Average two-year fixed rate mortgage the lowest on record
This month the Bank of England has yet again held UK interest rates at the record low of 0.5%. The Bank Rate (sometimes called the ‘Base Rate’) has now remained unchanged for more than six years.
The Bank’s Monetary Policy Committee (MPC) said that inflation would stay below 1% until spring 2016, well below the Bank’s 2% target. Inflation has been hovering just above or (this month) below 0% for the past few months, but the Bank says that growth in the UK economy and the fading effect of last year’s big oil price falls will cause it to head towards 2% next year.
Many economists still think a UK rate rise will happen early next year, though some are beginning to forecast a slightly later move. These doubts are causing swap rates (which are a good measure of what it costs lenders to offer long term fixed rate mortgages) to fall back to level not seen since 2013.
So what effect is this having on mortgage rates?
The latest Money Facts survey shows that the run of low rates has not yet come to an end. The average two-year fixed rate is as low as it was back in the summer, although that fall in the average has been driven by competition between lenders in the high loan-to-value (LTV) sector of the market. Without that competition, average rates would be rising.
Money Facts reports that the average two-year fixed rate has fallen by 0.04% this month, down from September’s rate of 2.72% to stand at 2.68%, meaning that it’s returned to the lowest rate on record. It’ll come as welcome news to borrowers who still want to snap up a low-rate mortgage before the Bank rate begins to creep up.
But while many banks are offering competitive fixed rates, mortgage borrowers still have to pass strict affordability tests which were introduced last April by the Financial Conduct Authority’s Mortgage Market Review.
So how low are the lowest fixed rates? A quick scan of the best buys tables shows that, for borrowers with a substantial deposit – or plenty of equity in their current property – and who can meet the affordability and other lending criteria, it is possible to find 2 year fixed rates below 2%, 5 year fixed rates around 3.5% and 10 year fixed rates below 4%.
There are of course a number of factors, in addition to the interest rate, which affect the cost of borrowing, such as arrangement fees, early repayment charges and other related costs. For mortgage advice and a recommendation that is based on your individual circumstances, please call or e-mail us now.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.