Finance News

Record Low Mortgage Rates Disappear

Em Morley - May 20, 2015

Those buying a home with a mortgage have run out of time to take advantage of the lowest ever long-term fixed rates.

Mortgage lenders have started taking their cheapest deals off the market, driving the best rates on a five-year fix over 2% again. The lowest five-year fixed rate mortgage is now 2.14%, up from 1.99%.

Lenders have been competing recently for the best offers on fixed rates. HSBC introduced a record low five-year fix of 1.99% in April, but this has since disappeared.

Woolwich also launched the same rate for a limited time last week, but this expired today.

Record Low Mortgage Rates Disappear

Record Low Mortgage Rates Disappear

These deals have been pulled due to the cost of funding on the wholesale markets – known as swap rates – increasing recently. Lenders use these rates to price their mortgages and they have a huge impact on the cost of lenders’ fixed rate mortgage funding.

In the middle of April, swap rates dropped to 1.46%, but reached 1.73% last week before declining again to 1.66%.

Swap rates are climbing after the bond markets became chaotic. Yields on UK Government bonds, called gilts, have been driven up.

Lenders will also bear in mind that the Bank of England’s (BoE) latest inflation report claims interest rates will increase in mid-2016.

The best rates

After Woolwich pulled its 1.99% five-year fix today, Chelsea Building Society now has the best deal, a 2.14% rate with a 40% deposit and £1,675 fee. A 25-year £150,000 mortgage on this would cost £646 per month and £40,438 over the five years.

If borrowers are looking for smaller fees, Yorkshire Building Society offers a 2.19% rate with a £975 fee. On the same mortgage, this would be £649 a month, but £479 cheaper over the five years at £39,959.

Yorkshire Building Society has also released a range of fee-free mortgages this week, with £1,000 cashback. Borrowers could get a five-year fix at 2.54% costing £675 per month on the average home loan and £40,557 over the term.

This deal becomes cheaper than the others when considering the cashback, which takes the overall cost down to £39,557.

For borrowers with smaller deposits, Post Office Money has a five-year fixed rate at 2.49% with a £999 fee and 25% deposit. A 25-year £150,000 mortgage would be £672 a month and £41,329 over five years.

Leek United offer a 3.59% rate for a £495 fee and 10% deposit. This would cost £758 per month on the same mortgage and £45,986 for five years.

The Help to Buy mortgage guarantee scheme provides a five-year fix from Post Office Money at 4.89% with no fee. The same mortgage would cost £867 a month and £52,037 over five years.