Fixed rate mortgage costs on downward trend
The cost of fixed rate mortgages has been falling all year, with longer-term deals currently offering particularly good value. According to moneyfacts.co.uk, the average two-year fixed rate mortgage now costs 2.30%, compared to 2.31% in January this year and 2.57% in Jun 2016.
Five-year fixed rates have fallen more substantially to an average of 2.88%, down from 2.92% in January and 3.17% last June, while for ten year fixed rate mortgages the average is now charged at 3.12%, doen from 3.20% in January this year and 3.49% last June.
Charlotte Nelson, finance expert at moneyfacts.co.uk, said:
“The past six months have seen rates fall across the market, with some of the lowest rates on record reported in the first half of this year, clear signs that competition in the mortgage market is still rife. Alongside this, product numbers have also increased significantly, with the number of deals available at 75% loan-to-value (LTV) increasing by 81 to 904 since the start of this year.
“However, the traditional two-year fixed rate market seems to have become saturated due to heavy competition among providers. As a result, many providers have shifted their focus to longer-term deals, making borrowers now consider long-term fixed as an option to give themselves extra peace of mind.
“First-time buyers have had a good start to the year, too, with the number of products at 95% LTV increasing from 242 in January to 287 today. Rates have also fallen in this key area, with the average five-year fixed rate at 95% LTV dropping from 4.63% to 4.58% over the same period.
“With recent statistics from the Bank of England showing that the number of mortgage approvals has fallen to a record low and house prices are going down* there are signs the housing market is starting to stagnate. If this continues, it can have a serious impact on the mortgage market, causing the growth we have seen at the very least to slow, however this might be compensated by borrowers looking to remortgage. This could be partly to blame for the small reduction in the average two-year fixed rate over the past six months.
“Whilst the mortgage market is still buoyant, now would be a great time for borrowers to find themselves a cheap and cost-effective offering. Given the increased choice in the market, it is even more important for everyone to shop around to ensure they get the best deal for them.”