Mortgage rates hit record-breaking lows
Some of the most popular mortgage deals with borrowers have hit their lowest-ever levels as the New Year brings a fresh price war between the UK’s major lenders.
Research from a leading economist has revealed that expectations of low interest rates and strong competition between lenders have driven down the cost of mortgages to unprecedented levels. Two-year deals in particular are now at record lows, especially for borrowers with a large deposit.
Average rates on two-year deals now at record lows
New research from a leading economist has revealed that the average rates on two-year fixed-rate and two-year discounted-rate mortgages have hit record lows. Michael Saunders, an expert at Citi, says that the rates on these popular deals are now at levels never seen before.
According to Saunders the typical cost of a two-year fixed rate mortgage requiring a deposit or equity of 25% or more fell to 2.08% in December, down just over half a percentage point since the middle of last year. The economist added that this was main benchmark mortgage rate at the moment, given the huge demand for this type of short term fixed product.
The expert also revealed that the average rate on a two-year variable-rate mortgage with a discount fell to 1.63% in December, a fall of 1.1% since July.
Mortgage price war driving down the cost of borrowing
The Guardian reports that “in recent weeks the mortgage price war has intensified” with deals now available to 60% borrowing at just 1.29%. Lenders have been slashing their rates with HSBC recently launching a five-year fix at a record low of 2.35% and Barclays launching the lowest-ever 10-year deal at 2.99%.
Mr Saunders added that the average rate on a lifetime base rate tracker mortgage requiring a deposit of at least 25% also fell last month. However, at 2.86% this is still marginally higher than the mid-2014 low of 2.76%.
Mr Saunders said: “The drop in mortgage rates over recent months reflects a mix of lower swap rates and lower spreads on mortgage lending … The overall result is that even while the bank rate has been unchanged for nearly six years, monetary stimulus continues to expand – and, together with the boost to real incomes from lower petrol prices, this is likely to help ensure that the economy continues to grow strongly during this year.”
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