How to get the best mortgage interest rate

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Interest rates are falling

Our good news for the new year is that mortgage interest rates have come down after their spike towards the end of 2022. That should be a relief to hear if you need to remortgage your home or are considering buying a new house.

However, the average mortgage interest rate is still higher than the historically low rates seen in late 2021/early 2022. But before you despair, there are things you can do to give yourself the greatest chance of getting the best mortgage interest rate.

4 ways to get the best mortgage interest rate

1.  Improve your credit score

Lenders use your credit score to determine how much risk you pose as a borrower. For example, if you have a low score, a lender might assume there’s a greater chance you’ll default on your mortgage payments, so they might charge you a higher rate of interest to cover this perceived risk. Conversely, a good score suggests you’re a lower risk and gives reassurance to lenders to offer you a lower interest rate.

Tips to improve your credit score:

  • Check your credit report regularly so you can take action to fix any mistakes
  • Register to vote so you’re added to the electoral roll
  • Avoid applying for lots of credit in a short space of time
  • Pay your bills on time
  • Use a credit card but keep on top of your monthly payments

2. Increase your deposit

The larger your deposit, the less you need to borrow, making you a lower credit risk to lenders. As such, your mortgage lender is more likely to offer you a lower interest rate.

The best mortgage rates are often available to borrowers with a 40% deposit. But any amount above 20% should give you access to better mortgage deals.

3. Change the term of your mortgage

Increasing the term of your mortgage could give you access to a lower interest rate. Longer-term loans are less risky to the lender, so, as a result, they have lower mortgage rates.

Also, as you’ll be spreading the payments over a more extended period, your monthly payments will be lower, improving affordability.

4. Shop around

It pays to shop around when seeking a new mortgage. There are hundreds of lenders and mortgage products available (some only via a broker). So while it might be convenient to stick with your existing lender or go to your bank, these might not be your best options.

If searching the market seems overwhelming, a mortgage broker can save you the time and stress of searching for a mortgage and find you the right deal.

But remember…

The mortgage interest rate isn’t the only factor to consider when calculating the cost of your mortgage. Other expenses, such as arrangement fees or overpayment and early repayment charges, could increase the overall cost of your mortgage, so make sure to evaluate these alongside the interest rate. Sometimes a mortgage with the lowest interest rate isn’t the cheapest product.

If you’re looking for a new mortgage, we can help you find the right product for your needs.