The year of 2015 will been seen by many as the year of the mortgage: competition increased until it reached boiling point, with all sectors of the market becoming embroiled in a fight for borrowers. As a result, rates plummeted until they reached new all-time lows, so 2015 has certainly been a boom time for borrowers!
Record low rates
Our own data shows just how far rates have fallen in the last year, with both two-year and five-year fixed rate mortgages seeing significant reductions (check out the table below for more details). In fact, our calculations show that, based on a typical two-year fixed rate mortgage (a £200,000 loan over 25 years on a repayment only basis), a new borrower would now be £805.44 a year better off than they were a year ago, with their repayments having fallen dramatically.
"When looking back at 2015 it's difficult think of anything other than plummeting mortgage rates, which resulted in record lows across the whole of the mortgage market," commented Charlotte Nelson, finance expert at Moneyfacts. "For example, in just one year, the average two-year fixed rate mortgage fell by a whopping 0.65%.
"As a result of this fierce competition, borrowers are now significantly better off, and with five-year fixed rates also falling [down by a hefty 0.57% in the last year], many may now be considering fixing to a longer-term deal to protect them from rate rises in the near future."
In even better news, all sectors of the market have been able to benefit from this level of competition. At one time, providers opted to compete at lower loan-to-value (LTV) tiers as it was seen as less risky, but now the desire to compete is spreading – and even first-time buyers have been able to benefit.
They've had a particularly good year with the number of products at 95% LTV (typically the realm of the first-time buyer) increasing from 179 in 2014 to 249 today, and rates have also fallen in this key area, with the average two-year fixed rate at 95% LTV dropping from 5.22% to 4.29% over the same period. "This is all down to the influence of the Help to Buy mortgage guarantee scheme," explained Charlotte, "which has made it socially acceptable to lend at this high loan-to-value again."
So, given that the mortgage market has had such a good year, just what does the future hold for 2016? Well, the simple answer is that we just don't know, as much of it depends on when the much-anticipated base rate rise will happen.
"The mortgage market has experienced real uncertainty in terms of the timing of a base rate rise, and this is unlikely to end soon," said Charlotte. "The mortgage market is waiting on tenterhooks to see when the Bank of England will raise the rate, and with rumours rife about an increase in 2016, next year will prove to be a tense time in the mortgage market.
"There may be many uncertainties about the future, but one thing we do know is that these record low rates won't last forever, so anyone looking for a fixed rate mortgage now should act fast to secure the best deal."
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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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