Home buyers in the UK are seeing some of the best deals ever for mortgages with experts pointing out that borrowers should not be lumbered with expensive standard variable rate loans.
Figures from the Bank of England show that the recent launch of the first mortgage product under 1% means that the average rate of popular two year fixed rates was 1.26% in April, down from 1.73% a year ago.
It means that borrowers with a 40% deposit would see their monthly repayment on a £150,000 mortgage fall from £616.25 to £583.14 as lenders have been compensating for the loss of these customers by slashing rates for home owners.
David Hollingworth of broker London & Country pointed out that the ongoing rate war that is being waged by lenders at the moment and should act as a stark reminder to home owners to make sure that they are reviewing their deal to take advantage of the current market conditions.
‘Yorkshire Building Society launched the lowest rate on record at 0.89% for a two year deal with a 35% deposit. ‘Failing to grab the chance to cut the interest rate on the single biggest outgoing is tantamount to throwing money down the drain,’ said Hollingworth.
Santander and the Nationwide, Britain’s biggest building society, also cut their rates last month. AA Mortgages has also released a new product range offering a number of competitively priced two, three and five year fixed rate mortgages aimed at first time buyers with no fees and a 5% and 10% deposit.
Meanwhile, the latest research from Paragon Mortgages shows that 89% of broker introduced mortgages in the first quarter of 2017 were fixed rate, up 6% on the previous quarter an historic high for this sector and tracker mortgages fell to their lowest ever level at 10%.
The firm said that this continues a long term upward trend that has risen particularly sharply since the end of 2010 when fixed rate and tracker mortgages comprised 46% and 45% of all cases respectively.
Two year fixed rates are still the most popular product, despite declining to 48% in the first three months of 2017 from 53% three months earlier. The most notable shift was another increase in popularity of five year fixes, up 3% to 34% of all mortgages.
Following a period of disruption last year, buy to let lending stabilised in the first quarter of 2017, accounting for 18% of all mortgages handled, whilst remortgaging remained the most common type of borrowing.
In terms of buy to let lending, remortgaging accounted for 47% of all business, maintaining a steep upward trend since the third quarter of 2013, whilst lending to first time landlords eased to 15%, continuing a long term decline from 27% in the same period.
‘It’s clear to see that the benefit of certainty at such low rates is continuing to drive up the popularity of fixed rate mortgages, particularly five year fixed terms, which gained further ground in the first quarter of 2017,’ said John Heron, managing director of Paragon Mortgages.