank of England’s base rate, you get a discount off your mortgage lender’s standard variable rate
    • Interest-only — With an interest-only mortgage, you only pay the interest each month and don’t have to repay the amount you’ve borrowed until the end of the term
    • Offset — An offset mortgage enables you to use your savings against the amount you owe, so you only pay interest on the remaining balance
  2. Improve your credit score

You may be able to improve your credit score by doing the following:

  • Close any inactive accounts
  • Don’t go into your overdraft
  • Fix any errors on your credit report
  • Manage your available credit carefully
  • Pay bills on time
  • Register on the electoral roll
  • Remove links to ex-partners and flatmates with low credit scores
  1. Shop around

The easiest way to get an idea of the mortgage market is to do some research on the internet.

Price comparison sites like Compare the Market, GoCompare and Moneysupermarket are a good place to start your search, as they give you a quick overview of the best mortgage rates on the market.

  1. Go through a mortgage broker

A traditional mortgage broker will speak to you to find out about your circumstances and then advise you on the best deals. Alternatively, you may prefer to use an online broker like Habito, Trussle and L&C.

Mortgage brokers generally have access to deals that wouldn’t be offered to you by a bank directly and some lenders don’t have branches, so to benefit from their deals, you have to go through a broker. On the other hand, some lenders do offer their best rates to customers directly and going through a mortgage broker can be more expensive. 

  1. Consider other fees:
    • Arrangement fees
    • Booking fees
    • Exit fees
    • Legal fees
    • Valuation fees

It’s not possible to negotiate your mortgage rate, but you may be able to switch to a better deal, either elsewhere or with your current provider.