There may never be a cheaper time to buy a house, say mortgage experts

Posted 24 February 2015

The next six months may be the cheapest time to buy a house in history for borrowers looking for a mortgage. That’s the view of leading experts after official figures revealed that the cost of home loans has almost halved over the past year.

Bank of England data has revealed that a typical £200,000 mortgage is more than £100 a month cheaper than this time last year, with the cost of deals expected to fall further in the coming months.

Cost of new mortgages “never been bettered in modern times”

Strong competition between lenders, together with expectations of low interest rates, have pushed down the cost of new mortgages to record levels. HSBC recently unveiled a two-year fixed rate at 1.19% and many experts believe that short-term mortgage deals could fall to below 1% this spring.

Data from the Bank of England has revealed that over the last 12 months the average two-year variable rate has fallen from 2.76% to 1.64% for someone with a 25% deposit. On a £200,000 loan, the monthly repayments would be £813 before fees, down from £924.

Mortgage expert Brian Murphy, told the Daily Telegraph: “The next six months are shaping up to be the best-ever window to secure a low interest rate if you are looking to buy or remortgage. Today’s prices have never been bettered in modern times and given that a bank rate rise is inevitable at some point, it is unlikely they will be surpassed in the years ahead.”

Longer-term deals fallen

Longer-term mortgage deals have also fallen in price. If you have a 25% deposit then the average two-year, fixed-rate mortgage has fallen from 2.37% to 2.01% over the last year while the average five-year rate was down from 3.45% to 3.09%.

Keith Osborne, editor of Whathouse.com, says: “As lenders fight for market share, the deals on offer are becoming cheaper and cheaper. We are just weeks away from a five-year fixed rate at below 2% while it is surely only a matter of time before you will be able to take a short-term fixed deal at below 1%.”

Charlie Wells, managing director of buying agency Prime Purchase, said the ‘bounceback’ was due to the Chancellor's stamp duty reforms in December.

“With interest rates unlikely to rise this year, those reliant on a mortgage will find it is a good time to buy,” he remarks. “This will particularly benefit first-time buyers and stretched young families trying to move up the housing ladder.”

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