Mortgage deals get cheaper after Bank of England postpones rate rise

Homeowners looking for a mortgage in 2016 could benefit from the decision by the Bank of England to postpone a rise in interest rates. A financial analyst has revealed that the cost of mortgage deals in the UK has continued to fall, with a leading newspaper also reporting that some major lenders have cut the cost of their best products in recent weeks.

Last year, many experts predicted that the Bank of England (BoE) would raise interest rates this year from their current record low of 0.5%. Many mortgage holders had prepared themselves for an increase in payments but recent comments from the BoE suggest that the earliest rate rise may now not be seen until mid-2017.

With rates expecting to remain at their record low for an eighth year, a leading financial analyst has reported that the cost of borrowing in the UK continues to fall.

Moneyfacts say that the average two-year fixed-rate deal at 75% loan-to-value (LTV) has fallen by 0.69% in just one year, while the average five-year fixed deal at 75% LTV has dropped from 3.25% to 2.94% over the same period.

Charlotte Nelson, finance expert at Moneyfacts, says: "Rumours flourished throughout the latter part of 2015 regarding an imminent rate rise, but now that Governor of the Bank of England Mark Carney has said that it isn't quite the right time to raise base rate, many borrowers can breathe a sigh of relief – at least for the time being.

"However, it is still a question of when the Bank of England will raise interest rates rather than if, so borrowers need to take advantage of current low mortgage rates before they disappear."

The statistics come after a number of UK lenders cut the cost of their mortgage deals in response to the Bank of England's comments. This Is Money reports that the Yorkshire Building Society has cut the rates on its two- and five-year fixed rates by up to 0.5% while the Co-operative Bank and Principality Building Society have cut their rates on some deals by up to 0.2%.

Keith Osborne, editor of Whathouse.com, says: "With the Bank of England suggesting that interest rate hikes may now be over a year away, a number of high profile lenders have once again cut the cost of borrowing. I expect other lenders to follow suit and so this spring could be an ideal time for anyone looking to lock into a cheap fixed-rate deal."