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Cost of two-year fixed mortgages hits three-year low

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Cuts to the Bank of England Base Rate combined with some expensive mortgages being withdrawn has seen overall rates fall
Cost of two-year fixed mortgages hits three-year low

Average two-year fixed rate mortgages are lower than they’ve been in three years, at 2.11%, according to Moneyfacts.

This is down from 2.39% on 24th March.

The financial information provider explained that the fall is partly because lenders have removed some of their products for higher risk borrowers since the start of the coronavirus crisis – and those products tend to come with higher interest rates.

This restriction has pulled down the average rate of those products that are still available to lower risk borrowers.

Eleanor Williams, finance expert at Moneyfacts, said: “The number of available mortgage products, and also therefore choice for borrowers, has reduced over recent weeks in response to the ongoing Covid-19 pandemic and lockdown restrictions, as lenders acclimatise and adapt to the ever-changing circumstances.

“However, also experiencing a reduction are the average rates available for two- and five-year fixed deals. This may well in part be due to the fact that many of the mortgage products which have been withdrawn recently were those which offered higher loan-to-value ratios, and where risk, and therefore rates, are traditionally higher.

“This recent removal of some higher loan-to-value mortgage may be a temporary measure, while mortgage providers reassess risk in this area of the market.

“Indeed, we are beginning to see positive signs that providers are beginning to relaunch products, with some of the larger banks reintroducing products in the 80% and even 85% loan-to-value brackets this week.”

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