Mortgage rates reach another record low – but are rises on the way?

Posted 16 September 2015 by Keith Osborne

Over recent weeks there have been a number of stories about how lenders have increased the cost of their very best mortgage rates. With warnings being made that the era of rock-bottom deals is over, new data has revealed that mortgage rates are actually continuing to fall.

Figures from the Bank of England show that mortgage rates have reached another record low. The latest mortgage lenders and administration statistics from the Financial Conduct Authority have revealed that the overall average interest rate on gross advances fell in the second three months of 2015. The rate decreased by 0.16% between the first and second quarters and is now 2.83%, the lowest level since the data was first collected in 2007.

Commenting on the data, Keith Osborne, editor of new homes portal, says: “Recent headlines have been pointing towards a rise in the cost of mortgages but these figures show that the overall trend is that rates are continuing to fall. While some lenders have withdrawn their best deals, others have continued to cut their rates. This is great news for borrowers and shows that there are still some superb deals out there if you shop around.”

The data also showed that more borrowers were choosing fixed-rate deals. The proportion of mortgage advances at fixed rates edged up from 77.6% in quarter one to 78.9% in Q2.

Osborne adds: “Almost four in five mortgages between April and June this year were taken out on a fixed-rate basis, suggesting that borrowers are keen to lock their repayments at these record levels.”

There was a small increase in the proportion of advances at a 'loan to value' over 90% to 3.5%, while the proportion of advances to borrowers with a single income multiple of more than four times income increased 0.2 percentage points to 9.3%.

The Bank of England data revealed a sharp growth in mortgage lending in the spring. Gross advances totalled £52.5bn between April and June, 15.1% higher than the first three months of 2015 and 1.9% higher than the same quarter in 2014.

Mortgage expert Brian Murphy remarks: “The second quarter of 2015 saw a significant boost in mortgage activity, with both gross advances and new commitments on the up. At the same time, average mortgage rates fell to the lowest level seen since the MLAR series began in 2007. This improved affordability has caused a rush of demand from borrowers, and lenders are locked in fierce competition to win their business.”

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