Mortgages hit all time lowest rates

You may not know it from reading the press but there is a mortgage price war on.  Mortgage rates are now at the lowest they have ever been and lenders are in competition with each other to see who can have the lowest rate.

Lenders know that the bank or building society with the lowest interest rates get the most business so lenders have been trying to reduce their rates to be lower than their competition.

This is particularly the case with fixed rates.  Fixed rates stay the same for typically two or five years.  Borrowers like them because they know what they are going to pay every month.  Because fixed rates are not going to go up over the two or five years, even if all other interest rates rise, they usually have a slightly higher interest rate than what are called ‘variable rates’.  Variable rates can move up or down with the Bank of England’s base rate of interest so they are normally cheaper – it is very unusual that they are not at the moment.

According to price comparison site, Moneyfacts, in the last week of May, HSBC launched a two-year deal at 1.16% plus a £1,499 fee, which was immediately beaten by Yorkshire Building Society, which rushed out a 1.14 % deal with a £1,345 fee.

The cheapest deal on record was launched by the Post Office last August, which was a two-year fix at 1.05% with a £1,995 fee and we are getting closer to this again every day.  In fact many people are speculating that it is only a matter of weeks before the first lender launches a fixed rate mortgage that is under 1%.

This is all the more incredible when you consider that just five years ago, the cheapest fixed rate mortgage was 3.89%, while back in 2006 just before the financial crash, fixed rates were 4.99%.  That means that ten years ago payments on a £200,000 repayment mortgage would have cost you £1,168 a month, where-as now it would be £767 – £401 cheaper a month. (on a £150,000 mortgage would have cost you £876, where-as now it would be £301 cheaper a month at £575.)

What this highlights is that there has never been a better or more affordable time to take out a mortgage, with many mortgages being significantly cheaper than rents on the same size property.  Of course for many people raising the deposit is the biggest challenge, especially as lenders will usually give their lowest rates to the people with the biggest deposits.

However, there are now many government schemes that can help with deposits. Whether you are buying a new home or an existing one, come and talk to us and we will walk you through your options and help ensure that you can take advantage of these lowest ever rates.