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Fixed rate mortgage costs at historic low

Two, three and five-year fixed rate mortgages have all come down in cost over the past 12 months and witnessed some big reductions compared to five years ago, according to Mortgage Brain’s latest product data analysis.

The cost of a 60% LTV, five-year fixed rate, for example, is now 5.7% lower than it was this time last year, while a 60% LTV two-year fix is now 4.1% lower.

In the 80% LTV space, five and two-year fixed rate products now cost 3.2% less than they did at the beginning of January 2019.

Five years ago

The fixed rate market also shows a big improvement in terms of cost compared to five years ago.

Mortgage Brain’s latest data shows reduction in cost for the two-year fixes at 60, 70, 80 and 90% LTV of between 9.8 and 17.8% and the equivalent five-year fixed products have fallen between 12.1% to 14.4%.

Monetary savings

In monetary terms the 5.7% reduction in cost over the past 12 months equates to an annual saving of £432 on a £150k mortgage.

Compared to five years ago, however, borrowers can secure a potential annual saving of £1,584 for the 90% two-year fix, and £1,206 and £882 for the five and two-year 60% LTV products respectively.

While favourable reductions in cost have been seen over the past 12 months and longer, Mortgage Brain’s short-term analysis shows little movement with mortgage costs for the majority of mainstream products remaining static with those offered at the beginning of October 2019.

Comment

Mark Lofthouse, CEO of Mortgage Brain, commented: “Our latest product data analysis shows that while there’s little to get excited about in terms of rate and cost movement over the past three months, the UK mortgage market has seen some big cost reductions over the year and particularly over the last five year

“With mortgage costs down by up to 17.8% compared to January 2015, there are savings across the board that advisers are able to offer their customers. Mortgage costs remain at historic lows and forecasters are predicting that this will continue in to 2020.”

By Joanne Atkin

Source: Mortgage Finance Gazette

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Fixed rate mortgages become more popular

Fixed rate mortgage deals are becoming more and more popular as eight in ten mortgage shoppers are considering the option.

This month’s Experian Credit Barometer, out yesterday (June 20), showed May saw 81 per cent of searches directed at fixed rates, compared with 72 per cent in March and 77 per cent in April.

In comparison, interest for variable repayment rates slowed with only 10 per cent searching for a tracker and 9 per cent for a variable mortgage in the month.

Last year, The Bank of England raised interest rates for the first time in 10 years while governor Mark Carney has previously said interest rates were likely to rise twice more over the next three years.

The possibility of rate rises could mean homeowners increasingly value the stability that longer term fixed rate mortgages provide.

The Bank yesterday (June 20) announced it was holding the base rate at 0.75 per cent, which could encourage more savers to lock in the low rates while they can.

Amir Goshtai, managing director of Experian Marketplace & Affinity, said: “People want certainty when it comes to their finances, especially in times of such economic uncertainty.

“Rising popularity in fixed term mortgages and high searches for loans for debt consolidation tell us borrowers are looking for low, fixed monthly payments to effectively manage their outgoings and keep control of their finances.

“Interest rates for mortgages and loans are relatively low so now is a good time for borrowers to shop around and seriously consider locking-in their monthly repayments.”

It emerged in February that the number of fixed rate residential mortgages available has reached a 12-year high, as 5,214 fixed rates were available on the market compared with 4,570 in the previous year.

Daniel White director of White Financial Services said two-year rates have always been a popular choice because they provide “the flexibility of allowing a client to review over a shorter term”.

However, he added it is “the longer term security in a period of uncertainty” that is pushing more mortgage shoppers towards longer term fixed rates.

Jonathan Harris of mortgage broker Anderson Harris, said five-year deals were proving particularly popular at the moment.

He said: “The attraction is they give protection from potential rises for the medium term, without locking the borrower in for too long.”

Providers have also increasingly been introducing 10 year plans in order to meet growing demand for this option.

Research from consumer champion Which out earlier this year showed the number of providers offering such a mortgage had doubled in the year to January, to 14 providers.

For example, Santander was the latest lender to add a long-term fixed rate mortgage to its range with the launch of a ten-year deal in May this year.

