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Mortgage borrowers benefit from low base rate

Mortgage borrowers benefit from low base rate

Category: Mortgages

Updated: 02/04/2012
First Published: 02/04/2012

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 It is now over 6 months old so the content may be out of date.

Mortgage rates have fallen and product numbers almost doubled in the three years since base rate dropped to 0.5%, new research from has revealed.

Some 2,612 mortgages are available at present, according to the latest data, compared with just 1,452 in March 2009.

Encouragingly for those with limited deposits, much of this expansion has been due to rising numbers of higher loan-to-value (LTV) products coming to the market.

Indeed, 301 mortgages are now on offer at 90% LTV, up from just 89 three years ago, while the volume of 85% LTV products has soared to 452, up from 169.

And while the average deposit needed for a mortgage has dropped from 40% to around 25% today, more good news has come in the form of a drop in the initial rates on residential mortgages.

The average five year fixed rate mortgage is now 4.82% compared with 5.62% three years ago, while two year fixes have dropped to 4.60% from 4.79%.

It has not, however, been all plain sailing for borrowers.

Mortgage fees have been on the rise, with the average fee now charged at a record high of £1,502, some 27% higher than in March 2009.

"While the number of mortgage deals has increased, fees are at their highest since Moneyfacts records began, so consumers need to check the true cost of any mortgage offer," said Rachel Springall, spokesperson for

Meanwhile, the recent spate of lenders increasing their standard variable rates (SVRs), despite the base rate remaining on hold, has led to the suggestion that the trend towards falling rates might be about to change.

"Borrowers affected by an increase to their SVR should review their repayments and consider shopping around for the best deal rather than assume it will come from their current lender," added Rachel Springall.

The Co-operative Bank has announced today that its SVR is to increase by 0.5% from next month.

The bank said changing conditions in the mortgage market and rises in the cost of funding meant the rate would be increasing from 4.24% to 4.74% from 1 May 2012.

While adding that the average increase seen by its SVR customers will be £15 per month, the bank said 'alternative options' would be available to certain customers.

"We do recognise that some of our customers who have a higher loan to value on their mortgage may be particularly concerned about this change and we have specifically put measures in place to make alternative options available for these customers," said the statement.

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