Halifax Introduces Variable Rate Mortgage | Creditraters.com | Credit Raters

Halifax Introduces A Variable Rate Mortgage Starting At 0.98%

27 Nov 2019
Approx Reading time: 3 minutes

  • Halifax launches new variable rate mortgage with an initial rate of 0.98%
  • Mortgage rates have been dropping, but mortgagors prefer fixed-rate mortgages because of certainty in monthly payments
  • Variable-rate mortgages are a massive gamble because they depend on the possibility of base rate dropping

Halifax is taking the winter mortgage rate war to another level following the launch of an initial rate of 0.98%. It is the first time in over year that Halifax is breaking the 1% barrier. However, borrowers should be cautious, as this is somehow a gamble. This comes at a time when UK mortgage lending is declining having dropped to a new six-month low in September.

New variable rate mortgage deal

Home movers will now receive a mortgage at a rate of 0.98%. Interestingly this new tracker deal is available to mortgagors with a 40% deposit and an upfront fee of £999. It will be the lowest rate for borrowers in the market, but it is available for customers moving home. Therefore remortgagers and first-time buyers will have to look for variable rated mortgage deals elsewhere.

With mortgage rates low across the market, borrowers could save up to £1,300 if they capitalize on the variable-rate deals. Close to 90% of mortgagors prefer fixed interest loans seeking certainty in their monthly repayments. Variable mortgage rates change during the loan term. As a result, it will be hard for borrowers to know what they will be repaying each month. It is why most prefer a fixed-rate mortgage.

Dropping mortgage rates

This year borrowers have enjoyed as mortgage rates have been dropping across the board. And as lenders strive to get more business, there is a possibility that the rates could fall further. Currently, the average rate on a five-year fix and the two-year fix is the lowest registered this year.

Most borrowers will take either the two-year fix or five-year fix rate mortgage compared to this new Halifax deal. Only around 3.1% of borrowers sought the tracker last month according to Experian data. The variable-rate mortgages follow the base rate of the Bank of England and a percentage.

Halifax has priced its new deal at the bank of England's base rate plus 0.23% bringing it to 0.98%. Therefore should the Bank of England increase its base rate to 1%, then borrowers will pay 1.23%. Similarly, if it reduces to 0.5%, a borrower will pay 0.73%.

A variable-rate mortgage is a huge gamble

Taking the variable rate mortgage is a gamble one takes by hopping the mortgage interest rates will drop. However, most borrowers will not abandon the security of fixed-rate mortgage deals for the tracker deals. It is, therefore, essential to note that a tracker deal will be appropriate if one anticipates dropping the base rate.

Trinity Financials Aaron Strutt stated that there are concerns among borrowers regarding mortgage rates rising. It is important to note that it is possible to convert the variable rate mortgage to a fixed-rate mortgage. Strutt indicated that the variable rate mortgages ideal for those with plans of moving in the future. 

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Rebecca White

Rebecca White is chief editor at CreditRaters.com. Rebecca has an extensive amount of knowledge on financial subjects including short-term loans & debt consolidation in the UK and USA. Rebecca has wrote for many publishers such as Debt Secret, My Money, VL and more.