Mortgage fixed rates at a record low

The Bank of England has recently reported that fixed rates are at record lows. So could the next few months ultimately prove the best time in history to take out a fixed rate mortgage? The mortgage lenders’ fixed rate funding costs are historically quite low, but they are slightly higher than their lowest point two years ago – and they are steadily rising. That suggests that fixed rates are unlikely to fall any further and will start rising at some point in the next few months.

Experts are agreed that it is competition between lenders that is pushing mortgage rates down at the moment, not the funding costs. New entrants to the UK mortgage market have increased competition, as they have needed to offer attractive rates to make an impression against more established rivals.

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. There was also a further recommendation by the Bank of England last June that loans for more than 4.5 x income should make up no more than 15% of a bank’s new lending.

Both of these restrictions put the brakes on the UK mortgage market in the second half of 2014 as lenders got used to the new lending regime. It seems that they have started 2015 trying to make up for lost time.

So how low are mortgage fixed rates? Well, 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 below 3% 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.