At the end of last year, rumours about a base rate rise in the near-future reached boiling point, but it appears that mortgage providers were unaffected by the predictions and chose not to increase their rates. On the contrary, Moneyfacts can reveal that fixed mortgage rates have continued to fall across all loan-to-values (LTVs) and terms, which means that now could be a great time to get involved!
The table below shows just how far rates have fallen in recent years, with many being at never-before-seen levels. As you can see, borrowers of all kinds are able to benefit: while those with a bigger deposit are still able to secure the lowest rates, those lower down the housing ladder have been able to see truly dramatic reductions, too, which means that many could be better off by hundreds – or even thousands – of pounds a year.
Given that there was near-constant speculation about base rate last year, the fact that mortgage rates have continued to fall is particularly welcome. Historically, providers would typically align their prices with base rate (or speculation thereof), but rather than raising rates when faced with the prospect of a rate rise, most chose to focus on competition instead.
Charlotte Nelson, finance expert at Moneyfacts, commented:
"Rumours flourished throughout the latter part of 2015 regarding an imminent rate rise, but now that Governor of the Bank of England Mark Carney has said that it isn't quite the right time to raise base rate, many borrowers can breathe a sigh of relief – at least for the time being. However, it is still a question of when the Bank of England will raise interest rates rather than if, so borrowers need to take advantage of current low mortgage rates before they disappear."
As the figures show, now could be a great time to get in on the action. For the last few years, new and old borrowers alike have been enjoying the benefits of downward-spiralling mortgage rates, which have been fuelled by intense competition between providers.
For example, the average two-year fixed rate deal at 75% LTV has fallen by 0.69% in just one year, while the average five-year fixed deal at 75% LTV has dropped from 3.25% to 2.94% over the same period. These are significant reductions, and when you consider that the average Standard Variable Rate (SVR) currently stands at 4.82%, it's unsurprising that more and more mortgage holders are remortgaging to a better deal.
Our calculations show that, by switching to the average two-year fixed rate at 60% LTV (1.99%), borrowers can potentially save £3,618.72 in the first year (based on a £200,000 mortgage over a 25-year term on a repayment only basis). This isn't the only way you could make savings, either, as after taking advantage of a low rate deal, it could be worth using the money saved to make overpayments: by paying an extra £100 a month on top of your normal mortgage repayments, you could shave three years off your mortgage term (based on the same mortgage details above).
"Mortgage payments are one of the biggest financial outlays a homeowner can have, so it's a no-brainer to grab a low rate deal while they're still available," concluded Charlotte. "Of course, borrowers need to look at the mortgage as a whole to ensure they get the best deal for them, but by taking advantage of the rates on offer today, they could end up saving a significant amount of money."
Compare mortgage rates
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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