by Mark Johnston
Borrowers have high hopes for the coming few months as the average fixed term interest rate falls. The average rate for a two year fixed term mortgage has seen a reduction to 4.52%. The fall in the fixed rate mortgage rate is the lowest since the middle of September 2003, many are hoping that this is the market predicting low interest rates for the medium term.The UK based website Moneyfacts is showing low fixed rates which start at around 2.95% for a two year fixed rate mortgage. Moneyfacts is a leading financial information provider which offers rate data on a range of financial products such as savings, loans, credit cards and mortgages.
Mortgagerates.org.uk has been reporting on volatile market conditions which have showed a weak property market as well as an increase in the number of mortgage products available. Alongside the usual discount, fixed and variable mortgages, mortgagerates.org.uk has also reported an increase the mortgage of all type that offer mortgage to borrowers who have smaller deposits.
During the two years since the credit crunch many mortgage lenders who only offering mortgages with high rates and loan to value (LTV) ratios that many could not afford. As rates have come down so has the size of deposits that were need to take advantage of cheaper deals. Historically many providers were asking for at least a 25% deposit where recently mortgagerates.org.uk has seen deals with a loan to value (LTV) of 95%; that only require a 5% deposit.
The good news is that many can now get mortgages for less than 5% even if they only have a 10% deposit. This was unheard of a few months ago.
The Co-op is one of the lenders offering such deals. Their 2 year fixed rate mortgage is available in a 90% loan to value version. Borrowers only need to find a 10% deposit making it very attractive to first time buyers or those with smaller savings. The mortgage is fixed at 4.99% for the first two years, it then reverts back to their standard variable rate of 4.24%.
Michelle Slade of Moneyfacts said: “Previously, only deals for borrowers with large deposits were seeing cuts, but as the market improves borrowers with smaller deposits are being offered more competitive deals.”
Britannia is also joining the lenders cutting their mortgages and offering 2 year fixed rate mortgages at reasonable process. The lender merged with The Co-operative Financial Services to offer great deals to their member owned organisation. The 2 year fixed rate mortgage is priced the same as its big brother, 4.99% with a combined arrangement and booking fee of just £499.
David Hollingworth of broker London & Country Mortgages said: “The price falls partly reflect a general downward trend in so-called swap rates – the rate at which banks can borrow money to fund fixed-rate deals. But they also reflect a more stable environment. House prices are now less shaky and lenders are willing to take on more business, so competition is hotting up.”
Now that borrowers are seeing fixed rates slashed many are wondering where the Bank of England base rate is expected to end up in two years time.
The Monetary Policy Committee which sets base rates within the Bank of England recently maintained the 0.5% base rate for the 15th consecutive month. The decision will be welcomed by many struggling borrowers.
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