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The mortgage trick that could save you thousands

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Homeowners could save thousands of pounds by using a little-known mortgage trick.

And the timing couldn’t be better as borrowers brace for the Bank of England to hike interest rates to a 13-year high tomorrow. Around 1.5 million fixed-rate home loans are set to expire this year, according to banking trade body UK Finance.

With interest rates rising, borrowers face a hefty jump in their monthly repayments. Yet there is a way to mitigate this extra expense – you just have to act quickly.

Many borrowers do not realise that lenders often allow you to lock into a new rate up to six months before your current deal ends. 

Mortgage renewals: Around 1.5 million fixed-rate home loans are set to expire this year, according to banking trade body UK Finance

Mortgage renewals: Around 1.5 million fixed-rate home loans are set to expire this year, according to banking trade body UK Finance

They instead wait until their existing loan has run its course before signing up to a new offer.

But with top rates now disappearing almost daily and interest rates set to soar, this could be a costly mistake.

In fact, Money Mail figures show that reserving a new rate early could save the average homeowner nearly £500 a year — more than £2,000 over the course of a typical five-year fixed deal.

A fixed deal allows borrowers to lock in their rate for a period of two, three, five or even ten years. When it ends, they must pick a new deal to avoid paying their lender’s ‘standard variable rate’, which is usually vastly more expensive.

If you switch before the end of your term it usually triggers a hefty penalty known as an early repayment charge. 

What you need to know about remortgaging 

If your fixed rate deal is coming to an end this year, then it is time to start thinking about remortgaging now.

The way to find the best deal is to be armed with as much knowledge as possible. 

In our guide, we explain how to remortgage and find the best deal, answering borrowers’ common questions. 

But most lenders offer a loophole that allows borrowers to apply for a new deal up to six months before their term expires — which could prove invaluable in the current market.

David Hollingworth, of broker London & Country, says: ‘With rates rising, you could bag a rate that simply won’t be available in one month’s time, let alone six.’

The Bank of England has now hiked the base rate four times since December, from a record low of 0.1 per cent to 1 per cent last month.

Tomorrow could bring fresh pain with rates expected to leap to 1.25 per cent, possibly higher.

Experts also predict interest rates could hit 2 per cent before the end of the year as the Bank battles to keep a lid on spiralling inflation.

As a result, cheap mortgage deals are fast disappearing. All sub-1 per cent deals have vanished since last year. 

Many borrowers do not realise that lenders often allow you to lock into a new rate up to six months before your current deal ends

Many borrowers do not realise that lenders often allow you to lock into a new rate up to six months before your current deal ends

The average two-year fixed-rate deal has now breached 3 per cent for the first time in over seven years, according to data analysts Moneyfacts. 

And a typical five-year mortgage nudged up by 0.16 percentage points in just one month from April to May.

Analysis by Money Mail shows the average household could save £475 in one year alone by agreeing a new mortgage deal in advance — a £2,375 saving over five years. This is based on a typical outstanding home loan of £161,774.

If the average five-year fixed rate rises by a further 0.5 percentage points by the end of 2022, borrowers would pay 3.67 per cent compared with 3.17 per cent now. 

With the loan size above, this would cost homeowners on a five-year deal an extra £39.59 a month — or £475 a year.

While many homeowners may prefer to fix rates for longer terms, experts are wary of recommending ten-year fixed deals.

Jonathan Harris, managing director of broker Forensic Property Finance, says: ‘There’s been increased interest in ten-year fixes because they are so competitively priced. But once people realise the early repayment charges involved, they often change their mind.’

Anyone who has suffered financial setbacks may find it easier to apply for a product transfer with their existing lender. 

These are usually available up to three months before your deal ends and can be quicker to arrange as the bank already knows your details.

Mr Harris says: ‘While you can arrange a product transfer without proof of income, you can’t remortgage without it — which is why the former works better for some.’

For some borrowers, who are perhaps looking to move house soon, a flexible, variable-rate deal may still work out best as there are no early-exit fees.

Rosie Fish, of online mortgage company Habito, says: ‘If you have six months or less left on your current deal, now is the time to get ahead of any further rate rises. 

