Two-year fixed mortgage rates hit record low
Competition driving cost down for all types of borrowers.
There’s never been a better time to take out a two-year fixed rate mortgage.
Figures from the latest Moneyfacts UK Mortgage Trends report reveals the average two-year fixed rate has fallen for the third consecutive month to a record low of 3.28%.
What’s more the number of two-year fixed rate mortgages has shot up by almost 10% in the last month. There are now a whopping 3,906 two-year fixed rate deals available, an increase of 347 compared to October.
What’s behind the shift?
So why are rates falling?
Moneyfact points out that while SWAP rates (the rate at which banks lend to each other) have edged down this month (from 1.24% to 1.15%), this isn't enough to explain the shift.
Instead Moneyfacts suggests lenders are competing to attract borrowers ahead of the coming interest rate rise. The Bank of England Base Rate has been stuck at 0.5% for well over five years now, but it's predicted to creep up from next year.
Once this happens it will have a knock on effect on mortgage rates.
According to Moneyfacts, the reduction in rates and the increase in products is consistent across all levels of borrowing and encompasses all loan-to-value tiers, which suggests lenders are keen to attract all types of borrowers.
Should you fix for two years?
A fixed rate mortgage offers peace of mind that repayments will be the same each month for the length of the fixed period.
Two-year fixed rate mortgages tend to be the cheapest, but they only provide certainty for a short period of time.
They could also be more expensive over the longer term. Over ten years a borrower faces the fees and associated costs of remortgaging five times with regular two-year deals, compared to just twice with a five-year deal.
That said, two-year deals are more flexible than longer lasting fixes as you aren't locked in for such a long period and don't face such significant early repayment charges.
The best two-year fixed rate mortgages
If you want to take advantage of the mortgage price war on two-year fixed rates here are some of the best deals available right now across a range of loan-to-values.
|
Lender |
Rate |
Fees |
LTV |
How to get it |
|
Chelsea BS |
1.44% |
£1,675 |
65% |
Apply here |
|
Chelsea BS |
1.79% |
£1,675 |
75% |
Apply here |
|
Hinckley & Rugby BS |
2.19% |
£999 |
80% |
Go to our mortgage centre |
|
Principality BS |
2.30% |
£994 |
85% |
Go to our mortgage centre |
|
Post Office |
2.95% |
£995 |
90% |
Apply here |
|
Chelsea BS |
4.64% |
£1,675 |
95% |
Apply here |
As you can see some of the rates above command a pretty hefty fee. So below are the best two-year deals with a fee of under £500.
|
Lender |
Rate |
Fees |
LTV |
How to get it |
|
Barnsley BS |
1.69% |
£475 |
65% |
Apply in branch |
|
Barnsley BS |
1.69% |
£475 |
70% |
Apply in branch |
|
Nationwide BS |
1.89% |
£499 |
75% |
Apply here |
|
Nationwide BS |
2.29% |
£499 |
80% |
Apply here |
|
Market Harborough BS |
2.65% |
£250 |
85% |
Apply in branch |
|
Post Office |
3.29% |
£0 |
90% |
Apply here |
|
HSBC* |
4.79% |
£99 |
95% |
Call 0808 115 8734 |
*Help to Buy mortgage
This article aims to give information, not advice. Always do your own research and/or seek out advice from a regulated broker, before acting on anything contained in this article.
Your home or property may be repossessed if you do not keep up repayments on your mortgage.
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