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Mortgage deal quandary for borrowers

Mortgage deal quandary for borrowers

Category: Mortgages

Updated: 04/12/2009
First Published: 03/12/2009

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The rates on offer through short term mortgage deals are becoming increasingly favourable when compared with those available through long term ones, new research from Moneyfacts.co.uk has revealed.

Having recently fallen below the five per cent mark for the first time in four months, the average rate payable on two year fixed rate mortgages now stands at 4.93%.

By comparison, the average fixed rate mortgage currently stands at 6.15%, while rates are at 5.60% over three years and still increasing.

However, while the figures suggest short term deals could be the way forward, borrowers have been warned they still might not represent the best deal available.

Indeed, average arrangement fees for a two year deal currently stand at £928, more than £100 higher than on long term deals.

Opting for shorter term deals increases the frequency that borrowers will have to pay arrangement fees for new deals too.

"In such uncertain times, borrowers seem to prefer shorter term deals, where changes can be made relatively quickly if market conditions alter dramatically," said Michelle Slade, spokesperson for Moneyfacts.co.uk.

"By opting for a five year deal, borrowers are likely to benefit from a more stable mortgage market when they come to remortgage. Increased equity in their homes from rising property prices will increase their chances of being eligible for a more competitive deal at a lower loan to value band."

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