The average interest rate for two-year and five-year fixed rate mortgages has dropped to the lowest level since records began in 2007* The average rate charged on a two-year deal is now just 2.09%, while interest rates on a five-year fixed average 2.35%. This is significantly below the record low of 2.66% that was set only last month.
Why are mortgage interest rates low?
The corona-virus pandemic forced the Bank of England to respond to stimulate the economy by making two emergency cuts to the base rate.These have reduced the base rate to a record low of 0.1%.
This has meant that it is cheaper for the banks to provide loans and this is being passed onto borrowers.
However the impact the virus has had on the economy has meant that banks have also had to review the level of risk whilst lending. As a result many lenders have reduced the number of products they offer for those with a high loan to value (LTV - those borrowing a high percentage of their property’s value).
Now is the time to remortgage !
The record-breaking fall in average fixed-rate deals makes it a great time to remortgage Especially if your current mortgage deal is coming to an end.
This is the same for those sitting on their lender’s standard variable rate (SVR - currently typically 4.5%)
This means that homeowners could save more than £3,135 a year if they switch to an average two-year fixed rate deal of 2.09%, based on a £200,000 mortgage.
However there are less mortgage options available
The number of different mortgages homebuyers can choose from has more than halved. It’s dropped from 5,222 products on 20 March to just 2,566.
The situation is particularly tight for people looking to borrow a high proportion of their property’s value.
The number of two-year and five-year fixed rate mortgages for homeowners with only a 5% deposit has dropped from 279 to just 22. Choice for those with a 10% deposit has declined from 563 to 50.
What are the options for people with small deposits?
A total of 72 mortgage products are still available for people with only 5% or 10% to put down.
Although lenders have increased rates on loans for people borrowing 95% of their home’s value,(raising the cost of five-year fixed rate deals by 0.04% and two-year ones by 0.1%) the rise is very small.
Lenders have cut rates for people borrowing 90% of their property’s value. This indicates competition is still strong in this area, albeit on a reduced product range.
If you only have a small deposit and are struggling to find a mortgage, consider using an independent mortgage broker. They’ll be able to scour the whole market on your behalf and help you find the best deal.
*Figures provided by Moneyfacts.
Our in-house independent mortgage adviser can search the market for you to find the best mortgage deal to suit your individual needs.
Michael Prosser, Mortgage Advisor
Michael has been working in the industry for over 17 years. He handles more than 350 cases per year and has expert knowledge of the mortgage market, each lenders individual criteria and the surrounding area’s which can prove vital when choosing the right mortgage and lender for your specific needs.
Contact Michael Prosser from Simply Finance Ltd today to discuss your mortgage requirements.
firstname.lastname@example.org 01227 812866
The Legal Bit
Your home may be repossessed if you do not keep up repayments on your mortgage.
Some buy-to-let mortgages are not regulated by the FCA.
There will be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1% but a typical fee £250.
Simply Finance Limited is an appointed representative of In Partnership the trading name of The On-Line Partnership Limited which is authorised and regulated by the Financial Conduct Authority.