MORTGAGE rates on two-year fixed deals have significantly dropped across the market over the past six months – and first-time buyers should consider locking in now.
The average two-year fixed mortgage rate has fallen by 0.04 per cent, from 2.53 per cent in August 2018 to 2.49 per cent now, analysis has found.
Moneyfacts.co.uk also found that the amount some lenders charge to take out a two-year fixed-rate deal has also fallen – from £1,105 in August 2018 to £1,029 now.
This is despite the Bank of England base rate having increased from 0.5 per cent to 0.75 per cent in August last year.
The comparison service firm reckons that strong competition from lenders to attract first-time buyers – who are seen as the “lifeblood” of the mortgage and property market – has pushed the overall rates on offer on two-year fixes down.
For borrowers with deposits of 20 per cent to 30 per cent, two-year fixed mortgage rates have typically increased since last August.
What’s the difference between a two-year, five-year or seven-year deal?
WHEN it comes to mortgages, there’s a lot to take in.
Andrew Hagger from MoneyComms weighs up the pros and cons of a fixed-term mortgage to help you decide what one will work for you.
“With a five year fix you have the peace of mind that your interest rate and monthly repayments won’t change for 60 months, or 84 months with a seven-year deal, even if the Bank of England puts rates up.
“This is a great help with budgeting.
“Also most fixed rate mortgages charge a product fee – typically £500 to £1,000 – so it’s better to only have to pay this once every five to seven years rather than every two years.
“The slight downside with a longer year deal is that you are liable to pay an early repayment charge if you exit the loan early – and rates come down.
“It’s not applicable if you move home, but say for example, if you split following a relationship break up and had to sell before the end of the term, then you’l have to fork out for the fee.”
But for borrowers with deposits of between 5 per cent to 15 per cent – who are often first-time buyers – overall rates on two-year deals have dropped in the same period.
People with a 5 per cent deposit looking for a two-year fixed mortgage rate will find the typical rate on the market has rates fall by 0.54 per cent – from 3.95 per cent to 3.41 per cent.
Darren Cook, a finance expert at Moneyfacts.co.uk, described the rate falls as “fantastic news for prospective first-time buyers looking to get their foot on the property ladder”.
He continued: “There clearly seems to be a concerted drive by mortgage providers to try and secure the business of potential first-time buyers, who are the lifeblood of the mortgage and property markets and it is encouraging to see rates decrease as a result of some healthy competition.”
Building societies in particular appear to be focusing attention on attracting borrowers with smaller deposits, he said.
He said 37 per cent of two-year fixed products that only require a 5 per cent deposit are available through building societies, compared with just 16 per cent of all available products that require a deposit of 40 per cent or more.
He said that despite increased competition generally around lower deposit loans, there are “clear affordability measures” that mortgage providers must follow.
Mr Cook said: “Potential first-time buyers will still need to jump through several affordability hoops before they will find themselves on the first rung of the property ladder.”
Industry experts reckon 2019 is the ideal time to get your foot on the property ladder.
A Stamp Duty relief for people buying their first home has helped 180,000 homeowners get the keys to their first property.
Every week, The Sun speaks to first-time buyers to find out what it took for them to buy their own place, called My First Home.
This week we spoke to Laura Jones, 27, who managed to buy her one-bed flat in Cardiff on her own despite a poor credit score.
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