Average mortgage rates have continued to fall month-on-month, but with experts suggesting the Bank of England base rate may rise next year, borrowers coming to the end of their current fixed rate deal, or on their lender’s standard variable rate (SVR), are being urged to lock into a new deal now.
Figures due to be published in the latest Moneyfacts UK Mortgage Trends Treasury Report show average rates on a two year fixed mortgage deal have fallen by 0.13% month-on-month, down from 2.38% in September to 2.25% this month. Meanwhile, the average rate on a five year fixed mortgage has fallen by 0.08% during the same period, down from 2.63% to 2.55%. Although the ongoing rate wars at the top of the mortgage charts, which are mainly aimed at borrowers with a high amount of equity in their home or house deposits, will have an impact on average rates, lenders have also been cutting rates for those with a smaller amount of equity in their home or a low deposit. Even if mortgage borrowers cannot obtain a headline grabbing sub-1% fixed rate deal, they should still consider locking into a new mortgage deal now while rates across the charts are competitively low.
For example, first-time buyers with a 10% deposit will find that, month-on-month, the average rate on a two year fixed deal has fallen by 0.29%, down from 2.85% in September to 2.56% in October. To give an idea of how this rate fall would impact monthly repayments, a first-time buyer purchasing a property worth £200,000 with a 10% deposit of £20,000 locking into the October average two year fixed deal rate* compared to the September rate would be able to lower their repayments by £26.64 per month, down from monthly repayments of £839.60 to repayments of £812.96 – a reduction of £639.39 over the two-year period.
Meanwhile, the average five year fixed rate for those with a 10% deposit has fallen by 0.18% month-on-month, down from 3.23% in September to 3.05% in October. Again, as an example of how this would impact mortgage repayments, a first-time buyer purchasing a £200,000 property with a 10% deposit* would find locking into the October five year average rate would result in monthly repayments of £858.27, down from monthly repayments of £875.27 if they had locked into the September average rate. This would result in a reduction of £17 per month ora total of £1,020 during a five-year period.
While falling average rates are helping mortgage borrowers to keep their repayment costs down, borrowers are being urged to get the best rates while they are available as there is no guarantee that lenders will continue to reduce rates. “Should base rate increase, those borrowers who are on a variable rate mortgage such as their lender’s standard variable rate (SVR) would be at risk of seeing their monthly repayments rise. Therefore, the benefit of fixing to a new deal and securing a stable rate and payment are clear for many, particularly as there is no guarantee that average rates will continue their downwards trajectory,” explained Eleanor Williams, finance expert at Moneyfacts.co.uk. “Those considering a new mortgage may wish to secure the knowledge and advice of a qualified adviser, who can help with assessing their priorities and calculating the best route forwards for their circumstances.”
