Finding the right mortgage can be daunting. There are literally thousands to choose from, so you need to narrow down the choice.
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First work out how much you can realistically afford each month. Then work out how big a deposit you can scrape together – the bigger your deposit, the better the deals.
Next decide if you want a fixed or variable-rate mortgage. If you are on a tight budget or want to ensure your payments will not rise above a certain amount, consider fixed-rate and capped-rate deals.
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With a fixed-rate deal your repayments are fixed for a set period of time. With a capped-rate mortgage your interest rate cannot rise above a set ceiling and if the base rate falls the amount of interest you pay could fall too.
If you are prepared to take a bit of a gamble and can be more flexible, you might prefer a variable-rate mortgage. Variable-rate deals include your lenders standard variable rate (SVR), a discount rate linked to your lenders SVR or a tracker where the rate of interest is linked to the Bank of England base rate.
Many variable deals come with no early repayment charges (ERCs), so you can remortgage when you need to without paying a penalty.
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Fixed-rate deals offer certainty but are not always the cheapest option, says Ray Boulger of independent mortgage brokers John Charcol. He points out that fixed-rate deals are currently around 0.5 per cent higher than trackers so you could be buying at the top of the market.
Fixed-rate deals are currently based on the assumption that the Bank of England base rate will go up to 5.75 or 6 per cent. I expect the base rate to peak by the end of the year at no more than 6 per cent and then to fall back next year. Trackers will fall in line and will then look better value than current fixed-rate deals, he says.
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Next you need to consider how long you want a mortgage deal to last. If you plan to move, have children or change jobs in the future, this could influence the length of deal you want.
What is best for you comes down to your individual circumstances. The four boxes at the bottom of these pages provide scenarios to help you decide. The advice comes from independent mortgage advisers Ray Boulger, Debbie Boyes of Debbie J Boyes Professional Mortgage Advisors and Rob Clifford of Mortgageforce.
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