On The Martin Lewis Podcast, money-saving expert Martin Lewis explained how homeowners can save money long-term and secure lower interest rate deals.
He was joined with Andrew Montlake, managing director of the mortgage brokerage Coreco and they discussed how Britons can “beat the current mortgage mayhem”.
When asked about securing the best rate on the market, Mr Lewis stressed the less people borrow, the better.
He explained that if people still owe more than 60 percent of their home’s value on a mortgage, the more they can do to drop a Loan To Value (LTV) band, the cheaper their remortgage will be.
The main bands where interest rates really drop are at 90 percent, 80 percent, 75 percent and 60 percent LTV.
Mr Lewis said: “It’s important to say to people the real key when it comes to getting a mortgage is the less you’re borrowing the better until you get to that 40 percent level.
“But every five or 10 percent more deposit you have up to 40 percent can give you a better mortgage.”
LTV, is the ratio of what someone borrows as a mortgage against how much they pay as a deposit.
The money saving expert continued: “The big message is if you’re near one of the five percent extra deposit thresholds, try and push up to that.
“In fact if you can, try and push up to £100 beyond it as anecdotally that can improve underwriting.
“If you’re exactly on the limit it can look like you’re scraping it but if you’re over £100 it doesn’t look like that.’
Mr Montlake agreed, saying: “That’s a really big tip and a lot of people don’t realise they end up paying an interest rate a little higher than they needed to if they just put in another few hundred pounds.
“The best rates are unlocked at 40 percent but I will caveat and say rates are changing daily.”
The more equity people have in their property, then the lower their LTV will be. The lower their LTV, then the lower an interest rate they’ll be be able to get when remortgaging.
There are two things people can do to get into a lower LTV band.
Homeowners could borrow less and put some of their own money in at the point of remortgaging. Mr Lewis highlighted that this is well worth doing if people are really close to the next band.
Additionally, people can try to get a higher valuation figure. Those looking to remortgage could find out how much more the property would need to value at to push it down another band.
The website Money Saving Expert explains that to get a higher valuation, people will need to work for it and do their own research such as giving the valuer comparisons of other more expensive properties in the area, being at the valuation if it’s in person or making some changes to the home to make it look as best as possible.
Research shows almost two million households are set to feel the squeeze as their fixed-rate mortgage deals end this year, with most facing the prospect of higher monthly payments.
Anyone coming off a fixed rate deal who hasn’t got a new mortgage sorted will end up falling on their lender’s standard variable rate (SVR).
MoneyFacts data shows that the average SVR has increased over seven percent and could see an average rate rise from 2.58 percent to 7.3 percent.
Episodes of The Martin Lewis Podcast are available on BBC Sounds.
