Chelsea Building Society is the latest lender to go sub-3% on a five-year fixed rate mortgage.
Chelsea Building Society has revived the sub 3% five-year fixed rate mortgage war with an offer of 2.99% on a loan-to-value of 70%.
Back in July HSBC caused a stir when it launched the cheapest ever five-year fixed rate mortgage. The sub-3% fixed rate prompted a raft of other lenders to join the race to slash prices. The only problem was that all these lenders were battling to attract low risk borrowers that could afford to get a new home on a 60% LTV.
Those headline-grabbing rates soon disappeared as people lucky enough to have 40% worth of savings or equity took advantage.
But now it seems the competition could be reignited and that the Funding for Lending Scheme is producing some cheaper mortgage deals for those that really need it.
New leader
The Chelsea mortgage is now the cheapest five-year fixed rate on the market.
The low 2.99% rate means that on a loan of £150,000 taken out over 25 years the payments over the five-year term would be just £710.54 a month.
The product fee of £1,495 is less appealing. Of the total £1,300 can be added to the mortgage but £195 is payable on application and is non-refundable.
The bold move from Chelsea could encourage other lenders to compete at the same level and those with less money saved up could benefit.
Growing popularity
If the security and safety of a five-year fix interests you, you’re not alone.
John Charcol, one of the biggest mortgage broker firms, revealed that 30.4% of its clients went for a five-year fixed rate mortgage in September. Back in 2010 just 5.7% opted for this type of deal.
The shift towards more long-term security is echoed by other advisers like London & Country Mortgages (L&C) who agree that there has been more interest in five-year fixed rates lately. David Hollingworth, head of communications at L&C, told us the take up of five-year deals at the company is nearly double what it was a year ago.
According to the experts, because the rates have narrowed between fixed rate deals and variable options, it is causing buyers to think twice.
The table below shows how the availability of these products has risen to meet demand over the past two years.
|
|
October 2012 |
October 2011 |
October 2010 |
|
5 Year Fixed Rate Product Numbers |
508 |
418 |
345 |
Source: Moneyfacts.co.uk
One downside
The problem with fixing for such a long time is that early repayment charges (ERCs) make it difficult to get out should your circumstances change.
The Chelsea deal comes with tiered ERCs. A 5% charge is payable until 30th November 2015, 4% up to the end of November 2016 and 3% up to the end of the deal in 2017.
For those not sure which way life will take them shorter term deals might be more appropriate. Traditionally two-year fixed rate deals are popular with far more products on these terms available (1,043 today according to Moneyfacts).
Best five-year deals
But if you’re set on a five-year fix we have rounded up a few of the best deals across different levels of LTVs to give you an idea of the rates involved.
Five-year deals on 60-65% LTV (sub 3.5%)
|
Lender |
Rate |
Fee |
Max LTV |
|
3.09% |
£2,195 |
60% |
|
|
3.19% |
£1,495 |
60% |
|
|
3.19% |
£1,295 |
60% |
|
|
3.25% |
£699 |
60% |
|
|
3.29% |
£499 |
60% |
Five-year deals on 70-75% LTV (sub 4%)
|
Lender |
Rate |
Fee |
Max LTV |
|
2.99% |
£1,495 |
70% |
|
|
3.04% |
£995 |
75% |
|
|
3.39% |
£995 |
70% |
|
|
3.39% |
£795 |
75% |
|
|
3.49% |
£599 |
70% |
|
|
3.49% |
£999 |
75% |
|
|
3.49% |
£499 |
70% |
|
|
3.59% |
£0 |
75% |
|
|
3.67% |
£999 |
75% |
|
|
3.69% |
£995 |
75% |
|
|
3.69% |
£899 |
75% |
|
|
3.98% |
£995 |
75% |
|
|
3.99% |
£0 |
75% |
Five-year deals on 80-85% LTV (sub 4.5%)
|
Lender |
Rate |
Fee |
Max LTV |
|
3.84% |
£899 |
80% |
|
|
3.99% |
£999 |
85% |
|
|
3.99% |
£599 |
80% |
|
|
3.99% |
£995 |
80% |
|
|
3.99% |
£999 |
85% |
|
|
3.99% |
£195 |
80% |
|
|
4.15% |
£999 |
80% |
|
|
4.19% |
£499 |
80% |
|
|
4.19% |
£1,198 |
80% |
|
|
4.24% |
£499 |
85% |
|
|
4.39% |
£995 |
80% |
|
|
4.39% |
£0 |
85% |
|
|
4.49% |
£0 |
80% |
|
|
4.49% |
£995 |
85% |
Five-year deals on 90-95% LTV (sub 6%)
|
Lender |
Rate |
Fee |
Max LTV |
|
4.74% |
£1,495 |
90% |
|
|
4.74% |
£299 |
90% |
|
|
4.79% |
£0 |
90% |
|
|
4.79% |
£995 |
90% |
|
|
4.79% |
£999 |
90% |
|
|
4.89% |
£599 |
90% |
|
|
4.99% |
£199 |
90% |
|
|
4.99% |
£995 |
90% |
|
|
5.49% |
£995 |
90% |
|
|
5.49% |
£995 |
95% |
|
|
5.59% |
£995 |
90% |
|
|
5.99% |
£690 |
95% |
Use lovemoney.com's innovative new mortgage tool now to find the best mortgage for you online
At lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free lovemoney.com broker. Call 0800 804 8045 or email mortgages@lovemoney.com for more help.
This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article.
Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term may revert to the lender's standard variable rate or a tracker rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.
Your home or property may be repossessed if you do not keep up repayments on your mortgage
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