The best fixed mortgage deals

Many of us are reverting back to the trusty two-year fixed mortgage deal. So let's check out 12 of the best fixed mortgage deals...

UK mortgage borrowers are commitment-phobes. We don't like to lock into a long-term mortgage rate, and never have done. The Government has tried its best to sway us towards mortgage loyalty. It's told us that long-term security allows us to budget better, protect ourselves from fluctuating interest rates, and save money on frequent remortgage costs.

But will we have it? Will we heck!

UK mortgage borrowers like to chop and change. We are rate tarts at heart, flitting between deals and lenders every few years, always looking for the next bargain, and never wanting to commit to a deal that might see us paying over the odds if rates were to plummet.

We chase short-term fixed rates and lenders have traditionally given us what we want with a vast range of competitive two-year mortgages, and a paltry range of expensive long-term fixed rates.

The brief resurgence of the long-term fix

The last year or so has been a slightly different story though, and from summer 2008 to spring 2009 longer-term fixed rates of five years or more (and even 10 years plus) enjoyed something of a renaissance -- albeit brief.  In July 2008, for example, fixed-rate deals over 10 years made up 15% of all loans -- a significant proportion.

This happened for two reasons. Firstly, lenders began offering attractive five and 10 -year fixed rates. And they were really attractive -- earlier this year HSBC had a cracking five year fix at 3.99% for example.

This made locking in for longer more tempting and happened at the same time that borrowers started worrying about potential future rate rises (by design not accident).

Secondly, interest rates dropped to a record low of 0.5% (and are still there) making many believe it was time to fix their mortgage rate for the long term, protecting themselves from the seemingly inevitable rate rises.

Everywhere you looked experts, lenders, and pundits were telling you to get a five-year fix or longer -- to go for security with barely any premium over the short-term deals. It was a no-brainer and the deals certainly did increase in popularity.

But not for long.

Come back to what you know

In June this year lenders began hiking their fixed rates across the board, and five-year plus deals started to look, well, just too pricey to lock into. Longer 10-year deals are now few and far between and only account for 3.5% of loans. And in the last 12 months the number of 25-year fixed rates has dropped from 18 to just one (from Kent Reliance Building Society).

At the same time lenders have been cutting tracker rates, making them look very attractive and opinion has shifted on the future movement of the Base Rate. Consensus now is that it will remain low for some time yet -- perhaps until the middle of 2011 (although nobody really knows!).

Borrowers have begun looking at the cheaper variable deals on offer, or going back to the old faithful two-year fixed rate -- offering a modicum of security for a relatively cheap rate.

Short-term fixes may not be quite as cheap as a tracker but they feel that little bit safer. And they are cheaper than locking in for longer at a rate that now appears over the odds.

The truth of the matter is that lenders have actively widened their margins on all deals and specifically on all fixed rates in the last year, so there are very few borrowers who now feel like they are really getting a great deal.

More profit in the lender's pocket?

According to financial information provider, Moneyfacts, the margin between the average two-year fixed rate mortgage (5.18%) and the two-year swap rate (2.04%) stands at 3.14%, the widest margin on record.

It suggests that this is down to lenders repairing their balance sheets at the expense of borrowers.

Swap rates influence the price of fixed rate mortgages, although the Council of Mortgage Lenders was quick to point out last month that there are many other important factors influencing fixed rates, especially in the current climate.

Nonetheless, swaps still provide a gauge, and despite them reducing in the last month, only a handful of lenders have reduced their fixed rates, and some have even increased them -- including Barnsley BS, Chelsea BS and The Post Office.

Moneyfacts claims lenders know that borrowers are keen to lock into the security of a fixed rate even when they are priced higher than variable rate deals -- and that they are 'cashing in' on this.

And they are right. Borrowers do love the safety of a fixed rate, especially in an uncertain climate. And a two-year deal offers that safety on a short-term basis that many of us are comfortable with.

Plus there are still some decent deals about as long as you have a deposit of 10% or more (preferably 25% for the most competitive rates), have a blemish-free credit history and are not self-employed or have any unusual circumstances.

Below are some of my favourite two-year fixed rates:

Best buy two-year fixed rates

Up to 60% loan-to-value

*available up to 70% LTV

Up to 75% loan-to-value

Up to 90% loan-to-value

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