The cheapest deals on the market are being withdrawn at short notice, so make sure your documents are in order to help avoid delays when it’s time to submit your application.’

A mortgage broker can help you find the right deal at the right time, as well as access offers not available to homeowners direct.

London & Country, Habito, and Trussle are all fee-free. Website unbiased.co.uk can also connect you with brokers in your area.

Best mortgage rates and how to find them

Mortgage rates have risen substantially as the Bank of England’s base rate has climbed rapidly.

If you are looking to buy your first home, move or remortgage, it’s important to get good independent mortgage advice from a broker who can help you find the best deal. 

To help our readers find the best mortgage, This is Money has partnered with independent fee-free broker L&C.

Our mortgage calculator can let you filter deals to see which ones suit your home’s value and level of deposit.

You can also compare different mortgage fixed rate lengths, from two-year fixes, to five-year fixes and ten-year fixes, with monthly and total costs shown.

Use the tool at the link below to compare the best deals, factoring in both fees and rates. 

> Compare the best mortgage deals available now  

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

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Bloom secures planning for London ultra-urban warehouse developments (GB)

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Bloom has secured planning consent for two developments in central London. The developments are located in Hackney and Brixton and are the first to be carried out by Bloom for its €290.4m (£250m) ultra-urban warehouse joint venture with Angelo Gordon to acquire and develop sites in central London. In Hackney, on a site by the A12 next to 331 Wick Road, Bloom will develop two units, totaling 14,045ft², designed by Michael Sparks Associates. Construction will start next month, with completion expected in April 2023. In Brixton, at 146-156 Brixton Hill and Units 5 & 6 Waterworks Road, Bloom will develop five units, totaling 35,360ft², designed by Chetwoods. Construction will start in September, with completion expected in August 2023.

 

Both developments will be targeting a BREEAM sustainability rating of ‘Excellent’ and an EPC rating of ‘A+’ in accord with Bloom’s core sustainability objective to reduce greenhouse gas emissions through construction and operational efficiency. The schemes will include extensive urban greening through the implementation of green walls, green roofs, increased landscaping, bird boxes, and insect hotels to significantly improve the biodiversity; renewable energy in the form of solar photovoltaic panels on the roofs; and lorry, car, and cycle EV charging points to encourage sustainable and active modes of transport as well as enhanced power capacity to accommodate future EV transport technologies.

 

Tom Davies, co-founder of Bloom, said: “Our first two planning consents represent an important milestone for the Bloom team, which is working hard to deliver high-quality and design-led industrial and logistics schemes in supply-constrained inner London sub-markets”.

 

Sam McGirr, co-founder of Bloom, said: “These planning consents for well-located sites give us the opportunity to meet the high demand for convenience and speed from businesses, such as F&B delivery, post and parcel, e-mobility, self-storage and urban logistics and consumers in the local communities”.

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Could equity release be used to help more younger homebuyers?

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Younger first-time buyers could be given more financial help from the Bank of Grandma and Grandad, through the use of improved equity release products, a new report suggests.

The document written by Tom McPhail, of consultancy The Lang Cat, claimed that younger buyers are missing out because older members of their family are unable to satisfactorily tap into their property wealth.

Mr McPhail said: ‘Releasing some of the equity in a property means older homeowners can choose when and how they share their wealth with younger generations.

‘An equity release by grandparents of say £20,000 now, could be transformational for a 20 something struggling to raise a deposit and get on the housing ladder but would make only a very modest dent to the value of the grandparent’s house.’

Releasing some of the equity in a property means older homeowners can choose when and how they share their wealth with younger generations, says new report

Releasing some of the equity in a property means older homeowners can choose when and how they share their wealth with younger generations, says new report

The report acknowledged that equity release has endured a poor reputation in the past after customers suffered ‘severe’ financial knocks.

The sector has been criticised for encouraging people to take on debt, particularly later on in life.

There has also been other concerns about equity release, such as customers falling into negative equity where the value of a property is less than the loan taken out against it when house prices fall.

The report suggested that while the equity release sector has since begun to put ‘its house in order’, it is ‘still not perfect’ and some regulatory safeguards need to be strengthened.

It called for several issues to be looked at, including early redemption charges on equity release products.

