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Mortgage rates hit new low

Mortgage rates hit new low

Category: Mortgages

Updated: 31/12/2012
First Published: 28/05/2010

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 It is now over 6 months old so the content may be out of date.
Homeowners have been given cause to celebrate after it was revealed mortgage rates had fallen to their lowest level for 15 months.

The latest research from Moneyfacts.co.uk found that the average two year fixed rate mortgage deal has dropped to 4.61%, significantly down on the peak of 5.21% seen since base rate was cut to 0.5% in March last year.

Average three and five year fixed rate mortgage deals have also been in decline, with their rates dropping to 5.30% and 5.74% respectively, compared with the highs of 5.61% and 6.24% seen since base rate fell to its record low.

However, with the average standard variable rate (SVR) currently standing at 4.66%, and the lowest SVR available at 2.50%, most mortgage borrowers reaching the end of their current deals are understandably sitting tight.

As interest rates have fallen, many existing borrowers have also chosen to overpay their mortgage, with some using their savings to pay off their borrowing while rates are low.

"There is little incentive for borrowers to remortgage to another mortgage deal," said Darren Cook, spokesperson for Moneyfacts.co.uk.

"Mortgage revert rates as low as 2.50% have meant borrowers should have taken the wise decision to overpay their mortgage."

However, Mr Cook had a warning for those borrowers who had seen their mortgage repayments fall, but had chosen to spend the extra money in their pockets rather than pay extra off their mortgage or save it.

"They may need to start preparing to make changes, as interest rates can go up as quickly as they come down," he added.

"A spiralling inflation rate, which could be pushed even higher by the predicted rise in VAT, can only point towards an increase in the base rate of interest sooner rather than later.

"Although this would not be the best news for borrowers, it would at least finally give savers something to smile about."

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