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By Kevin Peachey
Cost of living correspondent

Competition has intensified among mortgage lenders for people who are searching for a new deal, bringing some relief to those facing higher bills.

Brokers say that some lenders now have better options for those remortgaging than for those buying a property.

This will help people whose relatively cheap fixed-rate deal is coming to an end and are looking for a new one.

Two major lenders, Barclays and Santander, have announced further significant cuts.

The firms said they would reduce rates on some of their products on Wednesday by up to 0.82 percentage points.

Bills have risen

The interest rate on a fixed mortgage does not change until the deal expires, usually after two or five years, and a new one is chosen to replace it. Doing nothing would leave people on a variable rate, which is very expensive – with an average rate of more than 8%.

About 1.6 million existing borrowers have relatively cheap fixed-rate deals expiring this year. While their next deal is very likely to be more expensive, a series of cuts in rates by major lenders since the start of the year is set to ease some of that financial impact.

How much could my mortgage go up by?

At this rate, your payments could change by…

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The information you provided on your monthly payments would not be sufficient to pay off your mortgage within the number of years given.

This calculator does not constitute financial advice. It is based on a standard mortgage repayment formula based on the mortgage size and length and a fixed interest rate. It should be used as a guide only and does not represent the suitability, eligibility or availability of mortgage offers for users. For exact figures, users will need to approach an official mortgage lender.

Interest rates fluctuate based on the Bank of England’s base rate and market conditions.

“It is interesting to see that some lenders are offering cheaper products for remortgages than for property purchases, which shows where they believe the market is at the moment,” said Andrew Montlake from mortgage broker Coreco.

“This is excellent news for those who have been worrying about coming off ultra-low mortgage rates into a higher rate environment and will help ease the pain with the jump being less than they may have feared.”

The financial information service Moneyfacts said the latest average rate for all new, two-year fixed mortgage deals has dropped sharply since the start of the year.

It now stands at 5.76%, down about a percentage point from last year’s peak.

For five-year deals, the average rate is now 5.37%.

The impact of relatively high mortgage rates is still likely to bring down house prices and increase arrears during this year, according to forecasters.

What happens if I miss a mortgage payment?

If you miss two or more months’ repayments you are officially in arrears
Your lender must then treat you fairly by considering any requests about changing how you pay, such as lower repayments for a short time
They might also allow you to extend the term of the mortgage or let you pay just the interest for a certain period
However, any arrangement will be reflected on your credit file, which could affect your ability to borrow money in the future

Read more here.

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