Mortgage rates are at their cheapest since 1988

Mortgage rates are at their cheapest since 1988

8:56 AM, 28th June 2011, About 13 years ago 1

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Mortgage rates have tumbled to their cheapest since records started almost 25 years ago.

Fixed and tracker rate mortgages are at their lowest rates since 1988, according to independent finance monitor Moneyfacts.

Less expensive interbank borrowing on the money markets and confidence that Bank of England base rates are unlikely to rise until next year have combined to push mortgage rates down.

Several lenders have cut rates over recent weeks, with building societies like the Skipton challenging for larger market shares with below-average rate offers.

The lender has announced intentions to quadruple mortgage lending this year compared to 2010 and is offering a 3.99% two-year fix to buy to let landlords.

According to Moneyfacts, the average two-year fix is 4.32%, with slightly less favourable deals over three years (4.92%) and five years (5.29%).

A two-year tracker averages 3.37%.

“Lenders appear to be applying cuts equally across all loan-to-value  tiers, which is good news for first time buyers, as previously cuts were only being applied to the lower loan-to-value bands,” said Moneyfacts  spokesperson Michelle Slade.

“While rates may still fall slightly further, it is likely that some lenders will instead opt to make existing competitive deals available to borrowers with smaller deposits.”

Other research shows mortgage rates have fallen to their lowest since the Bank of England cut base rates to the record-breaking 0.5% in March 2009.

For borrowers about to come out of an incentive period, the warning from Moneyfacts and other industry insiders is that as soon as banks and building societies feel the Bank of England is about to raise rates, mortgage deals will start to edge up as well.

“If borrowers delay too long to secure a new mortgage deal, they could find that they miss out on some of the lowest rates ever seen,” added Ms Slade.

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Robert FitzHerbert

8:59 AM, 2nd July 2011, About 13 years ago

I would be very interested to know if Mark Alexander's calculations concerning the BTL interest rates in his article above, take into account the high cost of arrangement fees that many lenders charge? I have recently re-mortgaged two of my BTL properties on 2 year fixed deals but have had to pay a 2.5% arrangement fee to The Mortgage Works calculated on the sum borrowed. Whilst the interest rate is a respectable 4.49%, taking the true cost of the loan over two years (loan interest + cost of fee + interest on the fee), the real interest received by the lender is more like 6.1% on the original sum borrowed.
Doesn't sound that cheap to me when I consider I was only paying Birmingham Midshires 4.79% for a 2 year fix in 2003 and without any arrangement fees!

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