Home Loan Rates at Record Low

March 16th, 2015

The next six months could prove the best time in history to take out a mortgage, the Daily Mail has recently claimed.

“A price war between lenders will make it the perfect opportunity for homebuyers or anyone remortgaging.

Fixed-rate deals have never been cheaper and may even slip below 1 per cent within weeks. Variable rates have almost halved over the past 12 months to 1.64 per cent.

Brian Murphy, of the Mortgage Advice Bureau, said: ‘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 base rate rise is inevitable at some point, it is unlikely they will be surpassed in the years ahead.

‘Lenders have begun the year with a strong appetite for growth, and newcomers are going head to head with established names to launch attractive new deals.’

Bank of England data shows that a typical two-year fix has dropped from 2.37 per cent to 2.01 per cent over the past 12 months.

On a £200,000 loan with 25 per cent deposit, that would save £420 a year.

A five-year fix has fallen from 3.34 per cent to 3.09 per cent, saving £300 a year. And the average variable rate has plunged from 2.74 per cent to 1.64 per cent – chopping £1,300 off annual repayments.

Lenders have dropped their rates after economists tipped the Bank to keep its base rate at an historic low of 0.5 per cent until next year.

The arrival of new challenger banks entering the mortgage market has also increased competition, driving down rates further.

Experts said two-year fixed rates could fall below 1 per cent while five-year mortgages could go below 2 per cent.”

The low-deposit market has been fuelled by the Government’s Help to Buy scheme, where the state helps buyers with small deposits on to the property ladder.

One of the reasons banks are able to offer mortgages at such low rates at the moment is because they have a glut of cash to loan out from the Funding for Lending scheme.

Launched in 2012, the initiative allowed banks and building societies to borrow cheaply from the Bank on condition they then used some of the money to offer mortgages to home buyers.

Rigorous stress testing must still be carried out on customers, however, before loans are agreed”

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