The best mortgage

If you're buying a house, this deal should be top of your list! It's the best mortgage around....

Now seems to be a pretty good time to be in the market for a new house. Not only is the mortgage market improving, with deals slowly becoming more competitive, but according to the Royal institution of Chartered Surveyors, sellers are significantly outnumbering new buyers.

That’s great news for buyers for two reasons – firstly, there are more prospective properties to choose from, so you have a better range of choice. And with supply outweighing demand, buyers are in a reasonably strong negotiating position.

So if you are looking to buy in the next few months, the big thing to consider is the financial side – which mortgage to go for. Here are my favourite deals.

My favourite tracker

Bank Base Rate has now languished at its record low of 0.5% for over a year now, and many will argue that the best way to take advantage of that is with a tracker mortgage.

There is currently a range of spectacularly cheap-looking mortgages available, with an initial rate of less than 2%. The lowest rate in the market comes from Alliance & Leicester, with its two-year tracker deal at Bank Base Rate plus 1.34% up to 70% loan-to-value, giving it a current rate of just 1.84%, while Cheltenham & Gloucester boasts its own mega-cheap deal, tracking Base Rate plus 1.49% (currently 1.99%) for two years, though you’ll need a 40% deposit.

However, what puts me off these deals are the staggering fees you’ll have to shell out to get them – the Alliance & Leicester deal will set you back 2% of the mortgage (that’s £4,000 on a £200,000 mortgage), while the Cheltenham & Gloucester deal costs 2.5% of the mortgage, plus a £99 fee. That’s some serious cash!

Instead, my personal favourite is the mortgage on offer from Santander, exclusively via mortgage brokers, which tracks Base Rate plus 1.95% (currently 2.45%) for two years, but will only set you back £995 in product fees and a 30% deposit.  

On a 25-year £200,000 mortgage, your repayments will be £60 more expensive each month, but taking the fee into account, over the first two years you’ll save at least £1,500!

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The term tracker option

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There are a number of great looking term trackers, including one from ING Direct which tracks Base Rate plus 1.99% for the life of the deal, and will only set you back £945 in product fees, though you’ll need a 40% deposit.

However, my favourite comes from HSBC, with its term tracker at the same rate as the ING deal, and with the slightly higher fee of £999. However, it’s available to borrowers with a deposit of 30%, making it far more accessible.

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The short-term fixed rate

While a super-cheap tracker looks very tempting, I much prefer the security of a fixed-rate mortgage. And there is no more popular fixed-rate deal among British borrowers than the two-year fix, as it allows you to shop around again for a new deal at the end of those two years.

Recent question on this topic

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  Should I overpay on my Interest Only mortgage?

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    SoftwareBear answered "How do you plan to clear the capital sum at the end of the mortgage ? Are you going to use the..."
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    MikeGG1 answered "You will be paying 2.94% but interest rates are liable to rise in a few months. I would top up..."
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So long as you have a huge deposit, then Halifax is your best bet, as the bank offers a fixed deal at just 2.79% (though this jumps to 4.79% in year two), and with booking fees of £1,240. However you will need a 40% equity stake, so it won’t be an option for many of us.

Personally, I much prefer the two-year deal from Mansfield Building Society, fixed at 3.09% for two years, which only requires a 25% deposit and the fee of £999. This is as an absolute steal, certainly compared to the two-year fixes at a similar rate of interest from Alliance & Leicester and Cheltenham & Gloucester that require higher deposits and charge extortionate product fees.

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My favourite mortgage!

However, as anyone who has ever read my articles will know, I’m a massive fan of fixing your mortgage rate over a longer term, and with mortgages only going to get more expensive when interest rates start heading north, now is just about the perfect time to fix for five years.

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• John Fitzsimons writes:

  Should you get a fixed rate or a tracker?

  With interest rates languishing at record lows, is now the time to take advantage with a tracker, or go for the safe option of a fixed rate?

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While the rates are noticeably higher than short-term fixed deals, you do have the security of that rate for a longer period, so I reckon it’s worth it in the long run.

What’s nice to see is that there is a range of products on offer, from a number of different lenders, at around 4.5% interest, with varying deposit sizes and product fees.

In my view, the best of the rest comes from Britannia Building Society, a five-year fixed rate at 4.49%, open to borrowers with a deposit of 25% or more, and costing £999 in product fees. Not only is this the cheapest five-year deal, it also is open to more borrowers thanks to its generous loan-to-value limit, and doesn’t boast an extortionate product fee.

However, for first-time buyers without such a healthy deposit, there are still some decent options. There are a host of products available at 80% loan-to-value, charging a little over 5%, though deposits of 15% and less will see you pay a fair bit more.

The best deal that I can find comes from Leeds Building Society, fixed at 5.49% for five years. So long as your mortgage size is less than £500,000, it will cost you £999 to get the product, while larger mortgages will set you back £199 plus 1% of the mortgage advance.

• Read this blog: Should you get a fixed rate or a tracker?

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