It said that most providers apply a simple sliding scale of charges, for example 10 per cent in year on to 1 per cent in year 10.

However, it claimed that some providers apply an early redemption charge based on prevailing gilt rates at that time, putting customers at an ‘unfair disadvantage’.

This is because the fees are not transparent as there is no way a customer can know in advance whether they’d be liable for a charge and if so, how much. 

In the past, customers have also fallen foul of the small print on their equity release loans when it comes to early-redemption penalties – such as couples who must pay an exit fee unless both of them need to go into care.

The report also raised questions about interest rates on equity release products. It said providers should be consistent with their lending criteria and not move the goalposts after customers have taken out a loan, as this can make it harder for them to access a top-up loan in the future, potentially forcing them to remortgage. 

Equity release products could help people access their property wealth to help younger members of their family onto the property ladder

Equity release products could help people access their property wealth to help younger members of their family onto the property ladder

The report argued that equity release products could help people access their property wealth to help younger members of their family onto the property ladder.

Mr McPhail added: ‘Raising a deposit has become an increasingly significant barrier to getting on the housing ladder, with increasing numbers of first-time buyers having to rely on financial help from older generations.

‘Releasing some of the equity in a property allows older homeowners to choose when and how they share their wealth with the younger generation.

‘This more targeted approach gives them greater control to use their assets to the maximum benefit at the point of need.’

Raising a deposit is a barrier to getting on the housing ladder, with increasing numbers of first-time buyers having to rely on financial help from older generations, says the report's author Tom McPhail

Raising a deposit is a barrier to getting on the housing ladder, with increasing numbers of first-time buyers having to rely on financial help from older generations, says the report’s author Tom McPhail

Equity release: How it works and advice

To help readers considering equity release, This is Money has partnered with Age Partnership+, independent advisers who specialise in retirement mortgages and equity release. 

Age Partnership+ compares deals across the whole of the market and their advisers can help you work out whether equity release is right for you – or whether there are better options, such as downsizing. 

Age Partnership+ advisers can also see if those with existing equity release deals can save money by switching. 

You can compare equity release rates and work out how much you could potentially borrow with This is Money’s new calculator powered by broker Age Partnership+.* 

 * Partner link

Jonathan Harris, of mortgage broker Forensic Property Finance, said: ‘Equity release has historically been viewed as a ‘murky’, high-risk sector, fuelled by minimal regulation, poorly-qualified advisers, only a handful of lenders and extortionately high interest rates.

‘Fast forward to today and we see a dramatically transformed sector, benefiting from strict regulation, highly-qualified advisers, multiple lenders and access to very competitive interest rates. 

‘Not surprisingly, equity release is now a viable and growing market for older borrowers looking to utilise the gains seen on property prices to bolster lifestyles, as well as pass on wealth to children when they need it.

‘Those considering equity release should make sure they understand the implications and involve family in any decision-making. It is always important to seek advice from suitably-qualified advisers.’

It comes as a separate report by Legal & General suggested that one in every £90 spent by retired Britons is funded by equity release.

It said that equity release funded an estimated £3billion in retirement spending last year, although it didn’t mentioned the money going to younger generations towards buying a property.

Instead, the report’s survey of 2,000 homeowners found that those with equity release have most frequently used the product to finance home improvements, at 26 per cent.

It said equity release is also being used to support costs such as medical expenses at 17 per cent, maintaining living standards in retirement at 16 per cent, and paying off personal debt at 16 per cent, for example paying off interest-only mortgages. 

It suggested that equity release is likely to play an increasingly important role in financing care-related expenses, with 19 per cent of prospective homeowners citing it as a consideration.

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Allianz Real Estate buys prime office building in Rome (IT)

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Allianz Real Estate, advised by Dils, has acquired an office property in the centre of Rome. The transaction, worth circa €175m, is one of the most important to have been carried out on the real estate market in Rome in recent years.

 

The building, consisting of eleven storeys, comprising nine above-ground and two underground, has a gross lettable area of circa 22,000m² and has undergone a major refurbishment, offering the highest environmental sustainability and energy efficiency standards (LEED Gold Certification). The strategic location, between the CBD and Termini Station, is enjoying great success, especially among corporate occupiers. 

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