By Eveline Vouillemin

Source: FT Adviser

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Are the lowest mortgage rates relegated to history?

This time last year, Moneyfacts.co.uk recorded the lowest ever average rates for two, three and five-year fixed rate mortgages. However, with two base rate rises under the Bank of England’s belt since then, it seems that the lowest mortgage rates are now part of the history books.

Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, said: “October 2017 will be known not only as the month of the lowest fixed mortgage rates on record*, but also as the turning point in the market. This is because just one month later, mortgage rates were on the rise, as was the Bank of England base rate for the first time since July 2007.

“The past year has been a challenging time for providers as they have had to wrestle with two base rate rises for the first time in years, while at the same time needing to remain competitive to protect their mortgage book. This conflict of interest has meant average fixed mortgage rates haven’t followed the Bank of England’s rate rises entirely. In fact, data from Moneyfacts.co.uk shows the average two-year fixed mortgage rate has risen by just 0.28% in the last 12 months, instead of the full 0.50% base rate increase.

“Despite this, borrowers opting for a two-year fixed rate mortgage today would still be £27.93** per month or £335.16 per year worse off compared to those who were lucky enough to lock into a fixed deal a year ago.

“But it could be worse. Since the August rate rise, many would have expected rates to increase further, but instead they are actually falling, with the average two-year fixed mortgage rate standing at 2.49% today compared to 2.53% in August. Five-year fixed rates have also fallen by 0.02% over the same period.

“The reduction of average 95% loan-to-value rates (reported last week) has some element to play in the overall averages decreasing. However, providers know that many borrowers are starting to think about protecting themselves from future rate rises, and a fixed mortgage does just that. Therefore, lenders are trying to remain competitive, wanting to be seen as offering some of the lowest rates in the market. With the summer now over, providers may also be starting to look at end of year targets, and are perhaps readjusting their rates to meet them.

“However, while rates may be falling now, it is unlikely that the record low levels seen in October 2017 will return anytime soon. With multiple base rate rises predicted for the foreseeable future, it is likely rates will only get higher, so borrowers looking for a fixed deal should act fast avoid disappointment.”

* Moneyfacts average mortgage rate records began in 2007.

**Based on a £200,000 main residence mortgage over a 25-year term on a capital and interest repayment basis. Monthly repayment for the average two-year fixed rate in October 2017 is £868.30 compared with £896.23 today based on this example.

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Source: Property118

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Borrowers rush for fixed-rate mortgages as Bank of England rate hiking cycle continues

British consumers expecting another jump in the Bank of England’s interest rates are rushing to lock in fixed-rate mortgages, new data shows.

The proportion of customers searching for fixed-rate mortgages on data firm Experian’s comparison site arm rose to over 67.4 per cent in February, a jump from only 60.3 per cent in December.

The new hawkish tilt to the Bank of England has been a relatively recent development. Interest in fixed-rate mortgages had jumped in September, when only 58 per cent of potential borrowers searched for steady interest rates, after the Bank gave its first indications it would consider reversing its previous move, a post-Brexit-vote cut in August 2016.

The Bank of England’s determination to start raising the base rate at which it lends to banks has taken many economists by surprise, which resulted in a surge of interest in remortgaging from households faced with the first rate hiking cycle in over a decade.

Demand for fixing the rate, rather than plumping for a variable tariff which could rise if Bank of England lending rates do, jumped to 67.1 per cent in November after the first hike.

Separate data from UK Finance last week showed a spike in remortgaging activity as procrastinators rushed to get a better deal, with 7.4 per cent more remortgagers than the same month a year earlier.

The jump in interest in remortgaging has come against a backdrop of falling demand for mortgages from first-time buyers and home movers.

The Bank this month gave a strong signal that it expects to hike rates again in May, saying market expectations of a first hike only in November would not be sufficient to reduce inflation to target in three years’ time.

A May hike would raise bank rate, the Bank’s main interest rate to 0.75 per cent, its highest since February 2009 as the central bank fought the financial crisis. Economists then expect a second rate rise in November, before a period of stability as the UK prepares to leave the EU in March 2019.

Source: City A.M.