The lowest mortgage rates in the world ever!

Forget the naysayers - if you want to cut your monthly mortgage payments, now is the perfect time to get a mortgage!

There is so much talk about mortgages being expensive, buyers being frozen out of the market and lenders increasing their profit margins that you could be forgiven for thinking that servicing a mortgage has never been more difficult.

In fact, once you have got over the deposit and affordability stumbling blocks the opposite is true, and it is often overlooked that mortgages are currently cheaper than they have been for years. The best-buy super-cheap mortgages at sub-2% are low in anyone’s book.

Of course, there is a very good reason for such cheap mortgage rates, and it’s not the lenders being generous. It’s the fact that the Bank of England Base Rate has been at a record low of 0.5% for the last 13 months. This has meant that that all mortgages linked directly or indirectly to Base Rate have come down as a result.

But the fact remains that it is possible to get some really cheap mortgage deals at the moment, and that has to be good news for borrowers.

May hay while the sun shines?

It’s very tempting to get hold of one of these super-low rates for the obvious and simple reason that they minimise your monthly repayments.

If you have a £150,000 repayment mortgage over 25 years your monthly repayment will be just £636 if you bag a super-cheap 2% mortgage. If your pay rate is a more typical (but still competitive) 4% you would pay £792. That’s a saving of £3,744 over a typical two-year tracker period with the super-cheap rate.

And the savings get bigger the larger your mortgage. If you have a £300,000 mortgage your monthly repayments would be £1,272 on a tiny 2% mortgage and £1,584 on a more average 4% mortgage. Over a two-year tracker deal you would save £7,488 with the lower rate.

So it’s not surprising that many people are attracted to these cheap deals. They’re a no brainer, aren’t they?

Well it’s not quite that simple….

• Watch this video: Cut the cost of your mortgage!

Trouble ahead

The biggest concern over taking one of the super-low rates is that they are all variable deals. And this means they all have the potential to rise.

Trackers will automatically go up with every single Base Rate increase and discounts go up every time a lender increases its standard variable rate.

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Because interest rates are so low at the moment, it’s pretty obvious that the only way is up, although how soon rates will start to rise and by what degree is less clear.

Another massive consideration when looking at these extremely appealing deals is to look at the other costs and charges -- namely the arrangement fee.

Many of the cheapest rates come with a sting in the tail in the form of an eye-watering fee. Indeed sometimes these fees are so steep that they can offset the savings you are getting from the cheap rate -- you might be better with a higher mortgage rate and a more modest fee!

Of the cheap deals listed in the table below most have fees of around £1,000, although there are some worthy exceptions such as Earl Shilton Building Society and First Direct.

Even worse, many of the sweetest rates actually charge percentage fees which can really add up. Remember a percentage fee of 2% on even a modest £150,000 mortgage is a whopping £3,000. On a £300,000 it’s an astronomical £6,000.

When you look at any mortgage work out the total cost over the period you are looking at -- so over two years if you are comparing two-year fixes. The best way to do this is to work out the monthly repayment and multiple it by 24 months. Then add on any arrangement fee and, deduct any cashback if the mortgage offers it (not many do). That will give you the total cost over two years.

A much easier way is to search for the best mortgage using lovemoney.com's innovative mortgage tool, as it does the hard work for you, showing you what your monthly repayments will be, and showing you the total cost of your mortgage over whatever time period you choose.

• Read this blog: Should you use a mortgage broker?

Who do low rates suit best?

Clearly we all want a low mortgage rate and they are suitable for most borrowers.

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Cut your mortgage costs and pay off your mortgage early

Find out how to cut the cost of your mortgage by hundreds of pounds a month and become mortgage-free years earlier.

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However because the super-low rates are almost exclusively variable deals they are most appropriate for those who can afford to take a chance on the Base Rate staying low -- and most importantly can afford to be wrong.

If it’s important that your mortgage payment doesn’t change a fixed rate will be more suitable. This is often the case for those with a young family whose budgets are tight and who don’t have any leeway for increased expenses. Equally you may just be risk averse and happy to pay a premium for the peace of mind that you rate will not increase.

But if you don’t want to pay over the odds now and are happy to take a chance, take a super-cheap variable deal . Below are some of the best:

Super-low mortgages

*Year 1 payrate is 2%, Year 2 is 3%, Year 3 is 4% before reverting to SVR of 5.49% from year 4 onwards

Use lovemoney.com's innovative new mortgage tool to find the best mortgage for you online

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