Mortgage blog: Long-term deals fall again and further cuts could be on the way

Posted 2 January 2015 by Keith Osborne

Falling inflation and a receding prospect of an interest rate rise in 2015 have helped to push long-term mortgage deals to historically low levels. There has been a significant increase in the availability of ten-year fixed-rate products over the last few months with a leading lender launching a decade-long fixed deal at under 3.5%.

But, some experts believe that mortgage rates could be set to fall even further as the likelihood of a quick interest rate rise recedes.

Ten-year fixed rate deals fall to just 3.44%

Over the last few months the number of ten-year fixed-rate mortgage deals has increased from 12 to over 50. Santander became the latest lender to launch a market-leading ten-year fixed product last week when it launched a deal at 3.44% for borrowers with a 40% deposit.

The bank claims the deal is the cheapest in the market and undercuts a similar Woolwich deal at 3.45%.

The markets believe that an interest rate rise may now stay at their current rate throughout 2015 and this has pushed down ‘swap’ rates – the rates at which lenders borrow money on the money markets.

In addition, inflation fell to 1% in November: the lowest figure in 12 years. The Guardian reports that the fall “sparked speculation among economists that the first rise in interest rates, anticipated some time in 2015, may now not happen until 2016”.

Sylvia Waycot of data providers Moneyfacts says: “The battle to keep mortgage borrowers on side has moved on from the popular two and five-year fixed rates to an explosion of 10-year deals, increasing from just 12 in November 2013 to 52 today.”

Experts urge patience and say that rates could fall further

While ten-year deals have fallen in price some experts believe that there could be further cuts to come. Mortgage expert Ray Boulger said: “The 10-year gilt is down from 2% to 1.71%...We can now expect to see further cuts in five- and ten-year mortgage rates. We are going to see mortgage rates staying low for longer than people expected. This time last year most economic forecasters were saying they expected one or two base rate rises in 2014, and now the consensus is for a rise in the third quarter of 2015. But my guess is that this time next year we are going to be talking about the first interest rate rise in 2016.”

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