MortgagesJul 25 2016

Moneyfacts urges borrowers on SVRs to switch to fixed rates

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Moneyfacts urges borrowers on SVRs to switch to fixed rates

Since the start of this year, average rates across all fixed rates across all terms have fallen, with the average two-year fixed rate down by 0.24 per cent since January.

Research from Moneyfacts found five and 10 year fixed rate products have also dropped in price across the market during the first half of 2016.

Charlotte Nelson, spokeswoman for the price comparison site, said the trend has been driven by fierce competition between lenders.

She said: “Borrowers looking for a new mortgage deal today will be substantially better off than they were six months ago.

“In fact, anyone considering a five-year fixed rate mortgage today would save themselves £240 a year compared to January.”

This was based on the average five-year fixed rate and a £200,000 mortgage over a 25-year term on a repayment-only basis.


 

Jan-16

Apr-16

Today

Two-year fixed average rate

2.76%

2.55%

2.52%

Five-year fixed average rate

3.29%

3.20%

3.10%

10-year fixed average rate

3.63%

3.50%

3.43%

Source: Moneyfacts

 

Compiled: 25.7.16

Long-term fixed rates have benefited from the recent plummet in swap rates - which lenders tend to price their mortgage rates in line with - following the UK’s vote to exit the EU.

“While the economy may have faced some uncertainty after the EU referendum, one thing is for certain: mortgage competition is currently here to stay, and borrowers sitting on the standard variable rate or coming to the end of their mortgage deal would be wise to consider a fixed rate deal now, when they are still at record lows,” stated Ms Nelson.

A recent trend since Brexit has been for record low 10-year fixed rate deals, increasing from 80 in January to 127 today, with an average rate falling by 0.20 per cent in the same period.

Borrowers with smaller deposit have not been left out either, with the average two-year fixed rate at 95 per cent loan-to-value falling by 0.19 per cent from January to 4.09 per cent today.

“However, with the Help to Buy Mortgage Guarantee scheme ending in December this year, it begs the question of how long this can be sustained for,” noted Ms Nelson.

Earlier this month, Mortgage Brain’s quarterly product analysis revealed first-time buyers have had the pick of the most mortgage rate current reductions, with a 90 per cent LTV two-year fix now 6 per cent lower than it was this time last year.

peter.walker@ft.com