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Mortgage lenders are offering historically low rates on five-year fixed rate mortgages for borrowers with a deposit of 40% or more to put down.

During the course of the Covid pandemic, many mortgage lenders have withdrawn many deals from the marketplace due to general economic uncertainty. However, in recent weeks, data from financial information service Defaqto, reveals that some providers have started offering some extremely attractive deals, particularly for those looking to borrow at 60% LTV at a fixed rate for five years.

The current best buy is the Barclays five-year Fixed at 1.19% for 60% LTV, the lowest rate on the market for at least 12 years. Until a few months ago, the best comparable rate being offered was 1.28%.

Clydesdale Building Society, Lloyds Bank, HSBC and Virgin Money are also offering some of the most competitive five-year fixed rate deals for borrowers with smaller deposits.

As a rule, the longer a borrower locks in their rate, the higher the rate charged. So traditionally five year fixed rates are more expensive than those fixed for 2 years. Right now, this is not the case – the best buy fixed rate for two years at 60% LTV is currently 1.29%.

These products are only available to those who have very large deposits or equity in their homes, who only need to borrow up to 60% of the property’s value. This will mainly benefit those who are remortgaging, rather than first-time buyers, and those who know they are likely to stay in their property for the next five years.

Katie Brain, consumer banking expert at Defaqto, said:

“We haven’t seen rates this low for a very long time and it is great news for anyone looking to remortgage. While the Bank of England kept interest rates low throughout the pandemic, we have not seen this passed on to borrowers like this until now. It has been a turbulent year for borrowers needing a mortgage and it is encouraging to see these new products being offered at such great rates.

“These rates are very attractive if you know you are going to stay in your property for the next five years and can lock into a fixed rate. Although these products are primarily designed for those looking to remortgage, hopefully it is an indication of where mortgage lending is heading and we may see rates being lowered across the board.”

Product data taken from Defaqto Matrix on 10 June 2021