Thinking of remortgaging, moving home or getting on the ladder for the first time? Well, you've picked a great time to do it, because the cost of a mortgage is genuinely reducing! We all know that mortgage rates are at record lows, but they're falling even further – and so are fees.
Analysis from Moneyfacts can reveal that the average two-year fixed rate mortgage has fallen to another record low this month, now standing at 3.06%, a drop of 0.08% from February. The average variable rate stands at 2.11%, and despite remaining unchanged from the previous month, it's still the lowest rate ever recorded.
And that's not all. Mortgage fees continue to reduce, too, with the overall average decreasing from £697 to £688 in the last month. This incorporates reductions in both sectors of the market, with the average fixed fee falling to £682 (down from £687) and the average fee for variable rate mortgages dropping to £706, a significant reduction from the £727 recorded in February.
So, not only can borrowers benefit from lower rates – and therefore lower repayments – but they can benefit from lower upfront fees, too. This pattern goes against historic norms, as it's unusual for fees to reduce at the same time as rates, so it really is a golden age for borrowers.
Looking at annual figures highlights just how much things have changed. In the past 12 months, the average mortgage fee has reduced by £128, falling from £816 to the £688 figure of today. At the same time, the average fixed mortgage rate has fallen from 3.51% to 3.06%, but the additional drop in fee means that, in real terms, the rate has fallen even further.
Let's take a look at this in more detail. Taking a £150,000 repayment mortgage as a base, Moneyfacts' calculations show that the overall fee reduction of £128 actually equates to an additional 0.07% drop in rate. This means the decline in fee has had the same effect as the average rate falling to 2.99% had fees remained unchanged.
Essentially, borrowers are benefitting by a true cost reduction of an additional 0.07% in real terms, with the cost of a mortgage genuinely reducing.
So just why are providers cutting costs from every angle? Well, analysis suggests that the increase in competition at rate level means providers need to compete in other areas, too, particularly with consumers becoming more astute about finances. Since the financial crisis we've all needed to become a bit savvier when it comes to our cash, and that means more people realise the importance of fees – and how much a higher fee can add to the overall cost of a mortgage.
Providers are realising this and are reducing fees accordingly, resulting in mortgages truly being cheaper than ever before. That means it's a great time to consider taking the plunge. Things can't stay this way forever, so if you've been on the fence, it's time to get serious! Check out our mortgage best buys and see just how little you could pay.
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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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