The simple answer is it depends! It depends on so many factors that there is no quick answer on the spot that we can give you without thoroughly reviewing your financial situation, your current position and your future plans. 

 

But what factors determine what interest rates you qualify for and what interest rates are available for you? Well, we’ve got you covered, in this piece we will go through each of the main factors one by one and cover them for you to help you find what interest rate is available and how you can get the best rate possible. 

 

Loan to value is the term for the size of the mortgage compared to the value of the property. The smaller the mortgage, the lower the loan to value. The loan to value is created or amending by the size of your deposit when you are buying, or the equity within the property when you remortgage. 

 

The loan to value determines the interest rates available to you, lenders band the loan to values typically into bands of 5 or 10%. For example, 0-60% will qualify for one interest rate, 60-70% the next interest rate above and so on with the rates increasing slightly as the LTV increases. 

 

If your loan to value is close to the next loan to value bracket you may want to consider increasing your deposit slightly so that you fall into the next banding of interest rates. By securing a lower interest rate on a smaller loan amount can drastically reduce your monthly repayments. This could be done by increasing your deposit at the point of purchase or making an overpayment on your remortgage before securing a new interest rate. 

 

The second most important factor that determines your interest rate options is your credit history. Notice we say ‘credit history’ not credit score. The score on your credit report can be misleading as somebody who has never had credit before will likely have the same credit score as someone who has a lot of credit and may have missed a couple of payments in the past. 

Your credit history is a key indicator to lenders and what your borrowing future will look like. Many lenders have black and white rules on what credit history cases they will lend on, such as that particular lender will not lend to any applicant who has a CCJ of more than £300 in the last 2 years. So, your credit history does not alter the rate you will get with that lender, as the products they have on offer are the same for everybody. But it will determine whether they will lend to you or not. 

 

In this case your credit history will determine which lenders will lend to you. Each lender has a different basket of mortgage options with differing interest rates attached. The lenders with more lenient lending criteria otherwise known as ‘adverse’ or ‘specialist’ lenders who cater to those with poor credit history can lend but will do so at a higher interest rate to reflect the associated risk of lending. 

 

The type of mortgage you opt for will impact the interest rate you have available. A tracker rate mortgage will carry an interest rate of X% over the Bank of England base rate, and depending on the state of the market a 2-year fixed rate mortgage will carry a different interest rate to a 5-year fixed rate. Depending on your property ownership plans you may wish to opt for the lower of these rate types to secure the lowest monthly repayments possible. 

 

There are some lenders on the market that offer preferential interest rates for particular types of buyers such as 1st time buyers. In 2024 1st time buyers made up over a 3rd of the market, as a result many lenders have made 1st time buyers their target client. In doing so they are offering as many incentives as possible to secure that business such as lower interest rates, free valuations and cashback to cover legal costs. 

 

Many lenders also offering lower interest rates to existing mortgage customers (notice we say mortgage customers, having a current account or credit card doesn’t qualify you for a better mortgage) to stay with them. Like with any business it is easier and cheaper to retain a customer then to find a new one, so lenders offer lower interest rates to those customers to stay with them. 

 

With climate change being a growing issue and general cost of living remaining high, the government are pushing to encourage people to reduce their energy usage and encourage builders to build more energy efficient homes. Some high street lenders now offer lower interest rates and cashback to those buying properties with a higher energy efficiency – usually A or B. So, buying an energy efficient home will not only save you money on your utility bills but potentially your mortgage repayments too! 

 

Believe it or not but your occupation and job type can also unlock some different mortgage options for you that will carry different interest rates also. For example, there is a building society that specifically lends to teachers, offering unique criteria and affordability to teachers. Another lender also offers different interest rate products for people in ‘professional’ job roles such as Drs, Nurses and the emergency services. 

 

To thoroughly review what options are available to you from across the wider market the best advice is always to consult with an independent mortgage adviser that has access to these specific lenders which you may not otherwise be aware of.