25th January 2016
At the end of 2015 rumours about a base rate rise in the near-future reached boiling point but it appears that providers ignored the pundits as research shows that fixed mortgage rates have continued to fall across all loan-to-values (LTVs) and terms.
Given that Bank of England governor Mark Carney has said that it is not quite the right time to raise base rate many borrowers can breathe a sigh of relief – at least for the present.
However, it is still a question of when the Bank of England will raise interest rates rather than if, so borrowers need to take advantage of current low mortgage rates before they disappear.
Charlotte Nelson, finance expert at Moneyfacts.co.uk, said: “For the last few years, new and old borrowers alike have been enjoying the benefits of downward-spiraling mortgage rates, which have been fuelled by heady competition in the mortgage market.
“For example, the average two-year fixed rate deal at 75% LTV has fallen by 0.69% in just one year, while the average five-year fixed deal at 75% LTV has dropped from 3.25% to 2.94% over the same period.
“With the average Standard Variable Rate (SVR) standing at 4.82% today, it’s unsurprising that more and more mortgage holders are remortgaging to a better deal: by switching to the average two-year fixed rate at 60% LTV today, borrowers can potentially save £3,618.72 in the first year.”
But Nelson added that after taking advantage of the cheap rates on offer, borrowers should consider using the money saved to make overpayments on their mortgage.
Most deals offer this option, and by paying an extra £100 a month on top of their normal mortgage repayments, borrowers, with a £200,000 loan could shave three years off their mortgage term.
She added: “Mortgage payments are one of the biggest financial outlays a homeowner can have, so it’s a no-brainer to grab a low rate deal while they’re still available. Of course, borrowers need to look at the mortgage as a whole to ensure they get the best deal for them, but by taking advantage of the rates on offer today, they could end up saving a significant amount of money.”
|Average Two-Year Fixed at 60% LTV||4.05%||3.82%||2.91%||2.07%||1.99%|
|Average Two-Year Fixed at 75% LTV||4.14%||3.90%||3.12%||2.85%||2.16%|
|Average Two-Year Fixed at 90% LTV||5.40%||4.86%||4.28%||3.84%||3.06%|
|Average Five-Year Fixed at 60% LTV||4.35%||3.44%||3.21%||2.97%||2.66%|
|Average Five-Year Fixed at 75% LTV||4.13%||3.76%||3.53%||3.25%||2.94%|
|Average Five-Year Fixed at 90% LTV||5.54%||5.15%||4.77%||4.56%||3.79%|
|Source: Moneyfacts.co.uk||Compiled: 25.1.16|