Contractors, a sub-1% mortgage is on offer from Halifax (but it's not on the High Street)
Effective since Monday August 9th, Halifax is offering some of the lowest mortgage interest rates we’ve ever seen, and by ‘low,’ we mean astoundingly LOW.
But be aware contractors, this unprecedented deal is not available in-branch -- Halifax is only offering these sub-1% rates through intermediaries (brokers).
So, what are the relevant fees, who are these rates for, and why now? In this update exclusively for ContractorUK, let me address all these questions, writes John Yerou, chief executive of contractor mortgage broker Freelancer Financials.
What is Halifax up to with its new sub-1% mortgage deal?
The short answer is that the lender wants to balance its books.
The longer answer, and to fully understand Halifax’s timing and motivation, you first must realise that not all mortgage business is equal!
No doubt many regular mortgage holders, those of you with buy-to-let portfolios or who always switch before falling onto a lender’s SVR, will have heard the term ‘subprime.’
As the name suggests, subprime is mortgage lending to borrowers with imperfect credit. On the flip side, those with great credit, constitute the ‘prime’ mortgage market.
Now, responsible lenders like Halifax have a duty to ensure that their books are NOT weighted with subprime borrowers.
You’d therefore be forgiven for thinking that it’s the prime v subprime balance I’m talking about here. But not quite. Lenders also must be mindful of the spread of interest rates across their mortgage books.
Cash in the bank isn’t everything
While contractors might think that banks are overjoyed when a large portion of their borrowers are paying high interest rates, for all manner of reasons, it’s not necessarily a ‘good thing’ for them! Too many homeowners paying through the nose could push up ‘risk’. Lenders have enough of that to contend with at the minute.
It also makes them look uncompetitive, and could jeopardise existing customers staying with them when the introductory rate ends. Simple economics: it’s easier for a bank to retain a client’s business than it is to win a new one. So, again, too high = not good.
Thanks to recent events, that’s the position many lenders find themselves in now. Too many of the mortgages on their books are at a disproportionately high rate. As such, this move by Halifax to reduce interest rates to an astonishing low level is an exercise in balancing their risk -- both in helping their current borrowers stay on track, and their own ongoing business.
These new Halifax rates and who they’re for
The easiest way to represent the rates Halifax have launched is in a table. This is a snapshot of the mortgages we have with Halifax, many of which are exclusive or semi-exclusive to us.
As mentioned previously, you won't find these deals if you head to your local high street branch or ring the call centre (and yes, still no joy even if your personal or business account is with Halifax!). Here’s the table:
|For||Max LTV||Min Loan||Max Loan||Fixed Term||Rate||FeeType||Remortgage|
|Remortgage||60%||£25,0000||£1,000,00||2 Years||0.90%||£1,499||Repayment/Interest Only|
|Remortgage||60%||£25,000||£1,000,000||2 Years||0.91%||£999||Repayment/Interest Only|
|Remortgage||75%||£25,000||£1,000,000||2 Years||0.98%||£1.499||Repayment/Interest Only|
|Remortgage||60%||£25,000||£1,000,000||5 Years||0.98%||£1,499||Repayment/Interest Only|
|First Time Buyer /Homemover||85%||£25,000||£1,000,000||2 Years||1.91%||£1,499||Repayment|
|First Time Buyer /Homemover||60%||£250,000||£1,000,000||2 Years||0.83%||£1,499||Repayment/Interest Only|
|First Time Buyer /Homemover||60%||£250,000||£1,000,000||5 Years||1.03%||£1,499||Repayment/Interest Only|
Finally, fancy fee-free?
Hopefully, there's something in that table for everyone, or least something that reflects or part-reflects your circumstances. Bear in mind we also have ‘fee-free’ products (albeit with different interest rate and deposit criteria), among other offerings.
If not, don't worry; we have dozens and dozens of deals. Barclays and Accord especially have been brilliant over the last 18 months for contractors running either their own limited company or working through an umbrella company. More details from us on the brolly contingent will follow, as we were right to say lenders are waking up to the increasingly umbrella-using contractor workforce. For now however, keep in mind that our advisers are experts at matching specific circumstances to the best lender or mortgage. So let's get you on the ladder, too.
To read more about contractor mortgages click here.